THE ECONOMY
63
In 1988, re-exports grew by 51 per cent in money terms, or by about 46 per cent in real terms, following an increase of 49 per cent in money terms, or 46 per cent in real terms, in 1987. This rapid growth was a result of the buoyant entrepôt trade with China in particular and with the Asia-Pacific region generally.
While China continued to feature prominently both as a source and as a market for Hong Kong's re-exports, the value of those re-exports which were not related to China also grew rapidly. Besides China, the other major re-export markets were the United States, Japan, Taiwan, the Republic of Korea and Singapore. With regard to the origin of the re-exports, the major suppliers, apart from China, were Japan, the United States, Taiwan and the Republic of Korea.
When analysed by end-use categories, a major proportion of Hong Kong's re- exports comprised raw materials and semi-manufactures, and consumer goods, which represented 39 per cent and 42 per cent-respectively of the total value of re-exports in 1988. Re-exports of electrical machinery, sound recording and reproducing equipment, clothing, textile yarn, and textile fabrics and made-up articles showed more rapid increases than those of other commodity items.
Imports grew by 32 per cent in money terms or by about 27 per cent in real terms in 1988, compared with increases of 37 per cent and 32 per cent respectively in 1987. The major sources of Hong Kong's imports were China, Japan, Taiwan, the United States, the Republic of Korea and Singapore. A major part of this growth was attributable to the upsurge in re-export trade. There was, however, an increase of about 12 per cent in real terms in retained imports. Retained imports of capital goods and of raw materials and semi-manufactures, in particular, grew by about 16 per cent and 14 per cent respectively in 1988 over 1987.
As the value of total exports (domestic exports plus re-exports) was smaller than that of imports, a visible trade deficit of $5,729 million, equivalent to 1.1 per cent of the total value of imports, was recorded in 1988. If an estimate of the imports of gold for industrial and commercial use is included, the deficit was $8,105 million. This compares with a visible trade surplus of only $87 million (or a deficit of $1,955 million after a similar adjustment for gold imports) recorded in 1987. As the prices of imports rose slightly faster than those of total exports in 1988, the terms of trade deteriorated slightly when compared with 1987.
Domestic Demand
As the overall growth rate of the economy became more moderate, the growth rate in real terms of domestic demand also slowed down, from 12 per cent in 1987 to seven per cent in 1988. Private consumption expenditure grew by eight per cent in real terms in 1988, following an increase of 11 per cent in 1987. Government consumption expenditure grew by six per cent in real terms, while the corresponding growth rate in the preceding year was four per cent. It was the third consecutive year that the growth rate of government consumption expenditure was below that of the GDP, reflecting the government's policy of keeping the growth in public expenditure under control. Investment demand, measured in terms of the gross domestic fixed capital formation, grew by five per cent in real terms in 1988, compared with an increase of 15 per cent in 1987. Among its main components, expenditure on building and construction showed little change in real terms in 1988. On the other hand, expenditure on plant, machinery and equipment grew by 13 per cent in real terms. This rapid growth was prompted in part by the difficulty in recruiting labour, resulting in the adoption of more labour-saving production methods.