CONFIDENTIAL
037262
MDHI 2677 ·
BUSINESS BOOMING
3. THE BIGGEST SOURCE OF CONFIDENCE IS THE SHARP CONTRAST BETWEEN HONG KONG'S GROWTH PROSPECTS AND THE SLUGGISH PERFORMANCE WHICH CONTINUES TO AFFLICT NORTH AMERICAN AND WEST EUROPEAN ECONOMIES. OPTIMISM ABOUT THE TERRITORY'S UNDERLYING ECONOMIC STRENGTH WAS REINFORCED IN JULY BY THE FIRST-EVER PUBLICATION OF DETAILS OF THE EXCHANGE FUND'S ASSETS. THE PUBLIC WAS PLEASANTLY SURPRISED BY THE DISCLOSURE THAT THESE AMOUNTED TO DOLLARS 236 BILLION AT THE END OF 1991, WITH HONG KONG RANKED TWELFTH IN THE GLOBAL LEAGUE OF FOREIGN CURRENCY HOLDINGS.
4. THE STOCK EXCHANGE HAS PROVIDED A GOOD GAUGE OF THE RESILIENCE OF BUSINESS SENTIMENT. ON 16 JULY THE HANG SENG SHARE PRICE INDEX REACHED A NEW RECORD (6162), 43 PERCENT ABOVE THE LEVEL AT THE START OF 1992. (THE INDEX DROPPED BACK TO 5986 ON 20 JULY AFTER SHARE PRICES FELL IN TOKYO, LONDON AND NEW YORK.) REPORTS OF CHINESE DISPLEASURE OVER THE AIRPORT AND FUTURE POLITICAL DEVELOPMENTS HAVE HAD LITTLE IMPACT. POSSIBLE PROBLEMS OVER US RENEWAL OF MFN STATUS FOR CHINESE EXPORTS (MANY OF THEM PRODUCED IN HONG KONG-OWNED FACTORIES) WERE ALSO SHRUGGED OFF. INVESTORS, BOTH LOCAL AND OVERSEAS, SEEM CONVINCED THAT BUSINESS WILL BOOM FOR HONG KONG THIS YEAR.
5. STOCK EXCHANGE SENTIMENT REFLECTS THE REALITY OF HONG KONG'S CONTINUED ECONOMIC EXPANSION. GDP GROWTH THIS YEAR SHOULD COMFORTABLY ACHIEVE THE OFFICIAL FORECAST TO 5 PERCENT. TOTAL EXPORTS ROSE DURING THE FIRST FIVE MONTHS OF THE YEAR BY 21 PERCENT COMPARED WITH THE SAME PERIOD IN 1991. THIS GROWTH WAS GENERATED ENTIRELY BY THE RE-EXPORT SECTOR. RE-EXPORTS GREW BY 31 PERCENT IN THE FIRST FIVE MONTHS OF THE YEAR, COMPARED WITH A 29 PERCENT GROWTH FOR THE WHOLE OF 1991 AND 20 PERCENT IN 1990.
THE CHINESE CONTRIBUTION
6.
MUCH OF HONG KONG'S GROWTH MOMENTUM COMES FROM TRADE AND INVESTMENT WITHIN CHINA. DENG XIAOPING'S SUCCESSFUL DRIVE TO MOBILISE SUPPORT FOR FURTHER ECONOMIC REFORMS BEGAN THIS YEAR IN GUANGDONG PROVINCE, HONG KONG'S IMMEDIATE NEIGHBOUR. HIS CAMPAIGN HAS GATHERED STEAM DURING THE SUMMER. THE TERRITORY'S BUSINESSMEN INCREASINGLY BELIEVE THAT, AS A RESULT, THEIR PROFIT OPPORTUNITIES WILL CONTINUE TO EXPAND, NOT JUST IN SOUTHERN CHINA BUT ALSO FURTHER AFIELD.
7.
IN THE MEANTIME, CHINA'S ECONOMIC GROWTH THIS YEAR HAS BEEN STRONG, FURTHER ENCOURAGING BUSINESS CONFIDENCE IN HONG KONG. IN
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