1. For most purposes of this article we define “Greater China” in terms of the two southern provinces of Guangdong and Fujian, Hong Kong and Taiwan. Occasionally, however, our analysis extends to mainland China as a whole.

2. Global trade grew by 7.93% p.a., Taiwan's by 13.61%, Hong Kong's by 16.00%. See International Monetary Fund (IMF), International Financial Statistics Yearbook, 1992 (hereafter ISFY 1992) (Washington, D.C.: IMF, 1992), pp. 108–115Google Scholar. Note that in 1992 China's merchandise trade expanded by a further 22% (State Statistical Bureau (hereafter SSB), Zhongguo tongji zhaiyao 1993 (Statistical Survey of China, 1993) (Beijing: State Statistical Publishing House, 1993), p. 101Google Scholar.

3. IMF data for China reveal a reversal of the pattern of trade expansion in the first and second halves of the 1980s. In the earlier period, import growth sharply exceeded that of exports; latterly, the opposite was the case. In Hong Kong and Taiwan the second half of the decade witnessed an acceleration of growth of both exports and imports.

4. See, for example, Sung, Yun-wing, The China-Hong Kong Connection: The Key to China's Open Door Policy (Cambridge: Cambridge University Press, 1991)CrossRefGoogle Scholar.

5. This role is a major complicating factor in compiling and interpreting trade statistics between China and the region. Goods flowing from (to) Hong Kong to (from) China comprise some which are part of a purely bilateral trade flow and others which have their origin or destination in a third country. It is important to distinguish between the two categories and to allow for a “re-export margin,” added to goods which have passed through Hong Kong. In this article re-exported Chinese imports into Hong Kong are discounted on the basis of an assumed re-export margin of 25%; for commodities coming from other countries, a rate of 14% is thought more appropriate.

6. These estimates are derived from 1930s data, cited in Sung, Yun-wing, The China Hong Kong Connection, p. 19Google Scholar.

7. Including re-exports.

8. Calculations suggest that it would have declined by about 3 percentage points.

9. Kong, Hong Census and Statistics Department, Hong Kong Monthly Digest of Statistics (hereafter HKMDS), 01 1981, pp. 19–21, January 1987, pp. 19–22, and December 1991 pp. 19–22Google Scholar. By the beginning of 1993 re-exports accounted for 78% of Hong Kong's total exports (Kong, Hong, South China Morning Post (hereafter SCMP), 14 05 1993Google Scholar, which also noted that “… the market in China for goods re-exported through Hong Kong is now almost double the size of the United States market…”).

10. China's share of Hong Kong imports rose in every single year between 1978 and 1991, from 19% to 38%. HKMDS, January 1981, pp. 19–21, January 1987, pp. 19–22, and December 1991, pp. 19–22.

11. Re-exported imports to countries other than China showed a similar surge during the first half of the decade, but thereafter stabilized. Ibid.

12. To state it differently, in 1980 re-exports of Chinese imports accounted for 26% of all Hong Kong's re-exports; by 1990 the figure had risen to 56%.

13. The extent of the decline depends critically on assumptions made about the value of the re-export margin.

14. The very fact of such integration does, however, make interpretation of re-export data hazardous. Conventional practice regards any movement of goods across a border as trade. But cross-border shipments for processing purposes will lend an inflationary bias to measures of the volume of trade. Take the case of imported components from Taiwan, re-exported from Hong Kong to Guangdong, and subsequently shipped back in processed form (as Chinese exports) for re-export elsewhere (perhaps even to China itself!). Such a process will earn several separate entries in customs statistics, threatening to disguise the true value-added element embodied in each stage. The extent of the underlying interpretative problem is suggested by the finding that by 1991 the share of outward-processing trade in Hong Kong's gross imports from China had reached 67.6%.

15. These and other estimates cited in this paragraph are derived from statistics in HKMDS.

16. It increased from US$1.11 to 72.54 million between 1978 and 1991.

17. In the early 18th century some 3,000 small-scale boats plied across the Taiwan Straits, carrying large quantities of sugar and rice to the mainland in exchange for cotton cloth, silk, paper and timber. See Shulian, Zhouet al. (eds.), Haixia liangan ji Xianggang jingji hezuo qianjing (Prospects for Economic Co-operation across the Taiwan Straits and with Hong Kong) (Beijing: Economic Management Publishing House, 1991), p. 156Google Scholar.

