TNAG-2468-FCO40-3592-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 76

Annex

Impact on the Hong Kong economy of the United State's Section 301 Action against China

An initial assessment based on the preliminary hit-list

Summary

If the United States were to impose Section 301 Action on China based on the preliminary list of sanction items published on 27 August 1992, there would be:

2.

- a reduction of 13.4% or HK$14 billion (US$1.8 billion worth of Hong Kong's re-exports from China to the United States;

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together with other related trade flows, a reduction of 2.2% or HK$35 billion (US$4.5 billion) worth of Hong Kong's overall trade;

a loss in Hong Kong of around HK$4.8 billion (US$0.6 billion) in income and around 16 600 in jobs as a direct impact, with the growth rate of GDP reduced by 0.7 of a percentage point in the year of incidence (the impact specifically on those industries or firms which are directly hit by the Section 301 Action is, however, going to be much more serious); and

a further loss in income and jobs if China cuts back on its imports as a result.

More generally, there would be significant adverse effect on manufacturing investment ventures and other production arrangements by Hong Kong and foreign companies in China. Hong Kong's role as gateway to China would thus be reduced in importance and this

this would undermine the longer-term growth potential and business confidence in Hong Kong. Also, the further development of re-export trade, which has re-emerged as a major impetus to Hong Kong's economic growth, would be significantly curtailed.

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