The Credibility of the PRC Commitment to a Market Economy in Hong Kong: Hypotheses and Evidence

D. Newman and David Weimer

Economics and Politics, 1997, vol. 9, issue 3, 251-280

Abstract: How credible is China's commitment to a market economy in Hong Kong after 1997? Events signaling changes in commitment and the movement of time closer to 1997 should reduce the relative prices of immobile assets if commitment is not fully credible. Several factors may offset these effects: anticipatory adaption, growing dependence on China‐related trade, and Chinese investment in Hong Kong. Analysis of data on incorporation and investment decisions, the relative sensitivity of the stock prices of firms with different asset mobility to political events, and the market for office space most strongly support hypotheses about credibility, adaption, and demand augmentation.

Date: 1997
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