TNAG-2468-FCO40-3592-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 91

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

An initial assessment based on the preliminary hit-list 30|

Action

on

If

Нив HKB 091/2

Summary

1) Misky

Bastida Secti

the United States were to impose Section 301 China based on the preliminary list of sanction items put out on 21 August 1992, there would be :

I

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;

together with other related reduction of 2.2%

a

trade flows,

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 (USSO.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 109s 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 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

curtailed.

growth, would be

significantly

TOTAL P.08