Front Page || Main Index || Corpus Christi News || Business || Texas || Sports || Entertainment || Selena
Thursday, Sep. 24, 1998
Hong Kong: Crisis won't hurt growth or open markets
Trade leaders' trips to U.S. seek to assure investors area is stable
By MICHAEL WHITE
Associated PressLOS ANGELES -- Pressured by recession at home and the economic collapse of several neighbors, Hong Kong wants to convince the world that the tiny, free-market enclave remains a good place to do business.
For decades, its open markets and busy harbor brought the former British colony a level of prosperity that made it the envy of Asia. Now, Hong Kong -- still adjusting to its 1997 handover to China -- fears being swamped by the financial tsunami washing over Asia and other parts of the world.
To make matters worse, Hong Kong's commitment to open markets has come under question since the government spent nearly $15 billion last month to stave off attacks by speculators.
Next week, Financial Secretary Donald Tsang will visit Washington and New York to attend annual meetings of the World Bank and International Monetary Fund, and reassure investors and business leaders that Hong Kong's markets remain free.
Similarly, a delegation of business, political and academic leaders toured Washington and other cities last week to discuss Hong Kong's economy and tell Americans the United States and Japan must act decisively to slow the growing world financial crisis.
``We feel very threatened,'' said Nellie Fong, the member of Hong Kong's Executive Council who led the delegation to Washington, Los Angeles and Houston. ``We depend so much on world trade.''
Although Hong Kong has fared better than Thailand, Indonesia and other Asian countries, the crisis that began last year has taken a severe toll there. Asset values have fallen 50 percent, unemployment is at a 15-year high of nearly 5 percent and the Hong Kong dollar has been under repeated attack from currency speculators testing its peg to the U.S. dollar.
How far the crisis worsens, she said, depends on the United States and Japan. Fong said the U.S. should lower interest rates to ease the flow of capital in troubled economies, and help fund the IMF so the agency can respond should another country's economy collapse.
``What is brutally clear is that whatever Hong Kong does really makes no difference,'' Nellie Fong, a member of Hong Kong's executive council in an interview. ``Unless the U.S. and Japan do something, we cannot see Asia getting out of its turmoil.''
Hong Kong, which has successfully weathered last year's transition from British to Chinese rule, faces a much tougher task in dealing with the financial crisis, analysts said. Hong Kong had years to prepare for a smooth handover, but was unprepared for the financial crisis.
``What happened subsequent to the handover was a disaster scenario that people did not foresee,'' said Charles Morrison, president of the East-West Center, a Honolulu think tank that focuses on Asia. ``What happened illustrates the vulnerability of Hong Kong: that it is a very small economy, 6 million people at the edge of China with 1.2 billion, and that it is peculiarly dependent on trade and its role as a financial center.''
The Hong Kong government's intervention in the stock market, which consumed about 15 percent of Hong Kong's $96.5 billion in foreign reserves, came as a shock to the international investment community and drew criticism from Federal Reserve Chairman Alan Greenspan.
The move undercut Hong Kong's reputation as one of the world's freest economies, and raised the question of whether such action would have been taken before last year's unification with China.
``It's a different Hong Kong,'' said Greg Mastel of the Economic Strategy Institute in Washington.
``Whether these things were wise or not, we'll have to see over time. But certainly you won't see the absolute free market that you did before the power transfer,'' he said. ``I think it goes against the basic instincts of Hong Kong's traditional leadership. I think they would have gone to almost any other alternative.''
In a letter to Greenspan on Friday, Joseph Yam, chief executive of the Hong Kong Monetary Authority, said Hong Kong had to take the action to fight speculators who were trying to force down stock prices. Had they succeeded, the market may have panicked, he said.
Since then, Hong Kong has taken measures to make the market less suceptible to manipulation, Yam said.
``As you know, Hong Kong is one of the freest markets in the world, if not the freest,'' Yam wrote. ``The free market philosophy is very much in our blood. But a free market does not mean that it can be freely manipulated.''Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web