TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 42

CONFIDENTIAL

CRC INF 8/89

(CEC 3/89)

Results of the Survey of Exports to China for Outward Processing

Background

With increasingly close economic cooperation between Hong Kong

and China, there are various ways by which Hong Kong businessmen involve

themselves in outward processing activities in China. A manufacturer in

China may take up part of the vertically integrated production processes

for a manufacturer in Hong Kong. The same firm in China may however also

engage in production activities which do not have any connection with businesses

in Hong Kong. Moreover, it may be either an enterprise of wholly PRC interest,

or a joint venture between the Chinese side and business interests from Hong

Kong. In another case, a trading firm in Hong Kong may arrange for the supply

of raw materials to a manufacturing enterprise in China and for the marketing

of finished goods produced by the latter, but the raw materials and finished

goods may not have to pass through Hong Kong at all. There may also be cases

in which a Hong Kong businessman simply invests in China and performs manufacturing

and marketing activities solely there. In yet other cases, firms in Hong

Kong may be involved in a mixture of the above activities.

2.

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The complexities of business arrangement as exemplified above make

any study of outward processing activities rather difficult. As a result,

there can be no simple answer to questions like : the number of firms and

workers who are engaged in China for outward processing for Hong Kong; how

outward processing activities in China affect Hong Kong's manufacturing industries;

and how such activities affect Hong Kong's external trade. To address questions

on outward processing activities in China, many types of information, both

statistical and non-statistical, are required to be collected and analysed.

But such information is not easy to obtain.