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AGC 201
Ab
88
KORTATE CIPHON/CAT A
GRPS 350
FH F C O P91815Z
DCDIP
RECEIVED IN REGISTRY No. 51
30 AUG 1974
4KK 10/9
(HK)
Pla
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DESKBY 292359Z
TO IMMEDIATE HONG KONG TELEGRAM NUMBER 753 OF 29 AUGUST 1974.
M.1.P.T. : DEFENCE REVIEW.
FOLLOWING IS DRAFT TREASURY PASSAGE.
QUOTE.
HONG KONG'S ABILITY TO MAKE AN INCREASED CONTRIBUTION TO
UK DEFENCE COSTS,
མ
THE BUOYANCE OF THE HONG KONG ECONOMY IS REMARKABLE IN THE FACE
OF WORLD DIFFICULTIES CREATED BY THE RISE IN OIL PRICES, AND IN COMMODITY PRICES GENERALLY. IN SPITE OF SOME SLACKNESS IN THE LABOUR MARKET GUP ROSE IN 1973-74 BY A REAL 9 PERCENT (ITS GROWTH HAS AVERAGED ABOUT 8-9 PERCENT A YEAR IN REAL TERMS OVER THE LAST FIVE YEARS). THE VOLUME OF GOODS EXPORTED ROSE BY 7 PERCENT AND IN VALUE EXPORTS ROSE AS FAST AS IMPORTS IN 1973-74 (BY 41-42 PERCENT) IN THE MARCH BUDGET THE HONG KONG FINANCIAL SECRETARY SAID THAT HE
EXPECTED GDP TO GROW IN REAL TERMS BY ABOUT 4 PERCENT. THIS YEAR: BUT IT IS REPORTED (THE TIMES 23.3.74) THAT THE HONG KONG GOVERNMENT
IS NOW EXPECTING A GROWTH RATE APPROACHING & PERCENT. IN SPITE OF EXPENSIVE NEW COMMITMENTS, E.G. ON EXPANDED SOCIAL SERVICEC AND A WATER DISALINISATION PROJECT, HONG KONG GOVERNMENT EXPENDITURE HAS SO FAR BEEN FINANCED FROM A PAXIMUM INCOME AND, CORPORATE TAX RATE OF 15 PERCENT, AND BY ONLY #FREQUENT RECOURSE TO BORROWING (SINCE 1945 THERE HAVE BEEN BUDGET DIFICITS IN ONLY THREE YEARS). HONG KONG'S
FOREIGN EXCHANGE RESERVES ARE SUBSTANTIAL.
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/ IT IS NOT