TNAG-2621-FCO40-3812-Visits-by-Alastair-Goodlad--Minister-of-State-for-Foreign-an-1992 — Page 68

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MDHIAN

GOVERNMENT REVENUES ARE RISING RAPIDLY. THE FINANCIAL SECRETARY HAS BEEN ABLE TO BUDGET FOR FISCAL RESERVES OF DOLLARS 98 BILLION BY MARCH 1993. THIS SUM WILL BE SUFFICIENT TO FUND CAPITAL REQUIREMENTS FOR PADS AND OTHER PROJECTS: PROVIDE A CUSHION AGAINST THE POTENTIAL SHOCKS OF THE TRANSITION: AND MEET THE UNDERTAKING TO LEAVE DOLLARS 25 BILLION FOR THE SARG IN 1997.

4.

THE COMMUNITY CONTINUES, HOWEVER, TO HAVE ITS ECONOMIC WORRIES. INFLATION AND THE COST OF HOUSING REMAIN MATTERS OF CONCERN, AS DOES THE CHALLENGE OF RAISING THE LOAN AND EQUITY FINANCE FOR PADS. THE THREAT OF THE U.S. CONGRESS FORCING THE WITHDRAWAL OF MFN TRADING STATUS FROM CHINA ALSO CONTINUES TO CAST A SHADOW OVER HONG KONG'S FUTURE ECONOMIC PROSPECTS.

5.

BUT THESE ANXIETIES ARE MORE THAN BALANCED BY THE WIDESPREAD CONVICTION THAT THE ECONOMY SHOULD PERFORM WELL THIS YEAR. SHARE PRICES HAVE REACTED SHARPLY TO THE GOOD NEWS ABOUT THE TERRITORY'S BUSINESS PROSPECTS. THE HANG SENG INDEX HAS ARISE TO A SERIES OF RECORD HIGHS. IT CLOSED TODAY (20 MAY) AT A RECORD 5753, 51 PER CENT ABOVE ITS LEVEL A YEAR AGO. THERE IS ALSO EVIDENCE OF CONSIDERABLE INTERNATIONAL OPTIMISM. CONTACTS MADE AT THE RECENT ASIAN DEVELOPMENT BANK MEETING IN HONG KONG CONFIRMED THE WILLINGNESS OF THE OVERSEAS FINANCIAL COMMUNITY TO INVEST IN THE TERRITORY. MORGAN STANLEY, FOR EXAMPLE, HAVE RAISED THEIR RATING OF THE ATTRACTIVENESS OF THE HONG KONG STOCK MARKET.

CHINA:

ECONOMIC REFORM

6. TO THIS BACKGROUND OF ECONOMIC BUOYANCY, A FURTHER POSITIVE NOTE HAS BEEN ADDED BY DENG XIAOPING'S WELL-PUBLICISED BID TO GIVE ADDITIONAL IMPETUS TO THE LIBERALISATION OF THE CHINESE ECONOMY. THIS DRIVE, WHICH FIRST GOT UNDER WAY AT THE END OF 1978, LOST MOMENTUM IN 1989, WITH THE CRACKDOWN ON THE DEMOCRACY MOVEMENT AND THE THREAT OF DOUBLE-DIGIT INFLATION. DENG HAS APPARENTLY DECIDED THAT CONDITIONS THIS YEAR ARE RIPE FOR A NEW DRIVE TO MODERNISE THE ECONOMY THROUGH WIDENING THE SCOPE FOR MARKET FORCES, MODERN MANAGEMENT AND FOREIGN INVESTMENT.

7. DENG HAS MADE SOUTH CHINA'S SPECTACULAR GROWTH OVER THE LAST

DECADE A MAJOR PLANK IN HIS CAMPAIGN. HONG KONG ENTREPRENEURS HAVE PLAYED A MAJOR ROLE IN THE ECONOMIC TRANSFORMATION ON THE SOUTHERN PROVINCES. THEY NOW EXPECT DENG'S LATEST INITIATIVE TO PROVIDE A FURTHER BOOST TO ECONOMIC GROWTH IN CHINA, THUS CREATING NEW TRADE AND INVESTMENT OPPORTUNITIES FOR THEM.

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