TNAG-1243-FCO40-1557-Future-of-Hong-Kong-1983 — Page 135

1

ESSENTIAL FACTS

CONFIDENTIAL

A.

FUTURE OF HONG KONG

1. Mr Donald is aware of the background to the future of Hong

Kong.

B.

HONG KONG ECONOMY

2. After a period of gradual decline the Hong Kong dollar fell

dramatically by 22% against the US dollar in the week beginning 16

September, reaching a record low of HK$9.80 on 24 September. On 25 September the Hong Kong Government issued a statement in support of

the dollar and hinted that they would take measures to stabilise the

currency if necessary. With effect from 17 October the Hong Kong

dollar was linked to the US dollar at the rate of HK$7.80. Within a

few days the market exchange rate had risen to this level and it has

remained very close to this since. This stability has been

reflected in a rise in the Hang Seng Index from a low of 690 on 4 October to 896 on 7 November.( now stands at 850-60).

3. During 1983 the Hong Kong economy has shown increasing evidence

of emerging strongly from the recession, despite the uncertainty about the territory's future and the consequential instability of

the Hong Kong dollar. Domestic export growth surged by 29% during the third quarter of 1983. This suggests that trade for the whole year could out-perform the revised forecasts of 10% growth in real terms. The third quarter upswing was led by exports to the US which rose by 49%. Exports to Britain increased by 32% and totalled Hong Kong $2.59 billion.

4. The Governor of Hong Kong's annual address to the Legislative

Council, given on 5 October, emphasised that the Government would not allow political uncertainties distract it from the task of

'making Hong Kong a better place in which the people of Hong Kong can live, work and bring up their children'. The Governor said that

his main aims for the coming year would be the further development of the education system and the formulation of a development

CONFIDENTIAL

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