13. This inflationary boom subsided in 1982 and 1983, partly because Hong Kong's trade had begun to be affected by the world
recession following the second oil price explosion, partly because the speculative fever in the property market had begun to subside of its own accord, but also because of concern over the political.
future of the territory. This commenced the most recent phase of the development of Hong Kong's economy. It has been divided into two distinct periods: a relative slowing down in economic growth
between 1982 and 1985 and a renewed acceleration from 1986 onwards.
14. The most difficult period was the autumn of 1983 when the Hong Kong dollar, which had floated freely since 1974, came under speculative pressure. To deal with this situation, it was linked to the US dollar at a new fixed rate of HK$ 7.80 = US$1.
15.
In
During this period of uncertainty, however, a new and increasingly important factor began to appear in Hong Kong's economy. This was the rapid increase in trade and other economic links with China following the opening of the Chinese economy at the end of the 1970s. Previously, while Hong Kong had itself been a good and expanding market for Chinese exports and an important source of foreign exchange for the Chinese economy, it had sold little, if any, of its own domestic exports to China. This situation has changed completely in less than a decade. particular, the growth of the re-export trade has enabled Hong Kong to resume its traditional role as an entrepot. Re-exports had fallen to less than a fifth of Hong Kong's total exports in 1970 and were still less than 25% in 1978: by 1988 they accounted for as much as 56% of total exports. 80% of this trade involves re-exports to or from China. Hong Kong's own domestic exports to China also increased rapidly (by thirteen times in value between 1981 and 1988). As a result, China and Hong Kong are now each other's
largest trading partners.
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