Asian troubles continue with Obuchi`s budget speech failing to inspire the markets with much of the content already leaked. Consequently the Yen and the Nikkei fell again. Fears grow that China will devalue the HK$ and the Yuan which sent HK interest rates higher and the stock market to new lows.
But this am I can detect no news that a devaluation has occurred or is likely. Such a news report would affect stock markets round the world.
If there was a raid on the Hong Kong dollar the important thing tactically would be for the government to do nothing to support the rate, so no killing could be made by speculators, even though the disruption would damage some enterprises.
Once again I think the point is clear that Hong Kong is remarkably robust for a small state. The point is made that it is possible to survive without private ownership of land and with a high degree of control over finances with the aim of insulating the economy to some realistic extent from the turmoil of global short-term finance capital.
He made available to me figures from the South China Morning Post of 4.7.98
(HK$ to US$ 7.79, to UK pound 12.43 or thereabout)
1997/8 Revenue HK$ 275 bn Exp. 194 bn Surplus 80.9 bn (3.9 bn higher than expected)
Reserves 31.3.98 HK$ 457 bn
1998/9 planning for no budget surplus but expenditure of HK$ 21 bn from reserves to pay for social spending including 85,000 flats.
The fact that the exchange rate can avoid devaluation even for a month, with such a proportionately vast switch in the balance of the budget and a significant drawing on reserves, shows the advantages of a government policy that has no national debt and therefore finds it much easier to employ countercyclical measures even in the context of global economy with a trillion US dollars a day moving restlessly round the forex terminals.
Less easy to demonstrate, is that the government's confidence that it can get relatively immediate advantage from counter-cyclical measures is because of its cash flow from the public ownership of land which gives it an incentive to foster an active market in land leases ensuring that no land is idle even in a recession. This is a lean and flexible capitalist economy thanks to the degree of social control by the government. Large quantities of capital are not tied up in land or in the national debt, so no surplus value has to be sliced off to these classes before the profit making cycle can pick up again. The entrepreneurial capitalists can equilibrate their costs of production and concentrate on getting the available surplus value for their profits.
It is not socialism, but it proves we could make headway on land and on finance capital in many countries, suitably prepared and presented to minimise the outcry.
Chris Burford
London.