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6.
WITHIN THE LOCAL ECONOMY, THE PROGRESSIVE RELOCATION OF THE MORE LABOUR-INTENSIVE PRODUCTION PROCESSES TO CHINA HAS RESULTED IN A LEANER AND MORE EFFICIENT MANUFACTURING SECTOR. AT THE SAME TIME, THE SERVICE SECTORS HAVE EXPANDED CONSIDERABLY IN ORDER TO MEET THE SUBSTANTIAL DEMAND FOR SUPPORTING SERVICES THAT IS BEING CREATED BY THE VAST PRODUCTION BASE IN THE PEARLY RIVER DELTA, AND BY THE RAPID INCREASE IN TRADE WITH CHINA AND WITH THE ASIA- PACIFIC REGION GENERALLY.
7. CONTINUED ECONOMIC GROWTH IN 1991 WAS, HOWEVER, ACCOMPANIED BY HIGH INFLATION. THE BASIC CAUSE OF THIS IS WELL RECOGNISED: RAPID STRUCTURAL CHANGE AT A TIME OF TIGHT RESOURCES HAS CREATED STRONG SECTORAL INFLATIONARY PRESSURES, PARTICULARLY IN THE SERVICES SECTOR WHERE THERE IS GENERALLY NO READY SUBSTITUTE FOR IMPORTS. VIEWED IN THIS CONTEXT, INFLATION IS AN ACCOMPANYING EFFECT OF HONG KONG'S ECONOMIC DYNAMISM, NOT A SIGN OF ECONOMIC WEAKNESS.
8.
THERE ARE CLEAR INDICATIONS, HOWEVER, THAT CONSUMER PRICE INFLATION HAS BEEN MODERATING. FOR 1991 AS A WHOLE THE RATE OF INCREASE IN CPI(A) WAS 12 PERCENT. BUT IT HAS BEEN DECLINING STEADILY FROM THE PEAK FIGURE OF 13.9 PERCENT RECORDED IN APRIL 1991 TO 10.3 PERCENT IN DECEMBER 1991, AND FURTHER TO 9. 5 PERCENT IN MARCH 1992.
ECONOMIC OUTLOOK FOR 1992.
9. SEVERAL UNCERTAINTIES CURRENTLY AFFECT HONG KONG'S TRADE PROSPECTS. THE FIRST IS A GLOBAL ONE, ARISING FROM THE CHAOTIC CONDITIONS IN THE COUNTRIES CONSTITUTING THE FORMER SOVIET UNION. THE OTHER IS ASSOCIATED WITH THE RENEWAL OF CHINA'S MFN STATUS BY THE UNITED STATES IN 1992 AND THE MARKET ACCESS NEGOTIATIONS BEING HELD BETWEEN THE UNITED STATES AND CHINA UNDER SECTION 301 OF THE US TRADE ACT.
10. GIVEN THE SIGNIFICANCE OF RE-EXPORTS INVOLVING CHINA IN HONG KONG'S OVERALL TRADE, IT IS IMPORTANT FOR US THAT THE TRADE DISPUTES BETWEEN THE UNITED STATES AND CHINA SHOULD BE RESOLVED SATISFACTORILY. IF THIS DOES NOT HAPPEN, THE DIRECT RESULT WOULD BE A DECLINE IN PROJECTED GROWTH OF SOME 1.8 PERCENT-2.5 PERCENT AND A LOSS OF UP TO 60,000 JOBS. THERE WOULD ALSO BE A WEAKENING OF BUSINESS CONFIDENCE IN HONG KONG AS THE IMPORTANCE OF HONG KONG AS A GATEWAY TO CHINA WOULD BE SIGNIFICANTLY DIMINISHED.
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