TNAG-2749-FCO40-3964-Economic-situation-in-Hong-Kong-1993 — Page 73

JWL0262

BANK CONFIDENTIAL

с

24.9.93

42

MR S H KING

From Jakob Lund and Andy Orchard

tanten

lav Ils par Hey

Copies to ECGD

Key Economy

рери,

could home a Costeful if you quick look at this pyou, esp. risks p5 for quich

for quick connetr meeting. before tomo now's

Chit. 27/1.

Mr V Lunn-Rockcliffe

Mr P Radford

Mr M Hodson

Mr D Riley Mr N Edser

FCO

Mr N R Chrimes MAD Moran

ODA

Mr D L Merotto

Mr J T Roberts

MOD

Mr B Field

CABINET OFFICE

Mr I Tower

Mr D R Storey

HKD 090/

ни

27 SEP 1993 HMT

Miss J Martin

Ms H Roberts Mr K Hammond

Mr J Ray

DTI

Miss J Currie

Ms Booth Di-Giovanni

DESO

Mr M Faulkner

CHINA AND HONG KONG: ECONOMIST SUB-GROUP FORECASTS

1 The forecasts contained in this note will be discussed at the ESG meeting to be held on Tuesday 28 September at 2.15 in Conference room C. The meeting may wish to consider some of the downside risks to the forecast outlined towards the end of the note, and discuss whether any alternative scenarios might be considered further.

China forecast

2 The forecast assumes that China's economic cycles continue, but with somewhat diminished magnitude. It assumes that there is no substantial deterioration in the external environment: that retrocession of Hong Kong in 1997 is handled smoothly; and that Chinese politics remain stable and pragmatic. This environment will allow the Chinese authorities to pursue policies aimed at achieving strong and steady economic growth and at furthering structural reforms. The economic cycles are forecast to continue at four-year frequency, with a downturn in 1994-95, a boom in 1996-97, a further downturn in 1998-99 and another boom in 2000-01. The forecast is therefore pitched between the two alternative medium-term scenarios offered by the Fund in China's most recent Article IV consultation (SM/93/47). However, the Fund's assessment predates the flurry of recent measures to cool the economy, and in any case failed to make its assumptions explicit, instead inviting speculation on a range of possibilities between two extremes. Although the forecast is relatively upbeat, we recognise and address the considerable risks its assumptions face (para 17).