CODE 18-77
Mr Thomas
HKD
HKK...... 090/2
RECEIVED IN RPAISTUHY
8 DEC 1986
GISTRY won Taken
THIRD QUARTER. ECONOMIC REPORT
Reference...
29
In Themes Tory Enter pa
fliz
2
Very encouraging slit
Ctr 8/12
1. This most recent report from the HKG presents an encouraging picture of economic developments in the Territory, with an acceleration of the positive trends identified earlier in the year. Of particular benefit is the rapid growth in domestic exports.
EXTERNAL
2.
(All growth rates below are in 'real' terms, that is adjusted for price changes, and show changes against the corresponding period of 1985.) Domestic exports show a 13% increase for the first nine months, with an accelerating trend of 1% growth in Q1, 14% in Q2 and 23% in Q3. Continuing depreciation of the HK$ in line with the US$ has aided competitiveness (particularly in Japan and the FRG) and import demand has been strong in many major markets:
1986/1985
01 Q2 Q3
Growth by market (%)
USA
China
FRG
UK
Japan
1
-22
18
-3
6
8
3
40
16
18
11
32
51
23
28
3. High levels of imports of raw materials and semi-manufactures suggest a healthy order book position and a continuation of strong export performance. Retained imports of capital goods indicate increased investment, with retained imports of machinery for use in the manufacturing sector up 23% so far during 1986, following a 4% decline over 1985 as a whole.
4. Re-exports have shown rapid growth since April, with 24% growth in Q3. This is in part due to increased Chinese exports of non-oil goods with attempts to raise export revenues (44% of Q3 re-exports were of Chinese origin). The figures on domestic exports to the PRC
(para 2) suggest that the period of tighter control over foreign exchange use which began in Q4 1985 may have reduced imports from the Territory to what is seen as an acceptable level.
FINANCIAL
5. Demand for loans from the financial institutions has increased as exports and production show more rapid growth. Lending to the manufacturing sector is now 16% higher than September 1985. Loans financing visible trade have shown similar increases.
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