TNAG-2467-FCO40-3591-Economic-situation-in-Hong-Kong-1992 — Page 72

.3.6

19

- the regulatory atmosphere in Hong Kong will continue to be rather less biased towards intervention/ direction than in Singapore even though the regulatory systems have converged to

a large extent.

The bottom line for Hong Kong is whether its role as a port, the non-interference attitude of the government (even if reducing), the presence of well-developed infrastructure and a large number of international financial and other companies, and the economy's renowned flexibility will be overwhelmed by issues over which Hong Kong has less immediate control. Foremost amongst these is international uncertainty about the risks of political and economic stability and this could undermine the will of those international financial companies now in Hong Kong to stay and fight it out.

my

don't think

then in

indicates of ths at present- Uncutronity alone is unlikely to

caure a

senous exodus.

no

sign yet,

at least not

in the South

ANALYSIS OF POLITICAL ISSUES

3.7

The political dimension can be split into a number of issues.

Chinese Domestic Stability

3.8

The rapid development of a dynamic market-based economy in Southern China, to a large extent on the back of Hong Kong entrepreneurship, has probably raised the incomes and aspirations of the population there such that the Chinese authorities would find it difficult if not impossible to resist the likely attendant increase in calls for more political freedom. Consequently, although the possibility of a conservative backlash to Deng's calls for accelerated reform cannot be ruled out completely, it looks distinctly unlikely at present. However, should social unrest develop, calling for faster reform, greater freedom of speech etc, the Chinese authorities would almost certainly seek to crack down. again. Even so, the disruption caused to China and its loss of international reputation caused by Tiananmen means that the authorities would seek to calm the scene more carefully than last time. If this analysis is correct and if the authorities were successful, then international markets might not react adversely and quickly over Hong Kong prospects. However, social repression in China, despite the Joint Declaration guaranteeing Hong Kong autonomy for at least 50 years, would be damaging to Hong Kong and there might be a further exodus of people and companies.