CONFIDENTIAL
British companies (excluding the Hongs) with significant business interests in Hong Kong. This was because the Hong Kong
Government (HKG) assured us that reforms undertaken in the 1980s to the regulatory arrangements for the banking and financial markets had provided these markets with protection against major falls in either stock or property prices. Also, with the exception of volatility in the stock market, the HKG had not detected any significant pressures on the main confidence indicators such as the exchange rate, money market rates, the
futures market or land prices.
4.
The Treasury's interim assessment concentrates on four
areas: banks, insurance companies, other companies and ECGD.
The section on banks has been deleted from our copy because of
the restrictions on circulation of this material imposed by the Banking Act. However, in discussions at the meetings convened by the Treasury, the view expressed by the Bank of England was that the Hong Kong banking sector was sound and that major Hong
Kong banks had not overexposed themselves to the property
market. There was however some concern that Japanese banks,
although only having relatively small operations in Hong Kong, could be vulnerable because of problems they are experiencing
elsewhere.
5. The main conclusions on the other three sectors are as
follows:
- The DTI consider that UK insurance companies are most unlikely
to be put in any jeopardy as their portfolio investments and direct investments in Hong Kong represent a very small proportion of their total assets.
-
UK companies with major construction contracts in Hong Kong
are to a large extent covered by ECGD. The main impact of
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CONFIDENTIAL
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