Cheer in the Year of the Rooster

When Communist rioters swirled through the streets of Hong Kong in 1967, the business community trembled on the edge of chaos. The local stock market dropped to a modern low; bank deposits plunged; tourism dried up. Nearly 1,000 businessmen made inquiries about shifting to Taiwan or Singapore. But peace returned--and so did prosperity. No businesses actually moved out. Despite the monumental inconveniences caused by what is now euphemistically called "the disturbances," 1967 turned out to be Hong Kong's best export year until then, and 1968 was even better in every respect. Last week, as it celebrated the Chinese New Year--the "Year of the Rooster"--the British crown colony had plenty to crow about. Business has never been better.

Tunnel to the Island. With an economy more heavily dependent on exports than any other in the world, Hong Kong increased sales to foreign customers in 1968 by 26%, to $1.4 billion. Bank deposits climbed 20%. The stock market reached an alltime high. Tourism soared as 618,000 visitors spent $160 million and 200,000 U.S. servicemen on R & R left behind another $60 million.

Land prices are nearing record levels, and choice industrial sites sell for $23 per square foot, more than ten times the price of comparable U.S. industrial sites. About 140 U.S. firms have moved their offices from Japan to Hong Kong, and foreign investors have been attracted by the fact that the colony has no capital gains tax and a maximum tax on gross income of only 15%. Wages remain low, averaging $13.50 for a 50-hour week, but per capita annual income has risen in three years from $305 to $450.

Among the major new construction projects, the 800-room Hong Kong Hotel will open this year, bringing the colony's number of hotel rooms to 7,100.

Two more major hotels are due by the early 1970s, when tourism is expected to total 1,000,000 visitors a year. The local government is arranging financing for a $17 million runway extension that will open Kai Tak Airport to jumbo jets; it is also planning a $500 million subway and a $350 million road improvement, including a tunnel to connect the mainland Kowloon peninsula with Hong Kong Island.

Reason for Optimism. Hong Kong's ultimate fate depends on two unpredictable factors: the behavior of its neighbor, Red China and, to a lesser degree, the import policies of its best customers, the U.S. and Britain.

Red China can take over the "New Territories," an essentially agricultural area that makes up four-fifths of the 400-sq.-mi. colony, when a 99-year lease expires in 1997. That will reduce the colony to Kowloon and Hong Kong Island, the two centers of business and tourism that were ceded to Britain in perpetuity by China's emperors. Legalities aside, Red China could overrun Hong Kong in 24 hours whenever it wished. What permits business optimism is the belief that Peking finds the status quo alluring. Red China earns nearly half of its foreign exchange--upwards of $500 million a year in hard currency--by trading with and through the crown colony. Some $100 million of that amount comes in remittances from overseas Chinese that flow through the colony's banks; Peking owns or controls ten banks and innumerable other businesses in Hong Kong.

The immediate economic peril comes from Hong Kong's main foreign friends. Fully 95% of the colony's manufactured items are exported, and half of them are in textiles. Threats of U.S. restrictions on imports have stimulated many manufacturers to diversify into plastics, toys and wigs. Says P. Y. Tang, a textile millionaire: "The disturbances of 1967 did not worry me at all. They didn't hurt us. But quotas on our goods abroad do worry me."

This file is automatically generated by a robot program, so reader's discretion is required.