CRS-9
a retrenchment after some parcels of choice land had increased in value , FOUR
times in the four years prior to mid-1981. High interest rates and
the slowdown in the world business helped to explain the property market's
decline. All these factors impacted on the Hong Kong Stock Market and on
some of Hong Kong's risk-taking Deposit Taking Companies (quasi-banks)
which had invested particularly heavily in real estate.
A pickup in world trade this year is expected to put new vigor into
Hong Kong's important light manufacturing sector. Meanwhile, the colony's
largest financial institutions, led by the Hong Kong Shanghai Bank, have
taken steps to help shore up the value of the Hong Kong dollar and have
signaled new confidence in the territory's future by offering 20 year mort-
gages for properties located in areas due to revert to PRC control by 1997.
Nevertheless, the continued decline in the value of the Hong Kong dollar
during 1983 apparently caused partly by recent efforts by middle class
Hong Kong investors to move their holdings out of Hong Kong dollar domin-
ated accounts and into other investments has remained a cause of strong
concern. If the decline degenerates into a run on the dollar, resulting in
its collapse, it could seriously undermine Hong Kong's future viability as
an independent economic entity. It also might prompt the PRC to move rapidly
to intervene and take more direct control, well before 1997, in order to
halt the decline in value of the territory caused by the dollar's collapse.
At present, many Hong Kong observers would prefer to see the British
administration remain in Hong Kong, but they appear to judge that China's
recent strong position on the need to reassert Chinese sovereignty makes
that prospect remote. Assuming that China will regain at least de jure
sovereignty by 1997, therefore, they judge that several conditions are
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