18. Ibid. pp. 156–57.

19. The estimates are “suggestive” in the sense that they are derived from data which only show indirect trade between Taiwan and the Chinese mainland, conducted through Hong Kong. Such trade dominates transactions across the Taiwan Straits, but also underestimates their true extent by excluding indirect trade through other countries (for example, Japan and Singapore), as well as genuinely direct – but minor – trade with coastal mainland ports. See Chang, Gao, Zongda, Yanet al. (eds.), Liangan jingji jiaoliu jin xiankuang ji fazhan chushi yanjiu (A Study of Economic Exchanges Across the Taiwan Straits: the Current Situation and Prospects for Future Developments), (Taipei: Zhonghua Institute for Economic Research, 1992), pp. 14–16Google Scholar.

20. Notice that in 1991 alone the PRC's share of all Taiwan's exports rose from 4.8 to 6.13%.

21. Kong, Hong, Ta Kung Pao (Ta Kung Daily) (hereafter TKP), 30 12 1992Google Scholar.

22. Sources as in Table 4.

23. Since the late 1980s Taiwan's trade balance has also improved with ASEAN coun-tries, but deteriorated against the United States. The changing pattern is not coincidental. On the one hand, growing American protectionism has forced Taiwan to diversify its export markets; on the other, increasing FDI by Taiwanese entrepreneurs in both the Chinese mainland and ASEAN countries has given added impetus to trade expansion with these countries.

24. TIR is given by the following formula:

TIR = X_iJ/X_i ÷ M_j/M_w

where X_ij are the exports of country i to country J; X_i are the total exports of country i; M_j are the total imports of country J; and M_w are global imports.

25. That is, TIR ≥ 1. See above.

26. From 18.9 (1980) to 8.52 (1989).

27. By the end of the 1980s such shipments included a large proportion of goods destined for outward processing.

28. Also relevant are data cited in TKP, 31 May 1993.

29. Between 1980 and 1991 the share of primary products in China's total exports fell from 50.2% to 22.5%, whilst that of manufactured goods (mainly produced by labour-intensive methods) rose from 49.8% to 77.5% (SSB, Zhongguo shangye waijing tongji ziliao, 1952–1988 (Statistical Materials Relating to China's Internal and External Trade, 1952–1988) (hereafter ZGSYWJTJZL) (Beijing: State Statistical Publishing House, 1990), p. 430Google Scholar; and State Statistical Bureau, Zhongguo tongji nianjian, 1992 (Chinese Statistical Yearbook, 1992) (hereafter ZGTJNJ) (Beijing: State Statistical Publishing House, 1992), p. 630)Google Scholar. Since 1970 the share of labour-intensive manufactures in Hong Kong's exports has fallen steadily (e.g. from 75% to 55% during 1970–87) in favour of an expansion of capital-intensive goods (up from 21% to 41%) (data cited in Garnaut, Ross, Australia and the Northeast Asian Ascendancy (Canberra: Australian Government Publishing Service, 1989), p. 54)Google Scholar. The same period saw the simultaneous expansion of the export shares of labour and capital-intensive products in Taiwan, although it is only in recent years that the latter category has come to predominate (ibid.).

30. During the 1980s the proportion of total Chinese food exports retained in Hong Kong fell by more than half.

31. Ironically, more and more goods labelled “Made in China” have in fact been produced by subsidiaries of Hong Kong parent companies, sited in Guangdong.

32. Yun-wing Sung, The China-Hong Kong Connection, ch. 7.

33. A kind of technological complementarity is also evident. That Hong Kong's textile machinery does not embody the most up-to-date technology makes it appropriate for use in labour-intensive operations, such as China's resource-endowment favours.

34. Although their relative importance did decline, in 1990 such products still accounted for 76.69% of Taiwan's exports to China.

