TNAG-2242-FCO40-3223-Most-favoured-nation-status-for-China-impact-on-Hong-Kong-1991 — Page 113

ANNEX A

The Hong Kong Government estimate that if China were to lose

its MFN status the impact would be:

Directly

(a) 33% to 44% (US$3.5 bn to US$ 4.6 bn) reduction in Hong Kong's re-exports from China to the US;

(b) a reduction of 5% to 7% (US$9 bn to US$12 bn) in Hong

Kong's overall trade;

(c) a loss of between 32,000 and 43,000 jobs in Hong Kong;

(d) a reduction of between 1.3% and 1.8% in the expected GDP

growth (ie about a one third drop).

Indirectly

(a) significant adverse effects on manufacturing entures and other production arrangements by Hong Kong and foreign companies in China;

(b) the undermining of Hong Kong's role as a gateway to

China thus affecting longer-term growth potential and business confidence in Hong Kong;

(c) negative effect on foreign investment into Hong Kong on which Hong Kong's future stability and prosperity depend;

(d) further losses in income and jobs in Hong Kong if China

has to cut back on imports as a result.

REXACT/3