CONFIDENTIAL
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Brief No [ ]
HM TREASURY: 1992 IMF/IBRD ANNUAL MEETINGS
HONG KONG: Briefing
Financial Secretary: Hamish McLeod
Secretary for Monetary Affairs: David Nendick
Objectives
Welcome recovery in economic growth and improvement in inflation. Endorse fiscal prudence, especially with respect to Airport project.
Line to Take
- Note inflationary pressures.
Note persistent inflation generated by tightness in labour market and shortage of land. Property prices and real wages still rising although recent wage-settlements more flexible between sectors and unemployment has risen to 2%. Increased use of cheaper resources in Southern China, selective labour importation scheme and continued fiscal restraint should cushion against further inflationary pressures.
Stress importance of fixed exchange link.
Confidence resulting from stable link outweighs disadvantages from smaller role of monetary policy in combatting inflation. Past prosperity and balance of payments surpluses resulted from sound economic management, including fixed exchange link.
- Note high level of foreign reserves.
Recently published (previously secret) figures show foreign exchange reserves US$28.9 bn - 12th largest in world and second largest in per capita terms.
Defensive
-
де
auront will be built; gürt
matter of when
Airport financing row with China needs to be resolved.
1991 MOU (Memorandum of Understanding) on Airport now unstuck over question of contingent liabilities ("probable debt" in Chinese)
which China wants included in MOU's HK$5 bn debt ceiling. Airport land reclamation and site preparation contract recently awarded despite row. Likely that China is delaying, pending clear views on Governor Patten's stance on HK domestic politics.
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