TNAG-2597-FCO40-3785-Appointment-of-Chris-Patten-as-new-Governor-of-Hong-Kong--Ap-1992 — Page 38

expected to have detrimental effects on the two economies. Furthermore,

the

international exchange rate realignment (Table 9) in the latter half of the 1980s

adversely affected to some extent the competitiveness of Japan's and the ANIES' exports

in the international market." In addition, as a result of a rising demand for workers,

emigration and structural rigidities, these Asian economies are experiencing labour

shortage and thus rising productions cost. Chart 1 reveals the increase in the effective

exchange rates (and therefore decreasing international competitiveness) of Taiwan,

South Korea, Hong Kong and Singapore during the period 1987-89, and to some extent

in 1990.

move their

Amidst internal and external shocks, rapid economic growth continued. Economic

hardships have, in fact, served as an locomotive for economic transformation in these

Asian countries. For examples, a survey found that both Hong Kong and Taiwan

investors (in toys manufacturing) in China claimed that they would not

production out of China in the face of new protection measures. Rather, they planned

to diversify their production and find new markets.7 It had also been extensively

discussed that as a result of massive relocation of manufacturing activities to less

developed, labour abundant economies, the manufacturers of the ANIES have assumed

new roles in the process of transformation from process-based to product-based

manufacturing. Since a large part of the manufacturing process has shifted overseas, the

home manufacturers are taking up new roles such as designing, marketing, researching

and quality control. In some cases, resources in the home country are released to

develop its services sector and new industries. Its traditional industries may either be

upgraded or phased out smoothly.

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