CONFIDENTIAL
153646
MDHIAN 778
FOR JAGUAR). ITALY NEXT IN LINE BEHIND US, OF THE COMMUNITY COUNTRIES, INCREASED ITS EXPORTS IN 1989 TO HONG KONG BY NEARLY 30 PER CENT WHILE OURS INCREASED BY 8 PER CENT. FRENCH CONSTRUCTION COMPANIES ARE MORE VISIBLE IN HONG KONG THAN THOSE FROM BRITAIN.
5. BRITAIN IN TURN IS ALSO A VERY MAJOR MARKET FOR HONG KONG. IN 1989 HONG KONG'S EXPORTS TO BRITAIN, TO THE VALUE OF POUNDS STERLING 2 BILLION, WERE ALMOST TWICE THOSE OF BRITAIN'S EXPORTS TO HONG KONG. THIS IS A READY ANSWER TO THE CHARGE, OCCASIONALLY HEARD THAT BRITAIN IS TRYING TO EXPLOIT HONG KONG ECONOMICALLY IN ITS LAST YEARS AS A COLONY.
6. HONG KONG'S ECONOMY
HONG KONG'S ECONOMY HAS SLOWED SIGNIFICANTLY IN RECENT MONTHS. GDP GROWTH WAS 2.5 PER CENT IN 1989 AND A SIMILAR GROWTH IS PREDICTED FOR 1990. THE MAIN WORRY IS INFLATION AT 10 PER CENT. THE GOVERNMENT HAS FORECAST THAT
THIS WILL FALL TO 8.5 PER CENT DURING THE YEAR, BUT IT IS HARD TO SEE THE REASONS FOR EVEN THIS MODEST OPTIMISM. THE INFLATION IS DRIVEN BY MASSIVE RENT INCREASES (INCREASES OF 200 TO 300 PER CENT ARE COMMON) THAT AFFECT COMMERCIAL AND RESIDENTIAL PROPERTY ALIKE, AND EVEN MORE BY SALARY AND WAGE INCREASES. THE VERY TIGHT LABOUR MARKET CEMPLOYMENT IS LESS THAN 2 PER CENT) MEANS THAT ALMOST ANYONE CAN INCREASE HIS SALARY BY CHANGING JOBS. LEADING MEMBERS OF GOVERNMENT HAVE HAD SALARY INCREASES OF AROUND 30 PER CENT IN THE LAST YEAR AND MORE THAN 50 OF THEM NOW RECEIVE SALARIES HIGHER THAN THAT OF BRITAIN'S PRIME MINISTER. THE INTEREST BASE RATE HAS JUST BEEN INCREASED BY 1 PER CENT TO 11 PER CENT. HONG KONG IS NO LONGER A CHEAP MANUFACTURING CENTRE AND TO COUNTER THIS THE GOVERNMENT SEEKS TO ENCOURAGE MANUFACTURERS TO MOVE UP MARKET WITH HIGHER QUALITY PRODUCTS.
THE TOURIST TRADE, IMPORTANT FOR HONG KONG'S MASSIVE RETAIL OUTLETS AND LARGE HOTEL INDUSTRY, DECLINED SHARPLY AFTER THE EVENTS IN JUNE 1989 IN CHINA, AND HAS ONLY PARTIALLY RECOVERED SINCE.
7. NEVERTHELESS HONG KONG HAS MANY ASSETS: A VERY HARD WORKING AND SKILLED LABOUR FORCE, ENTERPRISING, ADAPTABLE AND VERY WEALTHY ENTREPRENEURS, AND WELL DEVELOPED AND NURTURED EXPORT MARKETS. EVEN IN THE RELATIVELY POOR YEAR OF 1989, DOMESTIC EXPORTS INCREASED BY 14 PER CENT, AN INTERNATIONAL CONSORTIUM ANNOUNCED IT WOULD INVEST NEARLY US DOLLARS 1 BILLION IN HONG KONG'S FIRST CABLE TV NETWORK, A US DOLLARS 1.34 BILLION LOAN RAISED BY AN INTERNATIONAL BANKING CONSORTIUM TO FINANCE A CONTAINER PORT EXTENSION WAS OVER SUBSCRIBED, AND THE LAST MAJOR DEVELOPMENT SITE IN CENTRAL DISTRICT
2
PAGE
CONFIDENTIAL