As Usual

After three months of Communist harassment, general strikes and riots, business in Hong Kong goes on as usual. There has been virtually no physical damage to mercantile property in the British crown colony. There are no bombed-out stores, no burned and looted buildings, no factories wrecked by sabotage. Taking stock, most firms have found that they have lost only a day or two of production time during the entire affair.

Exports continued to increase in June, up 22% compared with 1966, and well in line with the average monthly step-ups during the first half of 1967. During the worst rioting, the Hong Kong dollar dropped slightly, from 5.74 to the U.S. dollar to 6, but it has recovered since. Chinese businessmen have not left the colony, though some 30,000 Hong Kong Chinese applied for Taiwan visas, and thousands more plan to move to Canada or Singapore should the Reds move to take over.

Capital transfers out of the colony, mainly by some wealthy Chinese, are estimated at $66 million in May and June--a mere 4% of the total currency and bank deposits. Many businessmen find comfort in the fact that most firms could move out lock, stock and barrel with little trouble at all, if need be. It is a fact of Hong Kong business life that factory machinery has long been designed for easy loading aboard ships. Business has always been transacted in Hong Kong with an eye to quick returns and with relatively little capital tied down in buildings and such. Factories are expected to return their investment in four years, apartment houses in five to six years.

The astonishing resistance of the Hong Kong business community is based on the fairly widespread belief that for Peking, economic benefits of earning more than $400 million a year of hard currency by trading with the crown colony will continue to outweigh an easy political victory. Even so, long-term reaction to the disturbances may affect the colony adversely. Of critical importance is investors' confidence in the future. A free market in foreign exchange and fine banking facilities, plus few government restrictions, still make Hong Kong a tempting place to do business. On the other hand, how long will that last if the Communist Chinese decide to take over? A key test of confidence will come at the end of next January, with the Chinese New Year. On that occasion it is traditional for Chinese businessmen to settle their debts.

If Hong Kong businessmen pay up, China-watchers say, they will be announcing their confidence in the colony's future. If they don't, watch out.

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