REGET FO IN
REGIST: To. 51
- 2 MAÍ 1975
CONFIDENTIAL
FLAG F
HONG KONGI THE ECONOITY
General
1.
HKK 5/43. (1974)
The combined impact of steeply-rising oil prices, sharp increases in the cost of imported raw materials and food and the decline in world trade has slowed down the growth of Hong Kong's economy. Industrial output is patchy and the supply of credit is tightening. The Hang Seng index of industrial share prices recently fell to its lowest level for four years (165. against over 1,700 last year). Nevertheless an increase of about 4% in GDP for 1974 is forecast (against an average annual increase, in real terms, of about 8% in recent years). Until October exports were holding up quite well and the official reserves are still healthy.
2.
The Hong Kong Government announced on 26 November its decision to free the exchange rate of the Hong Kong dollar from its tie with the United States dollar, which was established in February 1973. The move followed speculative pressure against the US currency necessitating support by the Hong Kong monetary authorities under IMF rules at a cost which in the absence of "floating" would soon have become prohibitive.
Wages and Employment
3.
It is estimated that in the twelve months to April 1974 real wages declined by about 12%. They have since either remained stagnant or, in some cases, declined even further. consequent reduction in purchasing power has led to a marked
fall-off in retail sales.
.
The
Employment in the manufacturing sector fell by more than 2% in the second quarter of 1974, bringing the drop in manufacturing employment during the first half of the year to 35,000, or close on 6 of the industrial labour force. The
decline was particularly marked in textiles, clothing and plastics industries (which are among Hong Kong's leading export earners); employment in the electrical appliances, electronics, scientific instruments and allied industries has on the other hand
CONFIDENTIAL
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