TNAG-1891-FCO40-2684-Visits-by-Sir-Geoffrey-Howe-and-by-Douglas-Hurd--Secretaries-1989 — Page 74

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MDHIAN 1227

GIVING A RIGHT OF ABODE IN BRITAIN OR ELSEWHERE, ARE OF COURSE ALMOST INCALCULABLE). MANY BRITISH COMPANIES SERIOUSLY WORRY THAT THE ALREADY HEAVY LOSS OF SENIOR MANAGEMENT TO CANADA, AUSTRALIA AND ELSEWHERE WILL SERIOUSLY BLUNT THEIR COMPETITIVENESS AND EVEN IN EXTRIMIS THEIR ABILITY TO STAY IN HONG KONG. (SOME OF OUR COMPETITORS ARE DOING SOMETHING ABOUT THIS: FRANCE HAS GIVEN PASSPORTS TO TOP HK CHINESE MANAGERS IN THEIR MAJOR FIRMS HERE, THUS GIVING THEM CONFIDENCE TO STAY. GERMANY IS SAID TO BE STUDYING HOW TO DO THE SAME).

3. YET, DESPITE THESE FACTORS, THE HONG KONG ECONOMY, AS AN INTERNATIONAL TRADING CENTRE, AND AS A CENTRE OF PRODUCTION, DOES NOT SEEM TOO BADLY HIT. THE MULTIPLICITY OF MAJOR PROJECTS, INCLUDING THE NEW AIRPORT, WILL NOT BE AFFECTED, ACCORDING TO THE HONG KONG GOVERNMENT (ALTHOUGH ANY REAL LOSS OF BUSINESS CONFIDENCE COULD SEE A DRYING UP OF THE NECESSARY FUNDING). AS MANY HAVE POINTED OUT, HONG KONG HAS SURVIVED MANY ERUPTIONS IN CHINA BEFORE, AND THEREFORE WOULD SEEM TO HAVE A GOOD CHANCE OF DOING SO AGAIN.

4.

THE MORE DRAMATIC DIMENSION IS TRADE WITH CHINA, AND THE RECENTLY DEVELOPED INTERDEPENDENCE OF THE ECONOMIES OF HONG KONG AND GUANGDONG PROVINCE. A CLOSING OF THE OPEN DOOR POLICY TOWARDS FOREIGN INVESTMENT IN CHINA, OR AN ECONOMIC DOWN-TURN THERE BROUGHT ABOUT BY GOVERNMENT POLICIES OR THE DRYING UP OF FOREIGN CAPITAL, WILL HAVE BIG EFFECTS ON THE HONG KONG ECONOMY. EVERY DAY 25,000

TRUCKS CARRY GOODS BETWEEN HONG KONG AND GUANGDONG. SOME BRING MOST OF HONG KONG'S FRESH FOOD, BUT MORE CARRY COMPONENTS AND PARTLY MANUFACTURED GOODS TO AND FROM THE FACTORIES ON BOTH SIDES OF THE BORDER. BETWEEN 1.5M AND 3.OM GUANGDONG WORKERS (MORE THAN THE TERRITORY'S TOTAL MANUFACTURING WORKFORCE) ARE EMPLOYED BY OVER 60,000 HONG KONG COMPANIES IN FACTORIES IN THE PROVINCE, WHERE LABOUR IS PLENTIFUL AND CHEAP. THIS HAS BEEN THE MAIN FACTOR IN MAINTAINING HONG KONG'S MANUFACTURING COMPETITIVENESS. IN 5 YEARS

HONG KONG'S DOMESTIC EXPORTS TO CHINA HAVE RISEN 237 PERCENT AND RE-EXPORTS TO CHINA 238 PERCENT. CHINA NOW ACCOUNTS FOR 17.5 PERCENT OF HONG KONG'S TOTAL DOMESTIC EXPORTS, UP FROM A NEGLIGABLE AMOUNT 10 YEARS AGO. HONG KONG ON THE OTHER HAND ACCOUNTS FOR 37 PERCENT

OF CHINA'S EXPORTS. EACH IS THE OTHER'S LARGEST TRADING PARTNER. HONG KONG FIRMS HAVE INVESTED SOME USD176M IN THE MAINLAND. THE ECONOMY OF HONG KONG IS NOW SO CLOSELY INTEGRATED WITH THAT OF

CHINA THAT ANY DISENGAGEMENT WILL CAUSE SERIOUS DISLOCATIONS.

6. SOME BIG HONG KONG COMPANIES, WITH MANY EGGS IN THE CHINESE BASKET, ARE SERIOUSLY AFFECTED AND WORRIED. HOPEWELL HOLDINGS,

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