35. The share of chemicals and related exports rose from 2.24% to 12.65% between 1985 and 1990.

36. See Nobuo, Maruyama (ed.), Kanan keizaiken: Hirakareta chiiki shugi (The South China Economic Region) (Tokyo: Institute of Developing Economies, 1992), pp. 299–302Google Scholar for a useful summary of cross-Straits trade policies emerging from Beijing and Taipei between 1977 and 1991.

37. As a proportion of total PRC exports to Taiwan, goods under SITC 0 and 2 fell from 74.93% to 31.85% (1985–90), whilst those under SITC 6, 7 and 8 increased from 13.39% to 54.26%.

38. Notice too that as Taiwan has become increasingly involved in southern China, its investment in Hong Kong has risen dramatically (in 1991 Hong Kong was the destination of 43% of all Taiwanese FDI in Asia). This sharp rise no doubt reflects the need to make appropriate servicing arrangements in Hong Kong for the operations of subsidiary companies in China.

39. See, for example, Day, Alan J. (ed.), The Annual Register, 1992 (Harlow, Essex: Longman Group, 1991), p. 360Google Scholar; and British Broadcasting Corporation, Summary of World Broad-casts, Part 3: The Far East (Weekly Economic Report), FE/W0244, 19 07 1992, p.A/1Google Scholar.

40. SSB, Quanguo gesheng zizhiqu zhixiashi lishi tongji ziliao huibian, 1949–1989 (Compilation of Historical Statistics for Every Province, Autonomous Region and Directly-Administered Municipality in China, 1949–1989) (Beijing: State Statistical Publishing House, 1990), pp. 434Google Scholar and 618. These figures imply an average addition of some 400,000 (Fujian) and 800,000 (Guangdong) labour recruits each year. Notice too that secondary and tertiary-sector employment growth in both provinces has easily outstripped that of the primary sector (ibid.).

41. Guangdong recorded an average annual rate of growth of 20.27% during 1978–1991 (Guangdong Provincial Statistical Bureau, Guangdong tongji nianjian 1992 (Guangdong Province Statistical Yearbook 1992) (hereafterM GDTJNJ 1992) (Beijing: State Statistical Publishing House, 1992), p. 342)Google Scholar; the corresponding figure for Fujian was even higher (Fujian Provincial Statistical Bureau, Fujian tongji nianjian 1992 (Fujian Province Statistical Yearbook 1992) (hereafter FJTJNJ 1992) (Beijing: State Statistical Publishing House, 1992))Google Scholar. Fujian's faster trade growth needs to be set against a much smaller base level than in Guangdong. Compare these figures with the estimates for Hong Kong and Taiwan presented earlier (see n. 2).

42. In 1970 Guangdong accounted for 19.2% of all China's exports; in 1991 the corresponding figure was 19.0% (GDTJNJ 1992, p. 342 and ZGSYWJTJZL, p. 502). Note that preliminary estimates indicate that Guangdong exports grew by a further 32% in 1992 (TKP, 1 January 1993).

44. To cite just one example: available evidence suggests that without Guangdong and Fujian, China's trade surplus in 1990 would have been reduced by 70%!

44. During the same period Shanghai's share of imports rose from 1.2% to 3.6%. By way of comparison, Guangdong's share of China's trade increased from 1.78% to 13.34% (imports), and from 12.11% to 19.03% (exports). The corresponding increases in Fujian were from 0.71% to 2.21% (imports), and from 2.01% to 4.07% (exports). (National data from ZGSYWJTJZL, pp. 432–33 and 438–39; Shanghai data from Shanghai Municipal Statistical Bureau, Shanghai tongji nianjian 1992 (Shanghai Statistical Yearbook, 1992) (Beijing:, State Statistical Publishing House, 1992), pp. 349Google Scholar and 352. The sources for Guangdong and Fujian estimates are shown at Table 4, below. However, these figures conceal the fact that the shares of both Guangdong and Fujian in total exports declined between 1980 and 1985, thereafter rising in a spectacular fashion. Given the more consistent downward trend in Shanghai, it is clear that during the early 1980s the export performance of other parts of China outstripped that of all three regions. In this respect, it is noteworthy that in 1985 Liaoning's export share was the highest in the country (19.34%), even though just three years later its contribution had almost halved. Shandong was another province which experienced a significant relative decline (ZGSYWJTJZL, p. 510).

