TNAG-1748-FCO40-2467-Visit-by-Sir-Geoffrey-Howe--Secretary-of-State-for-Foreign-a-1988 — Page 288

var kun samazina comision kant kann du magari alat

CONFIDENTIAL

016561 MDHIAN 9539

OF INFLATION IS EXPECTED TO AVERAGE AROUND 7 PERCENT FOR 1988 AS

A WHOLE.

HONG KONG-CHINA ECONOMIC RELATIONS

1. SINCE CHINA'S ADOPTION OF THE OPEN POLICY IN 1979,

AND GUANGDONG PROVINCE IN ECONOMIC RELATIONS WITH CHINA GENERALLY, PARTICULAR, HAVE UNDERGONE RAPID GROWTH AND DEVELOPMENT.

HONG KONG'S

2. SINCE 1985, CHINA HAS BEEN HONG KONG'S LARGEST TRADING PARTNER. IT IS NOW THE SECOND LARGEST MARKET FOR HONG KONG'S DOMESTIC EXPORTS, THE LARGEST MARKET FOR HONG KONG'S RE-EXPORTS AND THE

HONG KONG LARGEST SOURCE FOR HONG KONG'S IMPORTS. RECIPROCALLY, HAS RECENTLY OVERTAKEN JAPAN TO BECOME CHINA'S LARGEST TRADING PARTNER, ACCOUNTING FOR MORE THAN A QUARTER OF CHINA'S EXTERNAL TRADE.

3. HONG KONG IS ALSO THE MOST IMPORTANT SOURCE OF FOREIGN INVESTMENT IN CHINA, BOTH IN TERMS OF THE TOTAL NUMBER OF PROJECTS ENTERED INTO (75 PERCENT) AND THE TOTAL CONTRACT VALUE COMMITTED (UP TO 70 PERCENT). IN RECENT YEARS, CHINA-INTEREST COMPANIES HAVE ALSO MADE VERY SUBSTANTIAL INVESTMENTS IN HONG KONG.

4. OTHER IMPORTANT AREAS LIKE INVISIBLE TRADE (INCLUDING TOURISM) AND FINANCIAL LINKS HAVE ALSO BEEN DEVELOPING RAPIDLY IN RECENT

YEARS.

5. OF ALL THE PROVINCES IN CHINA, HONG KONG HAS ITS CLOSEST ECONOMIC RELATIONS WITH GUANGDONG. GUANGDONG IS NOW CHINA'S TOP EXPORTING PROVINCE. HONG KONG IS ITS LARGEST EXPORT MARKET, ACCOUNTING FOR NEARLY 70 PERCENT OF THE PROVINCE'S TOTAL EXPORTS. HONG KONG IS ALSO THE MOST IMPORTANT SOURCE OF FOREIGN INVESTMENT IN GUANGDONG (60-80 PERCENT).

6. VIRTUALLY ALL OUTWARD PROCESSING ACTIVITIES IN GUANGDONG ARE RELATED TO HONG KONG. CONSIDERABLE LABOUR RESOURCES IN GUANGDONG COVER ONE MILLION WORKERS) ARE USED IN PRODUCTION WHICH EARNS FOREIGN EXCHANGE FOR CHINA, WHILE THE PRODUCTIVE CAPACITY OF THE MANUFACTURING SECTOR IN HONG KONG IS CORRESPONDINGLY INCREASED.

7. THE PROSPECT APPEARS TO BE FOR HONG KONG'S ECONOMIC RELATIONS WITH CHINA GENERALLY, AND WITH GUANGDONG IN PARTICULAR, TO STRENGTHEN FURTHER IN THE FUTURE TO THE MUTUAL BENEFIT OF BOT-H PLACES.

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