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Financial System and Economy
IN 1980, the Hong Kong economy experienced yet another year of rapid growth. Preliminary estimates showed that the growth rate of the gross domestic product in real terms was as high as nine per cent, matching the performance in the four earlier post-recession years (1976-9) of 12 per cent a year. Given that world economic prospects were uncertain and that economic conditions in two of Hong Kong's major markets -- the United States and the United Kingdom were unimpressive, such a performance was remarkable.
More remarkable still was the fact that economic growth in 1980 continued to be export- led, although to a lesser extent than in 1979. The growth rate of total exports in real terms was 18 per cent and the growth rate of domestic exports in real terms was 11 per cent. These compared favourably with the growth rate of domestic demand at 12 per cent. In 1979, the growth rates of total exports and domestic exports, at 20 per cent and 17 per cent, respec- tively, were much higher than that of domestic demand at eight per cent.
However, in 1980 there was a tendency for the growth rate of domestic exports to slow down. This became obvious in the second half of the year when, presumably affected by unfavourable conditions prevailing in the economies of some of Hong Kong's major markets, the growth rate of domestic exports slowed down to five per cent, compared with 18 per cent in the first half of the year. At the same time, there was a tendency for the growth rate of domestic demand to pick up, as indicated, for example, by an acceleration in the growth rate of imports of consumer goods. Such changes, however, were gradual for there was, in 1980, no sign of any significant shift in the distribution of labour resources away from the manufacturing sector. Nor was there any sign of a significant widening in the visible trade 'gap' (or proportion of the value of imports which is not covered by the value of total exports) - a phenomenon usually associated with the growth rate of domestic demand being excessive.
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The entrepôt trade remained buoyant throughout 1980, recording a growth rate in real terms of 37 per cent. This was the third consecutive year that a growth rate in real terms in excess of 20 per cent had been recorded. So, Hong Kong's role as an entrepôt for the region and in particular for China continued to gain importance, along with its role as an international financial and communications centre.
Activity in the financial and related business services sector (particularly the stock market) was also buoyant in 1980. The growth rates of such monetary aggregates as the money supply and total loans and advances in Hong Kong were rapid, but the precise significance of such rapid growth rates for the economy has yet to be established.
Labour Market
Economic growth in 1980 was also associated with a closer balance between the demand for, and supply of, domestic resources. The growth rate of the demand for output was