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41.
24
Rather surprisingly, the prices of imports into Hong Kong from China remained fairly stable in the first half of 1988 and recorded an increase of only about 2%
The rate of compared with the same period in 1987.
increase in import prices of foodstuffs was higher at about 3% but that of consumer goods recorded a slight decline. One explanation may be that as practically all the imports from China are denominated in Hong Kong dollars, the depreciation of the Renminbi in the black market has enabled the exporters in China to convert their foreign exchange earnings into more Renminbi than previously. Thus the pressure to increase the prices of China's exports to Hong Kong as a consequence of its domestic inflation appears to have been at least partly
offset.
42.
However, the prices of goods from China did increase significantly at the retail level and the consumer price index for Chinese goods recorded a year-on-year rate of increase of 7% in the first half of 1988. Against the background of a much smaller increase in their import prices, this implies that the profit margins of the wholesalers and retailers in Hong Kong have
This increased significantly during the same period. apparent increase in profit margins was probably made possible by the present consumption boom in Hong Kong after two consecutive years of very rapid economic growth in 1986 and 1987. Such an increase in prices at the retail level may be more domestically generated inflation
On inside Hong Kong than imported inflation from China. the other hand, it may also reflect price manipulation to get round China's exchange controls.
43.
It has been reported in the newspapers that some PRC interest companies like Ng Fung Hong raised the wholesale prices of some fresh food items (mainly
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