This paper consists of three parts: (1) an analysis of the results of research on the development of indirect trade between the ROC and the PRC via Hong Kong for the period 1978-1986, together with a calculation of the reexport interdependency between the ROC and the PRC; (2) the use of input-output methodology to estimate the degree of influence of such indirect trade on the ROC’s industries, account being taken of increments in output and employment levels; (3) based on the assumption of an absence of hostility between the ROC and the PRC, the identification of industries as candidates for such trade between these two areas, and a simulation of the kinds of impacts such trade would have on the output and employment levels of ROC industries. It should be noted that detailed trade data for the PRC from the U.S. A.’s Central Intelligence Agency are only available for 1984 for the purposes of our simulation. The major conclusions drawn are as follows:
(1) According to the Hong Kong governmental statistics, indirect trade between the ROC and the PRC, as shown in Table 1, has rapidly increased between 1978 and 1986 in both directions.
(2) The major direction of such trade is from the ROC to the PRC chiefly due to the different trade policies of the two economies. Although the PRC openly encourages such trade, the ROC expressly forbids the importation of PRC goods, but in practice it does not interfere with the export of its goods to the PRC.
(3) In 1978-80 about 6% of the ROC’s exports to Hong Kong were reexported to the PRC. The corresponding figures for 1981-83 and 1984-86 were 14% and 28% respectively. (4) In 1978-80 about 2% of the PRC’s exports to Hong Kong were reexported to the ROC. In 1981-83 the proportion remained at 2% but feel slightly to 1.67% in 1984-86.
