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Capital Mobility and Investor Confidence: The Case of Hong Kong’s Reversion to China’s Sovereignty
Author(s) -
Bumgarner Mary K.,
Prime Penelope B.
Publication year - 2000
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.00102
Subject(s) - china , sovereignty , negotiation , credibility , economics , foreign capital , government (linguistics) , politics , capital (architecture) , investment (military) , mean reversion , economy , foreign direct investment , political science , financial economics , geography , macroeconomics , law , linguistics , philosophy , archaeology
The paper hypothesizes that capital flows to and from Hong Kong in the years prior to its reversion to Chinese sovereignty were determined in part by the credibility of China’s economic and political policies towards Hong Kong. During the transition period, several events occurred that caused investors, foreign and domestic, to reexamine and revise their perceptions about concentrating their investment in Hong Kong. These events were the ongoing negotiations between China and Great Britain that resulted in the signing of the Joint Resolution and the Basic Law, the 1989 Tiananmen Square incident, and Deng Xaioping’s visit to China’s southern provinces in 1992. As a result, Hong Kong provides a particularly relevant example of the impact government policies can have on investor confidence and capital mobility.