File note.
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Uk Elona
(31
cc: FED, HKD
HKB 090/1
ISTRY
22 1993
Lunch with KY Tang, HKG Chief EconomisECE 9 July 1993
Present: S Broadbent, C Lane
Key points.
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REGISTRY Action Takan
HK economy doing fine on course for 5 per cent growth in 1993. Inflation moderating. A little more slack in the economy than last year as high investment and increased labour supply has boosted capacity. Surprising though that ¥ appreciation has not fed through to durable goods sector inflation.
Government budget outturn coming out better than expected good corporate tax receipts, stamp duty and land sales revenues. These revenue items had a high elasticity to GDP growth (implication being that they would fall sharply in a recession). Expenditures did not vary much over the cycle. Capital expenditure behind.
Last year
High prices being paid in real estate sector. boosted by Mainland Corporate buyers, less so this year.
Watching China economy closely. See Zhu Rongji's appointment more as a strong man than a fall guy. Also noted that PBOC Shenzhen office chief removed, probably for corruption. Noted that Zhu Rongji not a finance man but an engineer.
Too early to say whether the 16 point plan is sufficient to cool economy. But export oriented provinces likely to be relatively lightly affected need foreign exchange too much, therefore impact on Hong Kong relatively mild. Perhaps one or two percentage points off GDP growth. Effect more likely to be felt in 1994. But HKG has been criticised as being too complacent in the past. Some Banks exposed to China real estate market but overall is manageable.
Some HK banks saying China already in recession. KY expects administrative control of imports, perhaps unannounced.
9 July 1993
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