76 D073528 200M 2/74 Cr.P.C. $39/3
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11.
acquired at grossly inflated prices, resulted in bank credit becoming considerably tighter. And this was reinforced by the banks' decision to raise interest rates in the early months of 1973 in a move to prevent the further erosion of the liong Kong dollar deposit base. These more restrictivo money market condi- tions adversely affected the rate of growth of Hong Kong's exporta.
Although 1973 was a record year for world trade (OLCD exports rising by some 13%, in quantity terms) Hong Kong's domestic exports increased, in quantity terms, by some 7% only (though this was a marked improvement on its performance in 1972).
(g) Internal and External Inflation
23. But this rather slow rate of growth was not solely a quence of the tightening of bank credit. During the second half of 1973, interest rates increased still further in Hong Kong in
sharp line with movements abroad and this, on top of exchange rate uncertainties, had a further unsettling effect on producers. In addition, and associated with the stock market boom, there had been an acceleration of increases in property prices and rents (to such an extent that in the domestic sector the government introduced more comprehensive rent controls) and this also added to firms' trading difficulties. Furthermore, with the gathering momentum of inflation abroad as the world trading boom proceeded,
Hong Kong's manufacturers were faced with rapidly rising import prices for raw materials and semi-manufactures, the supplies of
which were becoming increasingly less reliable. Import prices increased overall by more than 20% in 1973, compared with less than 4% in 1972 and, for the first time in many years, the terms
of trade deteriorated. Largely because of these uncertainties, the demand for labour remained slackit (reported vacancies showing a sharp decline), and increases in output mainly from higher productivity and extended working hours. As a result, manufacturing wage rates continued to increase in 1973 by about 10% only.
with
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ing
24. This relatively slow rate of growth of money wage rates came in tho face of oxceptionally rapid increases in consumer pricen in the wake of very sharp increases in import prices for food- stuffs and household goods (reflecting not only mounting world inflation but also more aggressive pricing policies by China) and in the wake also of the heaviest rainfall in the region in
more than a century (which seriously disrupted local food sup- plies). Consumer prices increased by nearly 20% in 1973,
/compared
CONETDENTAL