The real estate market is important to Hong Kong's economic viability and stability, and it certainly has an important effect on U.S. firms and citizens resident there. Tourism in Hong Kong also has noticeably declined and it is difficult to predict how significantly the region-wide financial crisis will further affect this key industry. An additional issue of concern is the fact that the Peregrine Investment Corporation, Hong Kong's largest investment firm, declared bankruptcy on January 12, 1998. Despite recent difficulties, short-term confidence in the Hong Kong dollar seems strong, and policy makers express a continuing determination to defend the peg. Hong Kong's banking sector and its regulatory regime are strong.
Monetary figures show no sign of capital flight or panic.
Although there are many similarities between the imminent Macau reversion to China and that of Hong Kong, there are several key differences. If for no reason other than size, Macau has only a modest effect upon U.S. vital interests. Nevertheless, there are legitimate U.S. concerns in the areas of drug smuggling and intellectual property rights violations. For example, it is believed that a considerable portion of the region's illicit compact disc and videotape production lines may have moved to Macau. Estimates suggest that a hundred million or more illegal compact discs and movies per annum may now be produced in Macau.