THE ECONOMY
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In comparison with other sectors, workers in the manufacturing sector enjoyed a relatively faster rate of increase in earnings (measured by payroll per person engaged) in money terms and in real terms in the 12 months ending September 1984, as they continued to benefit from the strong performance in the export sector. Over the same period, salaries in the tertiary services sectors, in terms of payroll per person engaged, also increased in real terms. However, construction wage rates continued to fall in real terms, although a moderate increase in money terms was recorded.
Property Market
The rate of take-up for most types of finished property appeared to have improved or remained at a reasonably high level in 1984. Given the reduced level of completions, the vacancy rates for all types of property were lower at the end of 1984 than at the end of 1983. The demand for small residential flats in convenient locations and for industrial property in established industrial areas has been particularly strong. Prices and rentals of finished property in general remained soft in the first half of the year, but have become stable or firmed up in some sectors since mid-year. Reflecting the adjustment to the over supply situation made by some developers, the supply of new private sector property, in terms of total usable floor area of all buildings completed, fell in 1984. However, the value index of construction work performed by main contractors in the first three quarters of 1984 was about the same as in the corresponding period in 1983.
Movements in land prices are closely related to movements in the prices of property. Although there is no reliable overall measurement of movements in land prices, land prices seemed to have remained largely steady in 1984, with some indications of increased confidence by developers towards the end of the year.
The Financial Scene in 1984
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The global performance of the US dollar and developments over the future of Hong Kong were the dominant factors affecting the financial scene in 1984. During the year, the exchange rate of the Hong Kong dollar held relatively steady against the US dollar. It was traded for most of the time within half a per cent on either side of the linked rate of $7.80 per US dollar in February and March. In line with the world-wide strength of the US dollar, the Hong Kong dollar appreciated against many other currencies and the trade-weighted exchange rate index advanced sharply to close the year at 75.9, representing an appreciation of 11.1 per cent over the end of 1983. Thus, the linked exchange rate system adopted in October 1983 had achieved its principal aim of stabilising the exchange rate and restoring confidence in the Hong Kong dollar.
The stable performance of the Hong Kong dollar was, nevertheless, associated with considerable fluctuations in local interest rates. The behaviour of the monetary aggregates was also quite volatile, and interpretation of their movements was further complicated by unmeasured but seemingly varied activity in foreign currency swap deposits. At the beginning of the year, speculation of a revaluation of the linked rate against the US dollar caused a substantial expansion in Hong Kong dollar deposits, which exerted severe downward pressure on money market rates and on local administered interest rates. This was followed by several increases in administered rates in the following four months to counter the pressure generated by the switch back into foreign currency deposits as the likelihood of any revaluation of the Hong Kong dollar link receded and as US dollar interest rates firmed. But with the favourable shift in political sentiment towards the end of September upon the initialling of the Sino-British draft agreement on the future of Hong