Your ref: Our ref: MMF/
9 June 1992
Pa
Насим кне
Foreign & Commonwealth
Office
London SWIA 2AH
Telephone: 07270-2727
fax: 270-3369
25
Richard Graham Esq
British Consulate-General For Macao
Hong Kong
Dear Richard,
MACAU AND HONG KONG ECONOMIES
HKC 02013
1992
CM
1. Thank you for your letter of 11 May on the Macau economy, and for a copy of 1991 Macau trade statistics sent previously.
2. Though UK interest in the Macau economy may be slight (despite being the largest EC exporter in 1991) I thought your letter and its attachment demonstrated some interesting parallels with the Hong Kong economy.
Macau's
3. The performance of own-exports in both economies is very similar - Hong Kong own export value rose by 2 per cent, fell by two per cent in 1991. But Hong Kong has а more diversified export base (one third exports are textiles compared to Macau's three quarters) and has maintained rapid growth in some non-textiles categories like electronic components. By contrast a number of important Macau non-textiles exports toys) look as if they are in terminal decline owing to Chinese competition. Also Macau exports little of its own to the fast- growing south China markets, in contrast to Hong Kong where China is close to becoming the largest market for own exports.
4.
(e.g.
I also get the impression that once a producer leaves Macau for southern China that is the end of the story no re-export trade and allied services (at least until the airport is finished), no outward processing operations, and little in the way of profits, dividends and labour remittances flowing back from China. As the economic profile maintains, this is indeed a rather glooomy longer term outlook, particularly in comparison to Hong Kong. On the other hand it is also to be expected as Macau's lower income, technological sophistication and labour productivity make it more vulnerable to competition from China.
5.
But a number of the other economic indicators, at least in the short term, do not look so bad. Foreign assets of the banking system are growing rapidly, which suggests the overall balance of payments is strong. Indeed with gambling profits up 25 per cent in the nine months to September 1991, I suspect there is a very healthy services trade surplus. Also hotel occupancy at around 80 per cent looks more robust than in Hong Kong. With negative real interest rates (like Hong Kong) there
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