THE ECONOMY
Among the various components of the CPI(A), the prices of alcoholic drinks and tobacco, services, transport and vehicles, housing and foodstuffs recorded faster increases than the others. For these five components, the rates of increase were 44 per cent, 14 per cent, 13 per cent, 13 per cent and 11 per cent respectively in 1991 over 1990. Taken together, they accounted for 90 per cent of the overall increase in the CPI(A).
Relatively more moderate increases were recorded in the prices of fuel and light, clothing and footwear, durable goods and miscellaneous goods, which rose by an average of six per cent, seven per cent, four per cent and eight per cent respectively in 1991 over 1990.
Economic Policy and Public Finances
Economic Policy
Economic policy in Hong Kong is to a large extent dictated, and constrained, by the special circumstances of the economy. Owing to its small size and open nature, the economy is vulnerable to external factors, and government actions designed to offset unfavourable external influences are of limited effectiveness. Moreover, the government considers that, except where social considerations are over-riding, the allocation of resources in the economy is best left to market forces rather than done through government involvement.
This basically free-enterprise, market-disciplined system has contributed to Hong Kong's economic success. A relatively simple tax structure with low tax rates provides good incentive for workers to work and for entrepreneurs to invest. Both workers and entrepreneurs are highly motivated. The primary role of the government is to provide the necessary infrastructure and a sound legal and administrative framework conducive to economic growth and prosperity.
Measures to Curb Inflation and Property Speculation
In recognition of public concern over the high rate of inflation, the government announced a package of counter-inflation measures in May 1991. These measures included (a) freezing a number of planned increases in government fees and charges for the rest of the financial year; (b) removing the one-dollar taxi fuel surcharge; (c) reducing by half the earlier increase in tobacco duty; (d) raising local interest rates by one percentage point (local interest rates were lowered subsequently following an easing in US dollar interest rates); (e) asking banks to continue to exercise vigilance in mortgage lending; (ƒ) asking the Housing Authority to consider its forthcoming revisions in public housing rentals with due regard to the impact on local inflation (Housing Authority subsequently announced that there would be no rent increases for the rest of the year), and (g) considering the admission of more imported workers to alleviate constraints on labour resources. In addition, the government re-asserted its policy of restraining the growth in public expenditure and in the size of the civil service. These measures had some effect in dampening the inflationary pressures.
In a move to curb property speculation, which had intensified since the early part of the year, the government announced on August 7 a package of measures to regulate the sale of uncompleted flats. These included (a) raising the minimum initial deposit with developers and the forfeiture amount; (b) requiring balloting of registration numbers; (c) allowing only one registration per person during the sale; (d) limiting purchase to one flat per registered person, and (e) requiring developers to announce the total number of flats being offered for sale and the number of flats being reserved by them for private allocation when they
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