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Mr J Stewart (HKD)
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BRIEFING ON THE HONG KONG ECONOMY FOH VISIT OF 12 OCTOBER
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Foreign Trade. Exports rose by 8.3% from January to
August this year compared with the same period last year to produce this year's first visible balance of trade surplus in August, aided by a 10.1% increase in re-exports so far this year. Imports were down in August (they usually are but the size of the dip is surprising) contributing to the largest BOT surplus on current account in at least 3 years. The increase in the value of exports reflects mostly increased quantities of goods sold (7% higher) rather than higher prices (2%) but of course the news is not really all good. Many of Hong Kong's najor buyers are stocked to saturation level, so it is believed, with the exception of the USA. Textiles and clothing, naturally, are the major causes for concern, Hong Kong comparing itself unfavourably with Singapore and South Korea who have both managed to increase their sales (Singapore 44% in the first quarter, South Korea 20% in the first third of the year while Hong Kong decreased its sales by 7'), though in other commodities (particularly electronic components and watches and clocks) Hong Kong has done well (a very recent decision by India to import 1 million watches will benefit HK considerably).
2. Imports so far this year are 13% higher than the corresponding period last year, most of the increase being an increase in quantity, not price. 13% growth is the result of averaging no growth at all in imports of raw materials (because of slack demand for the exports these are turned into) and strong growth (22%) in imports of consumer goods and capital goods (19% higher), though being durable some of these capital goods could well be re-exported in two years time after the Mass Transit Railway is completed, and if the government allows another recession to occur.
3. Re-exports are 10.1% higher than last year, accounting for 22% of total exports this year; they are mainly consumer goods and raw materials. There is scope for hope that they will become even more important as China may do a lot more trading with the rest of the world und Hong Kong can cash in as an efficient entrepct port (China provides 18% of K's imports but a third of this is re-exported - 26% of all re-exports).
4. The Visible Trade Balance. At 3082 the visible deficit looked, until the August trade figures came out, to be heading for the record books. But the record August Surplus reversed that and brought this year's deficit down to HK 2684, which may
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CONFIDENTIAL