83.g mg.ip/may/5.5
A
VISIT TO HONG KONG 6-10 APRIL: GENERAL IMPRESSIONS
The main objective of the visit was to understand far better what
makes Hong Kong tick; and to reach a view on its future economic was
prospects. The main question mark in my mind before the visit (
whether it was credible to assume, as the HKG does, that the economy could continue to grow in the medium term at some 5% per annum, consistent with continuing inflation at around 10% per
annum.
2. My main conclusion is that, assuming no political upheaval, growth prospects are indeed good, particularly because of the
burgeoning economic links with South China. The inflation
position may not be as worrying as a 10% headline implies; but I
have some worries that the HKG is rather more complacent about that aspect than it should be.
Inflation
3.
Viewed from 6,000 miles away there appeared to be some uncomfortable parallels between the current position in HK and that experienced in the UK in the late 1980s, with a rapid build up in asset prices, particularly in the property market. The great majority of people I spoke to were, however, relatively relaxed about the property market.
4. Comforting factors identified included the commercial
property market being under control; earlier intensive activity in
some parts of the residential market had calmed down; and the relative effectiveness of administrative measures taken by the HKG and the banks to cool the boom. Others pointed to the HKG being in a strong position to control future developments given its monopoly position as supplier of land. Some bankers argued that, unlike the UK in the 1980s, residential property loans were effectively limited to property purchase without the problem of equity withdrawal.
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