THE ECONOMY
larger decline in the price deflator for imports of goods and services. Within the GDP deflator, the total final demand deflator and the domestic demand deflator fell by 1.7 per cent and 1.1 per cent respectively in 2001, also reduced from the decreases of 3.1 per cent and 5.6 per cent in 2000 (Chart 14).
Chart 14
Main inflation indicators (year-on-year rate of change)
Per cent
8
6
4
2
0
-2
-4
-6
-8
GDP deflator
Composite CPI
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1996 i 1997
1998
1999
2000
2001
Both the Composite CPI and the GDP deflator continued to decline during most of 2001, but the decreases were smaller than those recorded in 2000.
Economic Policy
Under the 'one country, two systems' principle, the HKSAR shall continue to adopt social, economic and political systems distinct from those in the Mainland following reunification in July 1997. The Basic Law, as the constitutional law of HKSAR, gives a firm protection to this principle. The HKSAR shall continue to uphold the rule of law, maintain an effective executive-led Government, sustain an efficient and clean Civil Service, foster free enterprise and free trade, render a sound financial system and a robust monetary regime, practise prudent public finance, and keep a simple and predictable tax system with low tax rate. This will serve to provide a favourable overall business environment and help instil confidence for foreign investors coming to Hong Kong.
The Government firmly believes that the market can allocate and utilise resources more effectively and has a greater capacity to foster creativity, provide economic impetus and create employment opportunities. Yet the Government should not just take a passive role and distance itself from the economy. Rather, it should have a clear vision of the direction of economic development, be a proactive market enabler, and take care of those who are disadvantaged or in hardship. Specifically, the Government sees its primary roles as: first, maintaining an institutional framework conducive to market development, including reinforcing the institutional strengths,
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