HONG Kong manufacturers with production bases in China are generally receptive to the mainland's deflationary policy, the Trade Development Council says.
It said benefits from a more stable yuan, lower production costs and anticipated relief in infrastructure bottlenecks would outweigh any negative impact.
In a report on the impact of the austerity measures, the TDC noted there were already signs that the policy was paying off.
It said: ''The exchange rate of the yuan has stabilised, prices of capital goods have fallen, speculative activities have been restrained and savings deposits have significantly rebounded.
''Although the growth of the Chinese economy is expected to slow down, performance should remain admirable by world standards, and the risk of a recession is remote.'' The TDC believed China's trade performance would soon improve when domestic demand had cooled and more resources were directed to the export sector.
Notwithstanding some concerns about the short-term repercussions of the austerity programme, foreign investment in China had continued to soar, the report said.
