THE ECONOMY
In the first three quarters of 1997, seaborne outward transshipment rebounded strongly by 9 per cent in tonnage terms over a year earlier, in contrast to a 3 per cent decline in 1996. This reflected the accelerated development of offshore trading in Hong Kong's external trade. Analysed by market, transshipment to the USA and Taiwan rose substantially, both by 16 per cent. This was followed by the Mainland, with an increase of 14 per cent. On the other hand, transshipment to Japan showed only modest growth of 2 per cent, while transshipment to Singapore, Germany and the UK fell by 8 per cent, 19 per cent and 21 per cent respectively. Analysed by major commodity group, manufactured goods continued to account for the largest share of seaborne outward transhipment, at 44 per cent in tonnage terms in the first three quarters of 1997. This was followed by chemicals and related products (18 per cent), crude materials (13 per cent), machinery and transport equipment (12 per cent), and foodstuffs (11 per cent).
Imports rose by 7 per cent in real terms in 1997, faster than the corresponding increase of 4 per cent in 1996. This was mainly attributable to a strong revival in retained imports by 9 per cent in real terms in the first three quarters of 1997 for both consumption and production purposes. However, retained imports underwent a significant deceleration in growth to only 3 per cent in the fourth quarter, as domestic demand slackened against the adverse effect of the regional financial turmoil. The Mainland remained the largest source of Hong Kong's imports, accounting for 38 per cent of the total value in 1997. This was followed by Japan (14 per cent), the USA (8 per cent), and Taiwan (8 per cent).
Due in part to a larger intake of raw materials and semi-manufactures and of capital goods for production and business expansion in the early part of 1997, the visible trade deficit widened to $159 billion or 9.9 per cent of the total value of imports in 1997. The corresponding figures in 1996 were $138 billion or 9 per cent. The visible trade deficit nevertheless narrowed in the latter part of the year, falling from a peak of 13.3 per cent against the value of imports in the first quarter to 7.5 cent in the fourth quarter.
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As to invisible trade, mainly affected by the setback in inbound tourism since the middle of 1997, the value of exports of services weakened considerably to virtually zero growth in 1997. On the other hand, the value of imports of services increased by about 6 per cent in 1997. Yet with the former still much larger than the latter, a substantial invisible trade surplus of around $113 billion was still attained in 1997, which helped offset a large part of the deficit on the visible trade account.
Domestic Demand
Retail business was underpinned by a strong local consumer sentiment for most of the year, but offset to a considerable extent by the setback in inbound tourism. After late October, local consumer sentiment was also dampened by the marked correction in the stock and property markets and the rise in interest rates. The volume of retail sales, year-on-year, fell by 4.8 per cent in the fourth quarter, in contrast to an average increase of 3.1 per cent in the first three quarters. For 1997 as a whole, retail sales rose by only 1.1 per cent in volume, down from a 1.6 per cent increase in 1996. Of the total retail business, sales of motor vehicles rose most rapidly, by 26 per cent in volume in 1997. This was followed by sales of jewellery and watches and of other consumer durables, by 6 per cent and 5 per cent respectively. However, spending on
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