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1084 104, 1067
I
ICNG KONG TRADE AND PATIEMS
£ million (approximato)
1966
From: U.ke
C. Soho Chifpa
SALA
Other
Total
Importa
GO
60
160
300
580
irports and re-exports
70
00
ncgl.
320
470
The balance
+10
+ 20
−167
+ 20
-
110
Invisibles:
Tounicm
+
T.K. forces
+10
Domain 10 on Shalances
+25
Other I.P...
-10
Other (incomplete)
- 5
+10
Long-term capital
70
+
10
+
15
10
5
+
70
20
+
fotel neumonia deficit
Eurons and onierions
20
+ 110
+
១០
Incmonne (+) in reuetamp
holding, of idehi:
sterling
other chamoneles
55
+
35
Total sterling holdingğ: end-1966, £372 million not,(end-ifɩrch 1967
[1
dollar holdings ond-1966 £51 million
C336 million)
19/9/67
SECRET
A Note on the Economic Valve of Hong Kong to China
1.
heavily against Chinese interference in Hong Kong's present status
Under normal circumstances economic considerations would weigh From the
Colony China obtains a large annual trade surplus, most of he
remittances contributed by Overcas Chinese, and the important enefits
from Hong Kong's entrepot role. The following paragraphs set out the
chief facts about China's economic relations with Hong
Kong.
Trade with and through Hong Kong
2.
Chinese exports to the Colony in recent years have accounted for over
nine-tenths of the annual two-way trade, giving Peking a large surplus
(in Hong Kong dollars) ranging from the equivalent of £58 million in
1961 to £168.7 million in 1966:-
Chinese exports to Hong Kong* Hong Kong exports to China Hong Kong
re-exports to China China's trade surplus
1961
1962 1963 1964 1965 1966 (£ million)
64.5 76.2 92.5 123.1 145.0 173.1
0.5 0.5 0.5 0.8 1.1 0.96 5.7 4.8 3.9 2.9 3.4 3.4 58.3 70.9 88.1 119.4
140.5 168.7
(a more detailed table showing the composition of trade is given at
Annex).
This surplus, which is regularly converted into sterling, has played a
major role in financing Chinese trade deficits with other areas of the
Free World with the industrial countries of Western Europe in 1959-60
and again in 1965-66 and with Canada, Australia and other major grain
exporters to China,
3. The Colony depends largely on China for supplies of fresh fruit and
vegetables, meat, dairy products and oilseeds, and to a lesser extent,
for the main staple foodstuffs such as rice, wheat and sugar. Although
large amounts of rice are imported from China the principal sources of
supply are the South East Asian countries. There is also a considerable
market for Chinese textiles, simple machinery and other manufactured
goods.
4. From 1962 to 1965 Chinese exports to Hong Kong increased at an
average annual rate of 24%. This may be regarded as a period of
exceptional growth, during which China was not only benefiting from the
long-term expansion of the Hong Kong economy and population, but
regaining a market largely lost in the difficult years of 1960-62. Signs
of a levelling off appeared in 1965-66, and in the 12 month period July
1965. to June 1966, Chinese exports showed an increase of only 4.2% over
the previous 12 month period. This may
/have
(1) Total Chinese receipts from exports to Hong Kong are probably
somewhat higher than shown in the HK Government statistics, since
valuation takes place when the goods first enter the Colony, and
therefore excludes the profit margins of Chinese trading corporations
operating in Hong Kong.
(2) Re-exports of goods obtained from China (see para. 5) are
recorded as imports from China both by HK and by the country .eventually
receiving them.
SECRET
have been due largely to the levelling off of the economic boom in the
Colony and the consequent lower increase in demand. Shortages of supply
(reportedly in evidence at the Canton Fair in April 1966) may also have
played a part. The third and fourth quartero showed a ufficiently large
recovery to lift the total figure of Chinese exports to £173.1 million,
an increase of 19% over 1965.
A part of this increase must be attributed to a change in Hong Kong
regulations which have increased the coverage of trade statistics.
Compared with 1965 recorded figures for 1966 may over state the growth
by about 5%.7
Under normal circumstances Hong Kong's consumption requirements could be
expected to continue to grow, but further Chinese successes would
probably turn increasingly on the quality and diversity of their
exports.
5. Entrepot trade. The figures show that Hong Kong's domestic exports to
China are negligible, and that most of the items sold originate
elsewhere. Such re-exports include chemicals, base metals, textile
fibres, and animal and vegetable materials. Their value, however, is
steadily decreasing, as China ships more and more goods from the
original supplying countries. The value of Hong Kong's re-exports of
goods obtained from China is not published, but from information
supplied by the political advisor's office is believed to have been
about £34 million (about 20%) last year (1966). Goods thus re-exported
include Chinese food specialities, textiles, animal by-products and
medicines; and are sent mostly to South East Asia, Japan and Europe. It
is evident that the Chinese still find it convenient to use Hong Kong
and its variety of services for shipping many of their exports. Their
own trading organisations, moreover, are not nearly so well equipped as
Hong Kong merchants to handle a variety of small orders from overseas
markets. Never- theless, as time goes on, the Chinese may be expected to
improve their own facilities, and rely correspondingly less on those of
Hong Kong.
