TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 91

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3.

Except for 1987, the City's visible trade

account has been consistently in deficit (paragraph 13). Despite the claim by the Shenzhen officials that the SSEZ was rapidly building up its industrial base, only about 50% of Shenzhen City's exports in the first nine months of 1988 were made locally. Entrepôt trade between the rest of China and Hong Kong is probably still the mainstay of the SSEZ's economy (paragraph 15). Hong Kong is Shenzhen's principal trading partner, as regards both exports and imports (paragraph 16).

4.

As for the investment environment, there is a serious power shortage though the Shenzhen officials claimed that power supply in the SSEZ was sufficient by Chinese standards (paragraph 18). A formal land sale

system, by means of both auction and tender, modelled on

that of Hong Kong is to be introduced in 1989. Land leases would last between 30 to 50 years, depending on the types of land use (paragraph 19). Labour was being brought in from nearby counties to support the expanding industries (paragraph 20). By the end of August 1988, total realised direct foreign investment in the City amounted to US$1.7 billion. This was small when compared with the total investment (mainly in infrastructure) so far undertaken by the Chinese in Shenzhen, which was in the region of Rmb 10 billion (roughly equalled to US$4 billion) (paragraph 22). Probably up to 80 to 90% of the realised direct foreign investment in the City was from Hong Kong (paragraph 23).

5.

Shenzhen City is required to submit only a small proportion of its foreign exchange earnings to the Provincial Government of Guangdong. Thus the retained earnings can be used to finance trade, develop industries and improve infrastructure (paragraph 24). The foreign exchange retention ratios for enterprises in the SSEZ are

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