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CONFIDENTIAL
010353
MDADAN 1424
THE HONG KONG ALLIANCE
8.
THE ASCENDANCY OF THE CONSERVATIVES IN PEKING AND THE RESULTING MAINLAND ATTACKS ON THE ALLIANCE COWED MANY OF ITS EARLIER SUPPORTERS WHO WERE RELUCTANT DIRECTLY TO CONFRONT CHINA. THE ALLIANCE ITSELF ADOPTED A LOW PROFILE BUT EVENTS IN EASTERN EUROPE INJECTED NEW LIFE. A LARGER THAN EXPECTED TURN-OUT OF ABOUT 8,000- 10,000 PEOPLE AT NEW YEAR RALLIES IN UNFAVOURABLE WEATHER SAW A RECURRENCE OF EXPLICIT ANTI-LEADERSHIP SLOGANS. WHILE THERE REMAIN RESERVATIONS OVER THE ALLIANCE'S OPEN CONFRONTATION WITH CHINA CONSIDERABLE SYMPATHY HAS BEEN SHOWN TOWARDS INDIVIDUALS IN THE ALLIANCE WHO ARE ALLEGED BY CHINA TO HAVE BEEN DIRECTLY INVOLVED IN EXFILTRATING DISSIDENTS.
EMIGRATION
9.
OUTFLOW FOR 1988 WAS 45,800 AND ESTIMATES FOR 1989 AND 1990 ARE 42,500 AND 55,000 RESPECTIVELY. INTEREST IN EMIGRATION, AS INDICATED BY THE NUMBER OF VISA APPLICATIONS TO CONSULATES, IS STILL RUNNING AT WELL ABOVE PRE-JUNE LEVELS BUT HAS MODERATED SLIGHTLY FROM ITS PEAK IN AUGUST. MANY WHO WERE WAVERING ARE NOW REPORTED TO HAVE MADE UP THEIR MINDS TO EMIGRATE. THE BRITISH NATIONALITY SCHEME WILL AT LEAST DELAY DEPARTURE FOR MANY OF THOSE WHO BENEFIT, BUT IT IS UNLIKELY TO BE REFLECTED IN APPLICATIONS OR DEPARTURES TO OTHER COUNTRIES BEFORE 1991.
ECONOMY
10. THE PACE OF ECONOMIC GROWTH DECELERATED IN 1989, REFLECTING A SLOW-DOWN IN BOTH EXTERNAL TRADE AND DOMESTIC DEMAND. THE GROWTH RATE IN REAL TERMS OF HONG KONG'S GROSS DOMESTIC PRODUCT FOR 1989 IS EXPECTED TO BE 3 PERCENT, COMPARED WITH AN INCREASE OF SLIGHTLY OVER 7 PER CENT FOR 1988. WHILE SLACKENED DEMAND FOR HONG KONG'S PRODUCTS OVERSEAS AND TIGHT CAPACITY CONSTRAINTS IN THE LOCAL ECONOMY WERE THE MAIN FACTORS UNDERLYING THIS SLOW-DOWN IN GROWTH, CHINESE AUSTERITY MEASURES AND THE EVENTS IN JUNE ALSO CONTRIBUTED.
11. LOCAL BUSINESSMEN ARE REPORTED TO BE ADOPTING A ''DEFENSIVE STRATEGY'' OVER INVESTMENT. THERE IS INCREASED INTEREST IN EXPLORING INVESTMENT OPPORTUNITIES OVERSEAS IN ORDER TO DIVERSIFY RATHER THAN TOTAL WITHDRAWAL. BUT BUSINESSMEN SEEM TO BE LESS PESSIMISTIC THAN THE PUBLIC AT LARGE. LESS PESSIMISTIC STILL ARE FOREIGN INVESTORS WHO HAVE NOTHING TO FEAR PERSONALLY FROM POTENTIAL CHINESE REPRESSION. SUBSTANTIAL INVESTMENTS FROM OVERSEAS ARE STILL BEING MADE HERE AND HONG KONG IS STILL SEEN AS THE PREFERRED LOCATION FOR REGIONAL HEADQUARTERS.
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