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of the Administration that would operate this system and its freedom to act without regard to political pressure from outside, other than perhaps in matters of security and foreign relations, in which Hong Kong has in any case never been able to pursue an independent line since the foundation of the Colony in 1841. At this stage, it is clearly premature to speculate just how this might be achieved. But as a result, Hong Kong society is clearly grouping itself into opposing camps of optimists and pessimists, most of whom would classify themselves as realists. The latter bluntly believe that no matter how ingenious the system may be, it will by the nature of things fail, or at least within time succumb to pressures from within China. The optimists point to the fact that Hong Kong's success has been largely won as the result of local Chinese application, talent, initiative and hard work. If Hong Kong people have been able to do this within the framework of what already is an alien system it is claimed - then it should not be difficult for Chinese and Chinese to work together to ensure that they get the future system right.
What is interesting is that neither group falls into clearly predictable patterns with, for example, the expatriates believing all is foredoomed, while the local people look forward with anticipation. The groupings cut clearly across all classes, races and backgrounds. Even those with considerable experience of working with the People's Republic are divided in their views.
Opportunities in medium term
At present, it would clearly be wrong to attempt to edge CBI members, or any other British businessman, towards either camp. But for the medium term at least it seems realistic to continue to look towards Hong Kong for opportunities. Firstly, despite the rumours, it is hard to establish that there has been any mass outflow of
capital. Indeed, 1982, according to Government pronouncements, saw a net inflow of capital. The position may however have been distorted by short term inflows from the rest of the world masking the effects of a longer term move into a rising US dollar. Such withdrawal as there has been has tended to be small scale individual investment, most typically into overseas property in Canada, Australia and the US. This was a trend that was well established before Mrs Thatcher visited Peking. Nor has any large liquidation of corporate investment occurred. And as far as incoming overseas investment is concerned, 1982 was a record year according to Government spokesmen.
Figures produced by the US Department of Commerce show that up to end-1981 (1982 figures not yet available), Hong Kong was easily maintaining its position as the principal area for US direct investment among Asia/Pacific developing countries. This investment was moreover spread evenly across the board, in manufacturing, in trade, in finance and services, and in energy. The lure of China Sea oil suggests that this will continue, despite any political stormclouds. The investment in this is expected to be US$50 billion within ten years. Part of this must inevitably rub-off on Hong Kong.
Hinderance of weak dollar
Much must depend on the speed with which Hong Kong can pull itself from recession, and many commentators believe that a weak dollar is currently the greatest hinderance to this, since despite its short term advantage in keeping down export prices, the import-dependent nature of the economy means that Hong Kong cannot continue to remain competitive if prices of materials rise exhorbitantly and simultaneous consumer price inflation leads to wage pressures. Once the HK$ rises or at least stabilises - progress should be apparent.
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There is therefore no immediate need for alarm