IN CONFIDENCE
MARKET ASSESSMENT EXERCISE 1986
MARKET: HONG KONG
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SECTION I: Brief description of the type of market a) Political and economic factors
British Overseas Trade Board
Hong Kong will remain a British dependent territory until 1997 when it will become a special administratičg region (SAR) of the People's Republic of China. Under the arrangements set out in the UK-China Joint Declaration on the Future of Hong Kong, the high degree of autonomy which Hong Kong currently possesses in economic and trade policy, and its western capitalist system and way of life, are to remain unchanged for at least 50 years after 1997. However some anxieties about the long term future remain, and could increase as 1997 approaches.
Hong Kong has no natural resources; but its excellent harbour and strategic location and the dynamism and business flair of its (mainly Chinese) population have combined to make Hong Kong a major manufacturing, commercial and financial centre in SE Asia. Hong Kong's economy still heavily depends on experts, particularly of textiles and clothing which still account for some 40% of total domestic exports. In 1985 HK's domestic exports declined by about 5% in real terms; this partly explains the relatively very low GDP growth rate of 1% in 1985. In 1986, exports have recovered. The earlier forecast of a 4.5% increase in GDP has been revised to 5.6%. There is evidence that industrialists are beginning to invest in new sophisticated machinery.
b) ECGD Assessment
A highly rated market.
ECGD's high level of exposure is the result of its support for several major projects. All facilities available. The economy remains resilient and no change in policy is visualised.
c) Prospects for the future
ECGD's of HKG's?
The growth rate of HK exports depends largely on economic growth in the developed western markets (especially the USA which takes 45% of HK's domestic exports) and Hong Kong could be affected if the US enacted highly protectionist trade legislation. In the longer term, prospects depend very much on the maintenance of domestic and international confidence in the years up to 1997 and beyond, and within the electronics sector (HK's second largest export earner) a higher level of investment to produce more sophisticated products to offset the increased level of competition on more basic products from elsewhere within the Far East. HK's increasingly important trade with China is also susceptible to, fluctuations reflecting changing political and economic circumstances in China.