45. Average growth during 1985–1991 was 27.94% p.a. The estimates show imports to have grown by 17.44% p.a. during 1985–1991.

46. Guangdong's export surplus vis-à-vis Hong Kong almost doubled in two years, rising from US$2,960 to $5,290 million between 1989 and 1991.

47. For 1985–1990 the corresponding figure is over 33% p.a.

48. Average annual growth of imports from Hong Kong was only 14.23% during 1985–1991, compared with 42.90% during 1980–1985.

49. This phrase (literally “three foreign-funded”) refers to the activities of equity and contractual joint ventures and firms wholly under foreign ownership.

50. That is, processing operations based on the provision of raw materials, assembly operations based on the supply of components, and manufacturing based on supplied designs (sanlai); and exchange through the practice of compensation trade (yibu).

51. The difference between total exports and those associated with commissioned processing, compensation trade and FDI ventures provides a measure of merchandise exports.

52. No doubt the figure would be even higher if provincial exports to Hong Kong alone were nsidered.

53. The available evidence also suggests that Taiwan's relationship with southern China has mirrored that of Hong Kong. Since shipments between Guangdong and Fujian, and Taiwan must formally pass through Hong Kong, the extent of Taiwan's linkages with the two Chinese provinces is partly concealed within the British Colony's own statistical records.

54. TKP, 1 January 1993, stated that China's trade balance with the USA had declined by 5% in 1992. However, another Hong Kong source subsequently revealed that the American deficit had further widened during the early months of 1993 (SCMP, 20 May 1993).

55. In the context of the accelerated re-location of manufacturing activity on the Chinese mainland, specific mention should be made of the Plaza Accord (1985), which forced Japan and Asian NIEs to appreciate their currencies against the U.S. dollar and thereby encouraged large-scale transfers of manufacturing operations within the Asia-Pacific Region.

56. For a detailed analysis of quantitative trends in foreign investment and its distribution amongst “economically opened coastal areas” in China, as well as consideration of its impact on output and income growth, see Kueh, Y. Y., “Foreign investment and economic change in China”, The China Quarterly, No. 132 (09 1992), pp. 637–690CrossRefGoogle Scholar.

57. But in terms of AFI stock growth, Fujian and Shenzhen are almost identical.

58. The figures for investment in all China are 53.2% p.a. (FDI stock) and 55.2% p.a. (AFI stock).

59. For an elaboration of this point, see Kueh, , “Foreign investment and economic change,” pp. 652–55Google Scholar. See also TKP, 10 February 1993, which argues that although the Pearl River Delta remains the principal destination of Hong Kong investment, signs of a northward extension of capital flows (to Shanghai, Jiangsu, Zhejiang, etc.) are also in evidence.

60. The momentum of Taiwanese investment in mainland China accelerated after an official government declaration (Taipei, November 1987) that Chinese from Taiwan would be allowed to visit relatives across the Taiwan Straits. The continued and active interest shown by Taiwanese entrepreneurs in seeking investment opportunities in the PRC eventu-ally brought official approval (1991) of investment conducted “through a third country.” For further details, see T. B. Lin, “Economic nexus between the two sides of the Taiwan Straits” (paper presented at Conference on the Economic Development of ROC and the Pacific Rim in the 1990s and Beyond: Taipei, 25–29 May 1992); and Charng Kao, “Economic interaction between the two sides of the Taiwan Straits” (paper presented at Conference on the Evolution of Taiwan within a New World Economic Order: Taipei, May 1993).

