TNAG-2478-FCO40-3608-Trade-relations-between-Hong-Kong--the-UK-and-other-countrie-1992 — Page 71

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Again, this will strengthen the trend in Hong Kong to move from manufacturing based employment to service sector employment.

The unease concerning the Tiananmen massacre has load to the flight, temporary and perhaps permanent of important sectors of the workforce.

There has been a skill shortage in certain areas of the Hong Kong economy and to make up for this labour importation schemes do exist. This is the case with the building of the new airport. In the construction industry this shortfall has been made up by (sometimes) illegal labour from the PRC. Such practices have lead to tension between the Trade union movement and the Hong Kong authorities.

But the most significant feature of the economy in recent years has been the dramatic rise in reexports. In the first quarter of 1991 the growth rate has been 22₺ in real terms. Most of this activity is based on outward processing in co-operation with the PRC.

Hong Kong and the PRC province of Guangdong are increasingly interdependent. The whole of the Pearl River Delta has blossomed largely due to investment from Hong Kong, a fact your rapporteur can testify, for I returned to Guangzhou in September 1991 after a five year absence and was quite surprised to see the obvious signs of increased economic activity and prosperity.

Travel across the Hong Kong-PRC border is easy and an estimated 50,000 Hong Kong residents cross daily to engage in economic activity including the management of factories in Guangdong. It has been further estimated that Hong Kong companies employ as many as 3 million workers in Guangdong province.

Hong Kong and the PRC are developing a symbiotic economic relationship and the distinction between the Hong Kong and PRC aconomies, particularly in trade related areas, is increasingly blurred and meaningless. Hong Kong now provides nearly 40% of China's foreign exchange earnings and is the source of 66% of foreign investment in the PRC.

This investment is reciprocated, the PRC has invested over US dollars 10 billion in Hong Kong, provides 60% of Hong Kong's water and 80% of its fresh food.

Hong Kong's domestic exports to the PRC (as a k of Hong Kong's total exports) have risen from 3.6% in 1981, to 14.3% in 1987 to 21% in 1990.

Hong Kong's importa from the PRC on the same basis have risen from 21.31 to 31.14 to 36.8% for the above years.

the Hong

Despite the political unease subsequent to the Tiananmen massacre, Kong/PRC economic interdependence has continued apace. There is no reason to question the confidence expressed in Hong Kong that it will remain and indeed grow in importance as the gateway to the economic development of the PRC.

EC/HONG KONG

The much vaunted and sought direct EC investment in PRC China has not come about and Hong Kong will remain the easiest and most successful intermediary for dealing with the PRC.

Despite its tiny size Hong Kong remains an important trader with the EC in its own right. Hong Kong's continued membership of GATT and other trading

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PE 156.153/rév.