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SCMP Reporter

HONG KONG'S gross domestic product growth rate could be cut by 2.1 to 3.0 percentage points if the United States fails to renew China's Most Favoured Nation (MFN) status, the secretary for trade and industry says.

  Denise Yue Chung-yee yesterday unveiled the latest government assessment of the possible economic damage that Hong Kong would have to face if the mainland lost its MFN status, before heading to Washington today on a lobbying mission.

   Ms Yue said that failure to renew China's MFN status could cost Hong Kong 6 to 8 per cent of its overall trade flow, worth $161 billion to $234 billion.

  The import and export sector would face the most severe damage, she said.

  MFN status allows for Chinese goods imported into the United States to be charged the lowest possible tariff rates.

  A decision on its renewal is due on June 3.

  If it was withdrawn, an estimated $66 to $96 billion worth of re-exports from China to the United States through Hong Kong would be lost, Ms Yue said.

   The sum represented 31 per cent to 45 per cent of the total re-exports between the two countries handled by Hong Kong, she said.

  Trade income would be slashed substantially, with an expected loss of $23 billion to $34 billion.

  A total of 61,000 to 89,000 of jobs would be lost.

  Ms Yue said there would be further losses of income and jobs if China cut back its own imports from the United States in retaliation for non-renewal.

   The secretary is today leading a high-level delegation of officials and local business leaders to Washington in order to lobby for an unconditional renewal of China's MFN status.

  The 10-member party will attend the 11th plenary session of the Hong Kong and the United States Economic Co-operation committee, a key bilateral trade conference.

  'The situation is more complex this year with the [US] presidential and congressional elections coming up,' Ms Yue said.

   'Election politics may affect the consideration of MFN,' she said.

  'Overall Sino-US relations are obviously related to the MFN question . . . We shall argue strongly that the MFN issue should not be linked with non-trade issues,'she said.

  Despite the growing concerns, the government did not have a contingency plan to mitigate the expected economic damage, she said.

   'Under a free market economy, it is impractical for Hong Kong to have a contingency plan,' she said.

  The issue of MFN renewal was a bilateral trade matter between the US and Chinese governments, outside the Hong Kong Government's control.

 'We should appreciate that the financial secretary has placed emphasis on policies to help the manufacturing and exporting services,' the trade and industry secretary said.

  Meanwhile, China's 1995 trade surplus of $16.7 billion could be erased this year if export growth was outpaced by imports, the Financial News reported.

   The paper said China's imports were likely to grow 20 per cent in 1996 to about $160 billion, while export growth may only reach 8-10 per cent, or $155-160 billion.



End to MFN could slash HK growth, Yue warns