TGIACA
CONFIDENTIAL
ECONOMIC AND FINANCIAL POSITION
BACKGROUND
1.
Hong Kong along with the majority of the world's major
manufacturing economies suffered during 1982 from the world wide
recession. Recovery began during the second half of 1983 and GDP
growth that year amounted to over 5%. 1984 saw the economy growing strongly by 9%, some 3% above Government forecasts. This growth was export led.
Several external and internal factors contributed to
this dramatic improvement. Hong Kong's manufacturing industry
benefited in 1984 from the continuing economic recovery of its major trading partners, principally the United States, Hong Kong's largest market for domestic exports. Exports to China also expanded rapidly as the territory's trading links with the PRC increased and China's economic policy created a demand for imported goods. This expansion
was sufficient for the PRC to replace the UK as Hong Kong's second most important export market. Domestic exports during the year rose to over US$130 million, some 32% above the corresponding figure for
1983, whilst re-exports chanelled through Hong Kong showed an
increase of 48%.
2. On the domestic front, the removal of doubt on
of doubt on the future
the future of the
territory following the signing of the Hong Kong agreement and the
resultant increased confidence of investors contributed to the
substantial economic expansion. The year-on inflation rate slowed down appreciably during 1984 to 4.6% whilst the unemployment rate
remained at under 4%. New investment in plant and machinery and
imports of capital goods for retention in Hong Kong grew by 25%.
3. The improvement in the economy has been maintained during the first months of 1985 with the main economic indicators signalling a
continuation of the 1984 trends. Exports have remained buoyant, the property and land markets show continuing signs of improvement and the Hang Seng index recently reached a four year high having risen over 600 points in the last seven months. The Hong Kong dollar has risen three cents against the US dollar, despite the official peg between the two currencies, and after three years of budget
CONFIDENTIAL