TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 44

CONFIDENTIAL

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6.

So for the purpose of the survey, exports to China for outward processing refers to the exportation of raw materials (including near-finished goods)

as

from or through Hong Kong to China for processing (including assembling, packaging etc), where the goods concerned are under contractual arrangement for subsequent re-importation into Hong Kong after processing. Although such activities may also exist between Hong Kong and other economies, the volume is unlikely to be of any significance compared with that between Hong Kong and China. Whilst for the purpose of the survey, the core activities as defined above are adhered to, other closely related activities would be kept in view, their size relative to the core activities may change in the long term to

an extension of the scope of the survey. such an extent as may warrant instance, if more and more Hong Kong businessmen set up factories in China which directly export to other countries without going through Hong Kong, one may wish to know whether China would eventually become a competitor rather

than a partner of Hong Kong in export production.

Survey coverage and methodology

7.

Outward processing trade between Hong Kong and China as defined

above involves the following four types of trade flows

:

For

(i)

importation of raw materials and semi-manufactures into Hong

Kong;

(ii)

exportation of raw materials and semi-manufactures to China

for processing;

(iii)

re-importation of the processed goods into Hong Kong after

processing; and

(iv)

exportation of the finished goods to buyers in overseas markets.

no matter whether

The present

Since the first and the fourth types of trade flows will occur there is outward processing in China or not, studies on outward processing

trade can be confined to the second and third types of trade flows.

survey focusses on the second type of trade flows, i.e. the exportation of

raw materials and semi-manufactures to China for processing. considered to study the third type of trade flows connected with the re-importation

of processed goods from China into Hong Kong.

Plans are being