XN000022-1981-10-29 — Page 18

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THURSDAY, OCTOBER 29, 1981

+THE DIFFICULTIES OF A TWO-TIER SYSTEM OF INTEREST RATES WILL, I AM SURE, ARGUE FOR THEMSELVES.

+ BUT LET US AT LEAST TAKE A GOOD, HARD LOOK AT IT, HE SAID.

EARLIER, MR CHEONG SAID HE DID NOT QUITE SHARE THE GOVERNOR'S OPTIMISM AT THE PRESENT TIME THAT +HONG KONG WILL EXPERIENCE YET ANOTHER YEAR OF PROSPERITY IN 1982+,

GIVEN THAT THE U.S. ADMINISTRATION HAS BEEN AT PAINS TO IMPRESS UPON OTHER GOVERNMENTS THAT IT WILL TAKE SOME TIME FOR ITS ECONOMIC AND MONETARY POLICIES TO BEAR FRUIT, HE SAID: +1 WOULD LIKE TO KNOW THE BASIS UPON WHICH THE CONSENSUS THAT 'THINGS ARE LIKELY TO BE BETTER IN 1982, NOT WORSE AND THAT 'THE RECESSION IS BOTTOMING OUT' WAS REACHED.+

FROM HIS TALK TO MANY BUSINESSMEN IN THE MANUFACTURING SECTOR ABOUT PROSPECTS FOR NEXT YEAR, MR CHEONG SAID HE HAD DETECTED +A MOOD OF DESPONDENCY+ HE HAD NEVER ENCOUNTERED BEFORE.

+THEY WOULD AGREE THAT, AS A SHORT-TERM PHENOMENON, THE RECENT DEPRECIATION IN THE EXCHANGE VALUE OF THE HONG KONG DOLLAR HAS MADE OUR EXPORT PRICES MORE COMPETITIVE- BUT THEY ARE IN MORE THAN TWO MINDS AS TO WHETHER THIS COULD LAST.+

BUT WHAT WAS EVEN MORE WORRYING IS THE GROWING RELUCTANCE OF MANY MANUFACTURERS TO INCREASE THEIR INVESTMENT IN PLANT AND EQUIPMENT.

+THIS IS WORRYING, PARTLY BECAUSE IT WILL RETARD THE PACE OF OUR RESPONSE TO ANY REVIVAL IN DEMAND IN OUR OVERSEAS MARKETS, AND PARTLY BECAUSE IT WILL SLOW DOWN THE RATE AT WHICH OUR MANUFACTURING OUTPUT MOVES UP-MARKET.

+1 CAN ONLY HOPE THAT THIS RELUCTANCE IS SHORT-LIVED.

+ IF IT PERSISTS, IT WILL DEFINITELY HAVE FAR-REACHING CONSEQUENCES FOR THE GROWTH RATE OF OUR ECONOMY, HE ADDED.

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