G.F. 326
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20
Summary and conclusions
33.
Reflecting the measures adopted by the Chinese
government to cool down its economy, the
previously-excessive rate of economic growth appears to
have been contained. However, whether or not the
austerity programme will put the Chinese economy back on
track depends largely upon whether the controls are
applied in such a way that funds are channelled to
bottleneck areas and well-run enterprises. The latest
investment figures, however, show that the share of
investment going to the critical transport and raw
materials sectors has declined. This trend, if continued,
will have adverse implications for China's long term
economic development. In the external sector, the visible
trade deficit showed no significant improvement in the
first half of the year. Probably in view of this, the
Chinese government has placed greater emphasis on import
substitution. It has also devalued the Renminbi by 13.6%
in July.
34.
The sharp devaluation of the Renminbi is likely
to have mixed effects on Hong Kong's economy. The competitiveness of Hong Kong's exports in the China market vis-à-vis those from other countries has not worsened.
However, as the Renminbi cost of importing foreign goods,
including those from Hong Kong, has been raised, Chinese
enterprises may reduce the level of their imports. This
would have adverse implications for Hong Kong's exports to
China. On the other hand, to the extent that China's
exports increase as a result of enhanced price
competitiveness, Hong Kong should stand to gain from
increased re-export trade and transhipment business.
the price front, the devaluation of the Renminbi is likely
to exert some dampening effect on price increases of goods
imported into Hong Kong from China.
On
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