6. Commercial liaison.
Hong Kong is in addition a useful trading outpost for China, especially
as regards commercial dealings with countries with whom Peking does not
have diplomatic relations. Preliminary negotiations for grain deals with
Australia and Canada have often taken place in Hong Kong. Western firms,
too, can readily make contact with Chinese commercial organisations in
the Colony.
Overseas remittances
7. Most of the remittances from Overseas Chinese to the mainland are
channelled through communist-controlled banks in Hong Kong. Up to 1958
they averaged about £25 million yearly, but subsequently there was a
prolonged decline, largely because of unfavourable reaction among
Overseas Chinese to the introduction of communes. This was accentuated
by the tendency of people abroad to send food parcels instead of cash at
the time when the Chinese food situation was at its worst - although it
temporarily increased foreign exchange receipts from parcel duties and
other charges. Cash remittances in 1961 and 1962 were probably down to
£15 million, but have subsequently recovered, reaching an estimated
£30-35 million last
This range is perhaps unlikely to be significantly exceeded; Indeed as a
result of the cultural revolution and events in China, Femittances
declined in 1966 totalling an estimated £23-28 million for the year.
Investments by Hong Kong Chinese in the Overseas Chinese Investment
Companies in China probably amount to £1-2 million a year.
year.
Other Invisible Earnings, Expenditures and Economic Advantages 8. The
main Chinese invisible expenditures in Hong Kong are for services
rendered by the latter in the fields of shipping, ship
/repairs,
SECRET
repairs, insurance and marketing.
These are gradually falling
as China improves her own port facilities, and extends her direct
trading links with other countries.
Such
inly from the operations of Chinese financial and commercial
Invisible earnings are derived enterprises in Hong Kong; from the annual
sale of £1-14 million worth of water to the Colony; and from a growing
tourist trade. receipts are not, however, large compared with those from
trade and remittances. Deposits received by the 11 communist controlled
banks in Hong Kong are lent to their head offices in China, but the sums
involved are subject to recall at very short notice In June 1966 the
figure involved was about £3 million/.
Conclusion
9.
It is estimated that China's net annual foreign exchange receipts from
the above sources averaged some £80 million in the years 1960-62,
£120-130 million in 1963-64, £170-180 million in 1965, and £200-210
million in 1966 (over a third of China's total earnings of foreign
exchange). Such a rapid rate of increase is in any case unlikely to be
maintained, and from now on Hong Kong's relative importance as a source
of foreign exchange may even gradually decline. However, it could remain
the largest single source of earnings for some years to come, and
continue to perform a valuable role in developing China's commercial
relations with the Free World.
D.E.I.(DIS)
#
LEVEL AND COMMODITY COMPOSITION OF CHINA'S TRADE WITH HONG KONG
(£ millions)
1
ANNEX
Commodity group
Chinese exports to H.K. 1961 1962 1962 1963 1964 1965 1965
H.K. exports to China
1961 1962
1963
1964 1965
H.K. re-exports to China 1961 1962 1963 1964 1965
Foodstuffs, beverages and tobacco
Crude materials
Chemicals
27.3 37.2 45.4 63.9 7.5 6.8 6.9 6.0 8.2 1.3 1.4 1.6 2.1 2.6
72.5
t
J
0.6
0.5 0.1 0.1 0.1
0.1 0.1 0.1 0.1 0.1
1.0
1.4
0.8
1.2
0.9
0.1
2.4
1.6
2.0
0.2
0.3
Textiles, machinery and other manufactured
goods
Other
Total
28.2 30.6 38.4 50.8
61.4
0.3 0.3 0.4 0.7 0.9
1.7
1.3
1.0 1.4
2.1
0.2 0.2 0.2
0.3
0.3
I
64.5.76.2 92.5 123.1 145.0
0.5 0.5 0.5
0.8
1.1
5.7
4.8
3.9
2.9
3.4
EN CLAIR
PERING TO FOREIGN OFFICE
Telno 620
1 June 1967
(194!!
UNCLASSIFIED
Addressed to Foreign Office telegram No.620 of 1 June. Repeated for
information to Washington, Hong Kong and POLAD Singapore.
Peoples Daily of 1 June, carries two articles on Hong Kong. The first
reports strike action by employees of the Water Board, Shanghai Garments
Co. and Wham Poa Dock, and claims that peasants in the new territories
are also active in expressing their anti British anger.
2.
Second article reports military exercise on Lantao Island
on 31 May in which Hong Kong Garrison and Marines from H.M.S. Bulwark
took part. Article also reports arrival on 30 May of Royal Welch
Regiments C.0., Bullock allegedly to conduct plotting activities.
Article concludes all these military activities are ridiculous, like
"ants trying to shake large tree". Same paper also prints photograph
showing Hong Kong police confronting demonstrators outside Hilton Hotel.
Mr. Hopson
FO/CO/WH DISTRIBUTION F.E.D.
Sent 0430Z 1 June Recd.0755Z 1 June
1.
:
E
VVVVV
вор
:
1
CLOSED
NO FURTHER
ין
•
10 6:
'
N YN MILL CONTINUED ON-
HWB 1/17 Part C (195)
Folio
TO BE RETAINED AS TOP ENCLOSURE
Cabinet Documents
No.
Reference
180A ce (67) 3310 Thocking
Date
30.5.67
The above-listed Cabinet document (s), which was/were enclosed on this
file, has/have been removed and destroyed.
For complete series of Cabinet documents see CAB (CABINET OFFICE
CLASSES
Signed
Landny
Date
3/7/98
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