TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 70

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28.

China remained Hong Kong's largest source of imports in 1988, supplying 31% of Hong Kong's total imports in that period. However, as a proportion of Hong Kong's retained imports, goods of China origin declined to 14.3% in 1988, from 19.2% in 1987 (23). But China's ranking among Hong Kong's major sources of retained

imports remained second, after Japan. This reduction in

China's share was due to an overall decline of 12% in Hong

Kong's retained imports of China origin in 1988 compared

with 1987, which was partly related to a sharp decline in

Hong Kong's retained imports of garments and textile products of China origin. Greater efforts made by Hong

Kong Government to enforce the certificate of origin rules

was probably the most important factor responsible for

this decline in retained imports of garments and textile

products of China origin

The very rapid growth in

(24)

•

(23) For analytical purposes, a re-export margin of 15%,

which includes trading margin and other domestic charges involved, has been assumed in deriving the estimates and growth rates of retained imports. But even after this adjustment, the decline in China's share in Hong Kong's retained imports may still have been somewhat over-stated because of the possibility of mis-classification discussed in footnote (24).

(24) With the tightening of the enforcement measures in

1988, some goods which were previously mis-classified as domestic exports are probably now being classified properly as re-exports of China origin. The value of retained imports of China origin is derived by subtracting re-exports of China origin (after allowing for a re-export margin of 15%) from imports of China origin, the re-classification leads to a larger amount of re-exports of China origin being recorded, thus resulting in a smaller amount of retained imports of China origin. To the extent that some mis-classification of re-exports as domestic exports existed in previous years, China's share in Hong Kong's retained imports, at 19.2% in 1987 (paragraph 28), might have been over-stated. Thus the decline of China's share in Hong Kong's retained imports between 1987 and 1988 may be more apparent than real.

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