CONFIDENTIAL
sovereignty has now been largely accepted and discounted. And the Basic Law, although not perfect, does incorporate into Chinese law almost all the guarantees of Hong Kong's autonomy set out in the Joint Declaration.
9. Hong Kong's economy could be damaged by US/Chinese trade rows and the withdrawal of MFN. And there could be a stockmarket crash between now and 1997 if there was a large movement of funds off-shore. But Hong Kong has weathered economic downturns before. There have been runs on the smaller banks. But the strength of HSBC, backed by the Exchange Fund and (in 1987) prompt intervention by the Bank of China as well, has always been enough to restore stability quickly. Local banks all meet the Basle capital adequacy ratios - the average is now almost 13%.
10.
Conclusion. Nothing can be certain, and I do not want to appear complacent. Hong Kong has its problems, and there are bound to be difficulties between now and 1997. But Hong Kong has come through some very difficult times since 1984, and has made the psychological adjustment to the transfer of sovereignty. I cannot see that either the people of Hong Kong or any foreseeable Chinese leadership would have an incentive to create turmoil in Hong Kong up to or during the transfer of sovereignty.
11. Whether international confidence can be sustained in Hong Kong also depends on HMG's actions. If HMG were to show a lack of confidence in HSBC's prospects, that would quickly be picked up by the markets and could become a self- fulfilling prophecy. Conversely, if HMG shows by its actions that it has confidence in Hong Kong's future at the centre of the Asia-Pacific region with its opportunities as well as risks, that will help give Hong Kong the resilience to weather short-term commotions and maintain its historical pattern of growth.
Че
الله
PF Ricketts
Petar Ricketts
POPALF
CONFIDENTIAL
Page 15Page 16
No comments yet.
Private notes are available after approval.