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Table 4
plant and machinery by the manufacturing sector since the second quarter of 1986 was sustained in the first quarter of 1987. Within this category of investment, textile machinery has registered the most rapid increase for four consecutive quarters
(Table 4).
9.
The strong rate of growth of investment in industrial machinery by the manufacturing sector in the first quarter of 1987 was in line with the growth rate of about 28% in real terms in domestic exports, and a reflection of buoyant activity in the manufacturing sector. More specifically, it is likely that the following factors contributed. First, strong order book positions and a high degree of capacity utilization are likely to have induced manufacturers to increase their investment
in industrial machinery. Second, the difficulties experienced by many manufacturers in recruiting workers as a result of the tight labour market at present will have strengthened the long term tendency for manufacturers to substitute capital for labour through mechanization and automation. Third, the expectation of further increases in the import prices of industrial machinery, as a result of the strengthening of the Yen (Japan being Hong Kong's largest supplier of capital goods) and of European currencies, may have induced some manufacturers to bring forward their investment plans. Fourth, the current low interest rate level provides an incentive for investment in industrial machinery through reducing the cost of funding them.
G.F. 326
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