3.5 The end of the Cold War in Northeast Asian trade
There has been an historic shift in the pattern of Northeast Asia's international trade relations over the past decade, with the breaking of the Cold War mould. This has had the largest impact on China and Hong Kong but has also significantly affected trade and economic structure in Taiwan and the Republic of Korea. It has begun to affect the foreign trade orientation of the Soviet Union and, if recent trends are maintained, could eventually profoundly influence economic development in North Korea.
3.5.1 China and Hong Kong
The reshaping of China's international economic relations commenced with the beginnings of normalisation of political relations with the West in the early 1970s. The establishment of diplomatic relations with the United States in 1979 marked the maturation of this process under China's new policies.
Hong Kong's economic re-integration with China began with the open door policies, and accelerated following the Sino-British Joint Declaration in 1984.
In 1977 the value of Hong Kong's domestic exports to China was HK$81 million. China was Hong Kong's twenty-fifth largest market. By 1986 Hong Kong's domestic exports to China had increased to HK$18 billion, representing compound growth at 50 per cent a year over a decade. Exports doubled over the next two years, to HK$28 billion in 1987 and to HK$36 billion in 1988.
Hong Kong's entrepot trade with China expanded even more rapidly. In the late 1960s re- exports had constituted approximately 15 per cent of Hong Kong's total exports. By 1988, the ratio had increased to 55 per cent. Hong Kong had resumed much of its pre-Second World War role as an entrepot centre for Chinese trade and development. On the strength of the expanding China trade, Hong Kong became the world's largest container port, as well as the largest liner and container port for China's foreign trade.
Hong Kong's entrepot role has also been increasingly important in China-Taiwan and China-Korea trade in goods and services. Hong Kong brings such advantages that direct trade between China and Taiwan, while reducing Hong Kong's share of China-Taiwan business, would be consistent with continued expansion in the volume of transactions involving Hong Kong.
Eight years before the transfer of sovereignty to China, the integration of Hong Kong into the Chinese economy has been substantially completed.
Economic integration with China has promoted the Manhattanisation of Hong Kong, specialising in the supply of high-value services and manufactured components to a much larger regional economy. Hong Kong is an integral part of a South China region covering : the Pearl River delta, including Macao and Guangzhou, capital of Guangdong province.
Political uncertainty in 1989 has weakened confidence in Hong Kong and reduced its capacity to service China's trade and development. It has not, however, reversed the historic changes in Hong Kong's economic role.
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