TNAG-1624-FCO40-2238-Relations-between-Hong-Kong-and-China-1987 — Page 143

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A note on Hong Kong's contribution to China's foreign exchange earnings

Table 1

Table 2

China's foreign exchange earnings

China earns its foreign exchange from two main

sources, namely:

2.

(i) from exports; and

(ii) from invisible trade, including shipping,

freight handling, insurance, tourism, remittances, and interest and dividends derived from overseas assets.

As regards export earnings, according to China's Customs statistics, China's exports grew at a moderate rate of 7% per annum in value terms between 1981 and 1986. This average figure, however, conceals significant developments during the past few years. Reflecting China's increased efforts to promote its exports since 1986, the value of China's exports rose by 13% in 1986, and the year-on-year growth rate further accelerated to 24% in the first half of 1987. Export earnings during these two periods amounted to US$30.9 billion and US$16.6 billion respectively (Table 1).

3.

Statistics on China's overall invisible earnings are only available since 1985. In 1986, these earnings stood at US$5.6 billion, representing an increase of 10% over 1985. Of the various items classified under invisible earnings, a longer series can be obtained in respect of income from tourism. In the past five years (1981-86), income from tourism increased at an average annual rate of 14%, to US$1.5 billion in 1986 (Table 2).

China's external sector balance and foreign exchange

reserves

4.

On visible trade, despite a continued increase in export earnings, China has been incurring a trade deficit since 1984. The initial worsening in the trade balance was attributable to a surge in imports in late 1984 and early 1985, following some decentralization of the importing activity. As the trade deficit increased sharply,

China

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