29. But productivity gains alone cannot overcome the overall shortage of resources which fuels inflation. Last year, thanks to the increased efficiency of our workforce, backed by the surge in investment which I have already mentioned, we saw a further increase in labour productivity generally. But still the pressure on prices continues. Plainly, we have to tackle the shortage of labour resources at source. The unemployment rate is currently below 2%. This is effectively full employment. It is for this reason that we have embarked on a carefully-controlled programme of labour importation.
Unemployment and Underemployment Rates
7
6
5
4
%
Unemployment rate
30.
3
2-
1
0
75 76
77 78
Underemployment rate
79 80 81 82 83 84 85 86 87 88 89 90 91 Year
The unemployment rate is currently below 2%
A widespread view among Hong Kong's economists, which I accept, is that inflation has mainly been generated by the strains and distortions involved in the restructuring of our economy. We are switching from an industrial to a mixed manufacturing/service economy. In only ten years, the proportion of our workforce employed in the services sector has increased from about 47% to 63%. And the manufacturing workforce has declined by 220,000 people. We are taking on a new role as the centre of an extensive manufacturing and commercial hinterland in Southern China.
31. This radical transformation in the fundamental character of the Hong Kong economy has created acute shortages of key professionals, executives and service workers, as well as of land and buildings. Higher living standards, and expectations of further rises in disposable incomes generated by this transformation, have also created a surge in demand for services of every kind within Hong Kong itself. The result has been inflation. It is undesirable and, for some, painful. It should gradually abate as the transformation progresses. In the meantime, we have to recognise the fact that rising prices reflect the strains created by the quest for growth and the pursuit of a higher standard of living.
32.
This transformation has given us good growth despite the problems of the world economy in recent years, and has allowed our exports to remain highly competitive
9
B