THE ECONOMY
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to 20 per cent in the second half of the year, following a four per cent increase in the first half.
Against the background of steady economic growth, there was a continued marked increase in overall employment. The labour market remained generally tight. Both the seasonally-adjusted unemployment rate and underemployment rate stayed at low levels, at two per cent and 1.5 per cent, respectively. The local workforce as a whole continued to enjoy full employment and rising incomes.
The residential property market experienced a significant downturn during the second half of 1994, following the successive increases in mortgage rates from March, the setting up of the government's Task Force on Land Supply and Property Prices in April and the announcement in June of a package of measures to stabilise the market. As a result, speculative activities virtually disappeared and flat prices fell. Flat rentals continued to rise steadily reflecting sustained end-user demand, though with some moderation towards the end of the year.
Consumer price inflation measured in terms of the Consumer Price Index (A) moderated to an average of 8.1 per cent in 1994, down from 9.4 per cent in 1992 and 8.5 per cent in 1993. There was a temporary upsurge in this inflation rate in the summer, when the prices of vegetables and certain other fresh food items showed greater volatility due to the poor weather in Hong Kong and South China. The underlying inflationary pressures, however, remained basically domestically-generated, concentrated mainly on housing rentals, transport fares and charges for various consumer services. There was a rise in imported inflation in the latter part of the year, along with the weakening of the Hong Kong dollar in line with the US dollar, and the uptrend in basic commodity prices and product prices in the world market.
In line with the moderation in consumer price inflation, the GDP deflator, as a broad measure of overall inflation in the economy, also recorded a more moderate increase of 7.7 per cent in 1994, compared with an 8.8 per cent rise in 1993. The rate of increase in the domestic demand deflator, at 7.4 per cent, was also slower than the eight per cent increase in 1993.
Structure and Development of the Economy
A small territory with limited natural resources and six million people, Hong Kong is probably one of the most densely-populated urban economies in the world. It has, however, a deep-water harbour and is strategically located on the international time zone that bridges the time gap between Asia and Europe. It is close to China and has strong traditional links with the Southeast Asian economies. In addition, it has a low tax environment, free and fair market competition, a sound legal and financial framework, a fully convertible and secure currency, a highly efficient network of transport and communications and, most important of all, a competent workforce working with a pool of enterprising entrepreneurs. These have all contributed to the success of the Hong Kong economy.
Hong Kong is now ranked the eighth largest trading entity in the world. It operates the busiest container port in terms of throughput. Its airport is the third busiest in the world in terms of the number of international passengers and the second busiest in terms of the volume of international cargo handled. The territory is also the world's fourth largest banking centre in terms of the volume of external banking transactions, and sixth largest