CONFIDENTIAL
155411
MDH N 6696
PROPERTY. LATEST INDICATIONS ARE THAT FLAT PRICES ARE BEGINNING TO STABILISE. IT IS NOT CLEAR, HOWEVER, WHETHER THIS WILL
CONTINUE.
ECONOMIC OUTLOOK FOR THE REST OF 1992.
7. EXTERNAL TRADE: TOTAL EXPORTS ARE EXPECT TO SHOW FURTHER SIGNIFICANT GROWTH IN 1992, FUELLED MAINLY BY A FURTHER EXPANSION IN OUTWARD PROCESSING ACTIVITIES AND A GREATER ABSORPTION OF IMPORTS BY CHINA. FOR HONG KONG'S RE-EXPORTS OF CHINA ORIGIN, THE TRADE RELATIONS BETWEEN CHINA AND THE UNITED STATES ARE HIGHLY SIGNIFICANT. ALTHOUGH THE RENEWAL OF CHINA'S MFN STATUS IN THE UNITED STATES IN 1992 LOOKS FAIRLY SECURE, THERE IS CONCERN OVER ITS RENEWAL NEXT YEAR IF CLINTON WINS THE ELECTION. MARKET ACCESS NEGOTIATIONS BETWEEN THE UNITED STATES AND CHINA UNDER SECTION 301 OF THE US TRADE ACT ARE ALSO GIVING RISE TO SOME UNCERTAINTY, ESPECIALLY IN THE LIGHT OF THE RELEASE OF A PRELIMINARY HIT LIST BY THE US WHICH, IF FULLY TAKEN ON BOARD, WOULD ADVERSELY AFFECT CHINA'S TRADE TO THE VALUE OF USD3.9 BN.
8. THE RECENT DEPRECIATION OF THE US DOLLAR, AND HENCE THE HK DOLLAR, SHOULD HELP TO ENHANCE THE PRICE COMPETITIVENESS OF HONG KONG'S PRODUCTS, THEREBY OFFSETTING THE SLACK DEMAND IN OUR OVERSEAS MARKETS. DOMESTIC EXPORTS TO THE UNITED STATES HAVE CONTINUED TO PICK UP IN RECENT MONTHS, NOTWITHSTANDING ITS SLUGGISH CONSUMER DEMAND. THE MARKETS IN EAST ASIA ARE EXPECTED
TO REMAIN BUOYANT, IN VIEW OF THE DYNAMIC GROWTH IN THE ASIA- PACIFIC REGION AND THE RAPID EXPANSION IN INTRA-REGIONAL TRADE. HOWEVER, GIVEN THE CONTINUED SHIFT OF DOMESTIC EXPORTS TO RE- EXPORTS, ALONG WITH THE FURTHER RELOCATION OF PRODUCTION PROCESSES TO SOUTH CHINA, ONLY A MODERATE OVERALL GROWTH IN DOMESTIC EXPORTS IS EXPECTED.
9. DOMESTIC DEMAND: BOTH CONSUMPTION AND INVESTMENT EXPENDITURES ARE EXPECTED TO SHOW STRONG GROWTH IN 1992. INVESTMENT IN MACHINERY AND EQUIPMENT IS EXPECTED TO CONTINUE AMIDST THE GENERALLY TIGHT LABOUR MARKET CONDITIONS.
10. WITH IMPETUS COMING FROM BOTH THE EXTERNAL AND THE DOMESTIC SECTORS, GDP IN 1992 IS FORECAST TO GROW BY 5 PERCENT IN REAL TERMS. THIS REPRESENTS A FURTHER INCREASE FROM THE 4.2 PERCENT GROWTH RECORDED IN 1991. PERFORMANCE IN THE SECOND HALF OF 1992
IS EXPECTED TO BE SLIGHTLY BETTER THAN IN THE FIRST HALF.
11. CONSUMER PRICE INFLATION: CERTAIN FACTORS ARE CONDUCIVE TO
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