TNAG-1253-FCO40-1586-Third-countries-and-the-future-of-Hong-Kong-1983 — Page 176

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ECONOMIC AND FINANCIAL MATTERS [DEFENSIVE]

7.

Hong Kong's budget deficit in 1982/83 (the first since 1974/75) caused mainly by sharp fall in local property prices. Coincided with general recession and uncertainty over the

future.

8.

Stock market and Hong Kong dollar exchange rate have

fluctuated considerably over last year. This is to be

expected with no exchange controls in Hong Kong. Obviously world

economy including strength of US dollar, is important;

but worries about future a factor. Fall in Hong Kong dollar 10% this year.

10.

Difficult to monitor movement of money in and out out of the territory. No major shift yet though some Hong Kong investors are holding cash in US dollars in preference to local

currency. Hong Kong Government guardedly optimistic about the Hong Kong economy in 1983-84. Already signs of an upturn.

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