TNAG-1942-FCO40-2768-Internal-economic-situation-in-Hong-Kong-1989 — Page 37

CONFIDENTIAL

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135764 MDHIAN 5630

CONFIDENTIAL

FM BTC HONG KONG

TO DESKBY 14140OZ FCO

TELNO 409

OF 14133OZ SEPTEMBER 89

INFO PRIORITY PEKING, HONG KONG

HKB026/23

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HKC090/2

TOP COPY Q DIST ?

PARA 4 OF YOUR TELNO 1860 TO HONG KONG: HONG KONG: THE COMMERCIAL AND ECONOMIC CLIMATE WITH PARTICULAR REFERENCE FOR PROSPECTS TO

BRITISH BUSINESS.

1. BRITAIN'S STAKE IN THE HONG KONG ECONOMY IS CONSIDERABLE. OFFICIAL FIGURES PUT UK'S EXPORTS TO HONG KONG LAST YEAR AT POUNDS STERLING 1.1. BILLION AND INVISIBLE EARNINGS AT ABOUT THE SAME. THESE HAVE BEEN GROWING. OUR EXPORTS TO JUNE THIS YEAR, AT POUNDS 548 MILL- ION WERE UP 13 PERCENT ON THOSE FOR THE FIRST SIX MONTHS OF 1988. THE REAL FIGURES FOR THE VALUE OF THIS TRADE TO BRITIAN ARE CERTAINLY CONSIDERABLY HIGHER STILL, E.G. HUGE ORDERS FOR ENGINES AND EQUIPM- ENT SUPPLIED IN AIRCRAFT FOR CATHAY PACIFIC DO NOT GET COUNTED. UK INVESTMENT IN HONG KONG HAS RECENTLY BEEN CALCULATED AT POUNDS 19 BILLION. THE TRADE IS EVEN MORE VALUABLE TO HONG KONG. THEY SELL HALF AS MUCH AGAIN TO US AS WE DO TO THEM, AND THE GAP IS WIDENING.

2. HONG KONG'S ECONOMY CONTINUES TO DO WELL, AND THE EVENTS IN CHINA IN JUNE DO NOT APPEAR TO HAVE HAD ANY CALAMITOUS EFFECT. THEY CAST THEIR SHADOW, AND THE APPROACH OF 1997 PERHAPS CASTS A DARKER ONE. BUT MEANWHILE THE PREVAILING VIEW IN HONG KONG IS THAT NEITHER THE RECENT EVENTS, NOR THE LONG TERM FUTURE, NOR ANY POLITCAL OCCURRANCE, SHOULD GET IN THE WAY OF MAKING MONEY. THERE ARE SOME SOWN SIDE FACTORS. DESPITE SOME RECOVERY THE STOCK MARKET IS STILL DOWN FROM ITS MAY LEVELS. SO ARE PROPERTY PRICES. AND SO ARE TOURIST ARRIVALS, SUFFICIENT TO CAUSE SERIOUS ANXIETY IN THE LARGE RETAIL AND HOTEL SECTORS. BUT AGAINST THIS, HONG KONG'S TOTAL EXPORTS IN THE FIRST SEVEN MONTHS OF THIS YEAR ROSE BY A STAGGERING 23 PERCENT TOTAL EXPORTS TO CHINA, BY FAR THE LARGEST MARKET, WERE UP 26 PERCENT TO HONG KONG DOLLARS 24 BILLION, AND EXPORTS TO JAPAN ROSE BY 23 PERCENT, TO HKD 7 BILLION (ALTHOUGH EXPORTS TO BRITAIN, THE US AND WEST GERMANY ALL SHOW SMALL DECLINES). BUILDING SITES MAY SELL FOR LESS THAN THE VENDORS HOPE, AND LESS THAN BEFORE, BUT STILL FOR ASTRONOMICAL SUMS, AND THE PURCHASERS CLEARLY CALCULATE THAT THERE IS PLENTY OF TIME FOR A SUBSTANTIAL RETURN BEFORE 1997, WITH, HOPEFULLY, GRAVY TO COME AFTER THAT.

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