The role of Hong Kong in Sino-American economic relations

Hong Kong has traditionally been a very important source of China's foreign exchange earnings. Prior to the 1980s, generally about one-quarter to one-third of the country's hard foreign currency earnings were generated from exports to Hong Kong. Tiny as the British enclave may be in geographic terms, and with a population of only six million, it has nonetheless always been a very important market for China's food and food-processing industries, as well as textile and clothing manufacturers. Sales to Hong Kong have earned the Chinese government the bulk of the hard currency needed to finance her enormous import bills incurred with major western suppliers of steel, machinery and high-tech products. This specific role played by Hong Kong in financing China's industrialization programme is of course widely understood. Yet hardly any observers have come to realize that the bulk of China's food and clothing exports to Hong Kong represent none other than Hong Kong's wage outlay on labour inputs necessary for sustaining its production of exports, which are, as is well known, overwhelmingly destined for the major Western markets, the United States in particular.