61. TKP, 2 June 1993.

62. See Kao, Charles H. C., Lee, Joseph S. and Lin, Chu-chia Steve, Taiwan tupuo: liangan jingmao zhuizhong (An Empirical Study of Taiwanese Investment in Mainland China) (Taipei: Taipei Commonwealth Publishing Company Ltd.), p. 12Google Scholar. The actual number of Taiwanese firms then operating in mainland China was thought to be between 3,000 and 3,500. Different estimates again are available in other Taiwanese sources. For example, the prestigious Chung-Hua Institution for Economic Research suggested that as of April 1993, some 2,700 Taiwanese firms were operating on the mainland with a total investment of US$3.7 billion Pei, (King and Chia-xian, Hsu, “Trends and prospects of economic interaction between the two sides of the Taiwan Straits” (paper presented at a Symposium on the Current State of Economic Management in the Mainland, Taiwan and Hong Kong: Hong Kong, 12 1991))Google Scholar. King and Hsu also give a cumulative total of US$100 million in Taiwanese investment in mainland China for 1979–1987. This figure increased by US$300 million (1988) and 600 million (1989) (see Lin, “Economic nexus”) to raise the cumulative total to US$1 billion. None of these figures is compatible with the official PRC statistics. The discrepancy is likely to reflect differences in the definition of FDI of Taiwanese origin (which may or may not include investment originating in Taiwanese firms based outside Taiwan -e.g. in Hong Kong or South-east Asia – and which have become detached from their parent companies). The cumulative total given in the MOEA 1991 survey (US$750 million) seems most reconcilable with the incomplete official PRC estimates shown in Table 7.

63. For example, any attempt to estimate FDI's contribution to China's domestic capital formation and GNP growth should take account of possible distortions arising out of erratic exchange rate adjustments in converting foreign capital into renminbi (RMB) equivalent. See Kueh, , “Foreign investment and economic change,” p. 657Google Scholar.

64. These estimates were obtained by applying Hong Kong's shares (HKS) in the total intake of foreign investment of all kinds (FDI and capital borrowing) received by Guangdong, Shenzhen and Fujian to the respective percentage contributions of all foreign investments to total investment in fixed assets (CFA) in the corresponding areas. HKS are calculated from the absolute dollar figures shown in Table 7 and in Kueh, , “Foreign investment and economic change,” Appendix A, p. 683Google Scholar. CFA are given in ibid. p. 656.

65. For an elaboration of this point, see Kueh, , “Foreign investment and economic change,” p. 658Google Scholar.

66. Tang, K.Y., ”Outward processing in China and its implications for the Hong Kong economy” (paper presented at Symposium on Asian Newly-Industrializing Economies: Past Success and Future Challenge: Hong Kong, 05 1991)Google Scholar.

67. Kao, , Lee, and Lin, , Taiwan tupuo, pp. 90–91Google Scholar.

68. See Kueh, Y. Y., “The Maoist legacy and China's new industrialization strategy”, The China Quarterly, No. 119 (09 1989), pp. 422–24CrossRefGoogle Scholar.

69. Shenzhen seems to be the only exception, its tertiary share in GDP having fallen from 45% (1980 and 1985) to 35% (1991). This decline was offset by a rapid increase in industry's GDP share (from 26% to 60%, 1980–1991).

70. We are grateful to Joseph C.H. Chai for raising the points outlined in this paragraph.

71. These are the Hong Kong government's own estimates, made in March 1992 in the wake of the annual U.S. review. The same report predicted that China's loss of MFN status would reduce Hong Kong's GDP growth in 1992 (forecast at 5%) by half. See SCMP, 14 March 1992; also The China Business Review, May-June 1992, p. 14. For consideration of the impact on the USA of a decision to revoke China's MFN status, see SCMP, 23 May 1993.

72. But see also below.

73. The capital/labour ratio provides one measure of the extent of industrialization.

74. See Yin-ping Ho, Trade, Industrial Restructuring and Development, ch. 10.

75. Lin, Yuh-jiun and Huang, Chin-shu, “Development of trade and investment between the two sides of the Taiwan Straits” (paper at Conference on Global Interdependence and Asia-Pacific Cooperation: Hong Kong, 8–10 06 1992), pp. 8 and 10Google Scholar.

76. See Kao, , Lee, and Lin, , Taiwan tupuo, p. 42Google Scholar.

77. Ibid. p. 65.