TNAG-1624-FCO40-2238-Relations-between-Hong-Kong-and-China-1987 — Page 189

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Kong exceeding imports from Hong Kong by US$2.34 billion.

This compares favourably with a surplus of US$1.84 billion

(15) in the first half of 1986

These figures reflect

•

the importance of Hong Kong as a major source of net

foreign exchange earnings for China. Without the trade

surplus with Hong Kong, China's overall trade deficit

would probably have been much larger.

42.

Outward processing arrangements with China seem

likely to expand further, given the sustained demand for

Hong Kong products in overseas markets. For Hong Kong's

manufacturing sector, the availability of sub-contracting

capacity in China enhances its overall productive

capacity, enabling it to cope with a sharp increase in

orders from overseas countries. Further, the savings in

production costs obtained from these sub-contracting arrangements have helped to maintain the price

competitiveness of Hong Kong's products. From China's

point of view, outward processing activities are a means for promoting export-oriented industrialization in

Shenzhen and in the counties in the Pearl River Delta

(15) In the first half of 1987, China's exports to Hong Kong and Macau) amounted to US$5.86 billion while its imports from Hong Kong (and Macau) stood at US$3.52 billion. The corresponding figures for the first half of 1986 were US$4.16 billion and US$2.32 billion.

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