1
Mee
13.
Our of inflation.
The essence of our system is that adjustments do not take place through the exchange rate itself, but through changes in other aspects of the
the economy, a process which may include
changes in the rate
recent inflation rate crept up over the course of 1987, but remains fairly moderate by historical standards (6). In the fourth quarter of 1987, the
was 6.7 higher than a year earlier cent Consumer Price Index (A) while for 1987 as a whole the average annual increase was 5.5% Some of the inflation was imported, partly
partly reflecting
the
per
Hong Kong dollar against
on
most
per
the
weakening of
other major
currencies, and some arose from the high liquidity and pressure
of demand within the economy.
14.
shortages
4
With the economy operating at full capacity, labour
became
in widespread
1987.
In
local
producers have displayed a remarkable degree of flexibility and ingenuity
significantly more
in
increasing
use
of
They have productivity.
outward processing
also
facilities
made
in
China. This increased inter-relationship of our economy with that of China was a marked feature of last year and seems likely
to
continue this year. There development of this relationship.
are
benefits
for
all
in
the
(6) Rate of increase of consumer prices over the past decade:
le.
(per cent)
Rate of Increase of CPI(A)
1978
5.9
1983
9.9
1979
11.6
1984
8.1
1980
15.5
1985
3.2
1981
15.4
1986
2.8
1982
10.5
1987
5.5
percent
Average 8.79
8
/15. The