Half a decade has passed sinfce the rise of international capital flows to many developing countries. Although there is a substantial decline in cpaital flows to developing countries in the immediate aftermath of Mexico's currency crisis in December 1994, in most cases capital inflows have resumed and by mid-1995 have been sustained at relatively high levels. Capital inflows after level of domestic saving. When high capital inflows to the countries, the domestic saving will increase because of investment. On the other hands, high capital inflows will decrease the domestic saving because of high payment of debts.
Capital inflows has a strong relationship with the level of domestic savings.
The level of domestic saving depends on the level of national income, rate of inflation, growth rate of income, and capital inflows. Hong Kong's industrial composition. In the 1960-70s, when labor was inexpensive, Hong Kong's manufacturing sector grew rapidly. However, as land and labor costs began rising towards the end of the '70s decade, Hong Kong exports became less competitive. As a result, manufacturing operations sought elsewhere and relocated to southern China, where costs were comparably lower.