THE ECONOMY
import/export, wholesale/retail, and transportation and warehousing, to newer areas like property development, financial services, manufacturing and infrastructural projects.
Increasing financial links between Hong Kong and China are reflected by the rapid growth in financial transactions with China. While the Bank of China Group is the second-largest banking group in Hong Kong, after the Hongkong Bank Group, the latter group is the best-represented foreign bank in China, followed by the Standard Chartered Bank.
Hong Kong is a major funding centre for China. Most of China's fund-raising activities in Hong Kong have taken the form of syndicated loans. Although in some cases Hong Kong is not the direct source of funds, it serves as a window through which China can have access to external borrowing. These loans are mostly for financing China's own economic development, but some of them are used by PRC-interest companies in Hong Kong to finance their investment activities in Hong Kong or abroad. In addition to syndicated loans, PRC-interest banks and other enterprises have been making greater use of negotiable certificates of deposit (from banks only), bonds, commercial paper, and share issuance (through shell companies acquired for the purpose) to raise funds.
The prospects for further development of economic links between Hong Kong and China continue to be good, given the firm foundation established over the years and the continuation of open-door policies and economic reforms in China.
The Economy in 1991
Following the revival in the latter part of 1990, the economy continued to grow steadily in 1991. Re-exports remained robust throughout the year, but domestic exports recorded virtually no growth. Locally, investment activity showed a marked improvement over the course of the year. Consumption spending also registered a fair increase.
Consumer price inflation was still high during 1991. There was, however, a gradual moderation of the inflationary pressures since April. For the year as a whole, the rate of increase in the Consumer Price Index (A) averaged 12 per cent. The GDP deflator, as a broad measure of overall inflation in the economy, rose less rapidly than the consumer price indices, by 9.6 per cent in 1991 over 1990.
According to the preliminary estimate, the growth rate in real terms of the GDP was 3.9 per cent in 1991, with increases of 3.9 per cent in the first half and four per cent in the second half. In 1989 and 1990, the GDP grew by 2.8 per cent and three per cent respectively in real terms.
External Trade
In 1991, the value of domestic exports was two per cent higher than in 1990. After discounting for an estimated two per cent increase in price, there was virtually no growth in real terms. This compared with an increase of one per cent in value terms or a decrease of less than one per cent in real terms in 1990. On a year-on-year comparison, domestic exports grew by two per cent in real terms in the first half of 1991, but decreased by one per cent in the second half. The moderate performance of domestic exports should, however, be viewed against the marked increase in re-exports throughout the year. Many of these re-exports were products of outward processing arrangements made between Hong Kong companies and manufacturing entities in China.
55