TNAG-1942-FCO40-2768-Internal-economic-situation-in-Hong-Kong-1989 — Page 18

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The official emigration forecast is 42,000 for this year and 55,000 for 1990. The corresponding estimate for 1988 is 45,800.

Desp the upward trend in the U.S. and Europe, domestic interest rates were recently cut and the prime lending rate was at 10% since early August.

In line with the U.S. dollar, the Hong Kong dollar also has been fluctuating against the major foreign currencies recently.

Due to the recent turmoil in China, Hong Kong's stock market became jittery. The Hang Seng Index experienced the most significant fall since the crash of 1987, it dropped from 3,300 in mid-May to below 2,300 in late June. The market had improved significantly since early July. In mid-October, it sank again in line with Wall Street's sudden drop. The Hang Seng Index closed at 2,776 on 10 November.

The property market was strong on entering 1989. In June however, the property market became quiet and the prices, particularly in the high-end sector, were declining. Property prices are estimated to have dropped 15-20%. Nonetheless, investors have continued to show interest in the government's land auctions; a prime site in Central was sold for HK$2.7 billion by tender in July.

As of September 1989, there were 135 overseas incorporated banks in Hong Kong.

Hong Kong upheld its position as the world's busiest container port in 1988, as total throughput registered a 16% growth to top 4 million TEUS.

Tourism receipts, Hong Kong's third largest source of foreign exchange income, rose by 31% to HK$33.3 billion in 1988; the number of visitors increased by 24% to 5.6 million. In the first nine months of this year, tourist arrivals recorded a drop of 1.6% to 4 million. From June to September, visitors passing through Hong Kong to China have substantially declined.

Accumulated overseas investment in the manufacturing sector totalled HK$26.2 billion by end-1988; this represented a rise of 24% from end-1987. The U.S. remained the biggest investor with almost HK$8.9 billion or 34% of the total. Other major sources included Japan (27%) and Mainland China (11%). The major sectors which absorbed foreign investment include electronics and electrical products, textiles and garment, and watches.

Many development projects are under planning at present. The Government has decided to build a new international airport at Chek Lap Kok on Western Lantau Island which will begin operation in early 1997. Other announced projects include a high-speed rail system and a six-lane highway joining North Lantau and Tsing Yi Island, and leading to Hong Kong Island through a new Western harbour tunnel; the No.8 and No.9 container ports; and various road links. These projects will involve a total expenditure of HK$127 billion. Additionally, there will be a new Hong Kong Technology Centre, while the Hong Kong Convention and Exhibition Centre will double in size.

Political Background

In accordance with the Sino-British Joint Declaration, the basic policies of the People's Republic of China (PRC) regarding the future Hong Kong Special Administrative Region (SAR) after 1997 will be stipulated in a Basic Law by the National People's Congress (NPC) of the PRC, and will remain unchanged for 50 years. A Basic Law Drafting Committee was subsequently established in 1985 by the NPC; and a Basic Law Consultative Committee was also set up in Hong Kong with the objective of collecting and analysing views and suggestions of the Hong Kong public for the Drafting Committee's reference.

The draft of the Basic Law was endorsed by the NPC's Standing Committee in February 1989. The second consultation period has just ended on 31 October 1989. The final draft will be submitted to the NPC for endorsement. The Basic Law is expected to be promulgated in 1990.

In accordance with the Joint Declaration, a Sino-British Joint Liaison Group (JLG) was set up to facilitate the smooth transfer of government in 1997 and the effective implementation of the Joint Declaration. Achievements of JLG include the enhancement of Hong Kong's independent participation in international organizations and agreements such as GATT, Customs Cooperation Council, UN Conference on Trade and Development, Universal Postal Union, International Labour Organization and Asian Development Bank. The JLG has also reached agreement on transitional arrangements for travel and identity documentation to be used before and after 1997, a new pension scheme for the Civil Service, the establishment of a Shipping Register, and a separate Hong Kong Air Service Agreements.

A Land Commission was formed by the Chinese and British governments. Decisions were reached on the issues of new land leases, the extension of existing land leases in the New Territories to the year 2047, and sharing of premium income from land transactions before 1997 between the H.K. Government and the future SAR Government. Until the end of August 1989, a fund of HK$14 billion has been credited to SAR's account.