CRS-12
in mid-1981.
Press reports speculated about alleged large scale "flight" of
capital from Hong Kong to other economic centers in East Asia; spoke about
wealthy Hong Kong entrepeneurs obtaining exit visas in case rapid escape
were necessary to safe havens abroad; and reported that these economic
leaders were determined to limit their future exposure in the colony while
increasing investment abroad.
Since the turn of the year, however, analysis indicates that the de-
cline in Hong Kong's economic fortunes had less to do with continued nerv-
ousness over the colony's future status and more to do with other economic
difficulties stemming from an inflated real estate market and the global
recession. Thus, property values were seen as overdue for a retrenchment
after some parcels of choice land had increased in value four times in the
four years prior to mid-1981. High interest rates and the slowdown in the
world business helped to explain the property market's decline. All these
factors impacted on the Hong Kong Stock Market and on some of Hong Kong's
risk-taking Deposit Taking Companies (quasi-banks) which had invested
particularly heavily in real estate.
A pickup in world trade this year is expected to put new vigor into
Hong Kong's important light manufacturing sector. Meanwhile, the colony's
largest financial institutions, led by the Hong Kong Shanghai Bank, have
taken steps to help shore up the value of the Hong Kong dollar and have
signaled new confidence in the territory's future by offering 20 year mort-
gages for properties located in areas due to revert to PRC control by 1997.
Nevertheless, the continued decline in the value of the Hong Kong dollar
during 1983 apparently caused partly by recent efforts by middle class
Hong Kong investors to move their holdings out of Hong Kong dollar domin-
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