Hong Kong: Pre-China takeover.

standup for their freedoms. Next year’s handover is predicated on a promise by China’s Communist leaders to keep Hong Kong highly autonomous and Capitalist under the Slogan “One Country, two Systems”. The handover to China of Hong Kong also effects China’s reputation and economic stability because if China loses the prosperity and stability of Special Administrative Region (SAR), China’s own credibility will be undermined. But it is inevitable that Hong Kong after the revision to China sovereignty will come under the dominant influence of China that the business environment will become more Chinese. Hong Kong is rapidly merging with Guangdong Providence economically. Deeper ties are certain to produce far reaching structural changes in the Hong Kong economy, how to handle them will be one of the largest tasks for the new SAR government. From a financial perspective, Hong Kong will shift to a Chinese style rules in all its business dealings. This means that greater emphasis will be placed on “guanxi” or connections over the rule of law. Such emphasis may raise questions about whether Hong Kong will be able to maintain a high level of autonomy from China and about the integrity of the “one country, two systems” policy. Chinese corporations will enjoy special status in Hong Kong just as British companies did under British rule. If these leads to the infiltration of unsavory business practices such as unjust political pressure, rampant bribes and too much dependence on personal contacts; Hong Kong will lose its position as a dominant informational business center of the world. China's self-restraint will be put to test in this respect. Hong Kong's near laissez -faire economy has been rooted in the territory being under colonial rule. Another distinctive trait of the city has been an air of temporizes as a place of transient residence. People who have fled Mainland China have stayed in Hong Kong for a while, before leaving to settle permanently overseas. Consequently, the residents of Hong Kong hence never expected the government to do anything for them. They have learned to rely on no one except themselves and their families. The vitality that fills the city is a direct reflection of the people's spirit of independence in surviving the harsh realities. How the numerous untold changes coming upon Hong Kong will effect he mentality of the six million people or their vigorous energy ultimately depends on their own consciousness and sense of value. Hong Kong's future prosperity and degree of democracy will hinge solely on this. The economic environment of Hong Kong before being handed over to China was one of stable growth. For the most part of the economic indicators in Hong Kong from the period of 1994-1997 were on the increasing side. For example Nominal GDP, Per Capita GDP and Foreign exchange rates were all on the increasing side. Due to high exports between 1994-1997 and imports their trade balance has been at a surplus causing their nominal GDP to increase through out the years. Nominal GDP million US$ 1994 130,808, in 1995 139,238 and in 1997 173,045. From 1994-1997 Hong Kong's foreign currency reserves increased exponentially from $49.3 billion in 1994 to $92.8 billion in 1997. The reason for this increase is primarily due to a very well managed trade balance. The interest rate environment in Hong Kong provided an excellent backdrop for the equity markets; thus, allowing the Hang Seng Index to show appreciable gains. The decline in the Composite CPI which are in 1994 8.8, in 1995 9.1, in 1996 6.3 and in 1997 5.8 directly correlates to the economic stability in the region over the years. The steady economic growth is further evidenced by the year over year increase in per capita GDP which has risen from $21,674 US$ in 1994, $22,618 in 1995 to $26,614 in 1997 . The growth and stability of the economic environment in Hong Kong has been predicated upon an extremely stable foreign exchange rate to the US dollar. In 1994 the foreign exchange rate per US$ was 7.728 in 1995 7.736 in 1996 7.734 and in 1997 7.742. The stability in the foreign exchange rate is shown by the fact that the rates have not varied by more than .02 US cents form 1994-1997. Word Count: 861