CONFIDENTIAL
Kong dollar after the latter was stabilised and pegged to the US dollar in October 1983 had the effect of greatly easing inflationary pressure in Hong Kong.
5.
According to a South China Morning Post report dated 26 April 1984 of a statement by Wang Guangying, quoted in Jao's article, over the previous few years China had invested some US $4 billions through 50 Chinese representative and trade offices in more than 300 projects in Hong Kong. Later Chinese reports (eg Xinhua 6 September 1986) have claimed that PRC investment in Hong Kong had reached US $5 billion by the end of 1985 (against US $2.3 billion Hong Kong investments in the PRC), while a Xinhua report of 14 November 1985 said that, according to Hong Kong Trade Development Council statistics, investments in Hong Kong by mainland institutions and PRC enterprises located in the territory had continued to rise, reaching a total of HK $30 billion. Meanwhile, the Bank of China has on at least one occasion provided support for a Hong Kong bank in financial difficulties.
6. The above figures demonstrate that since the Joint Declaration the Chinese have maintained a policy of investing in Hong Kong. This may well be motivated by the wish to promote confidence in the territory, as well as by more immediate commercial calculations. To represent this as China being compelled to support the Hong Kong economy as a major policy prerequisite is to exaggerate what has occurred. Even so, it seems reasonable to infer that the Chinese see political reasons for being ready to assist Hong Kong when difficulties occur. It is harder to say how much they would be willing to spend to help Hong Kong.
Kafallen
KC Walker Asian Region
RD
OAB 2/125 210 6220
13 January 1987
CC
Mr Hallett, Economic Advisers
Mr Fletcher-Cooke, FED
CONFIDENTIAL
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