TUESDAY, AUGUST 26, 1986
CONTINUED ECONOMIC GROWTH IN SOME INDUSTRIALISED COUNTRIES AND STOCK REPLENISHMENT IN THE UNITED STATES ALSO CONTRIBUTED. DOMESTIC EXPORTS TO CHINA, HOWEVER, CONTINUED TO BE ADVERSELY AFFECTED BY CHINA'S TIGHTENING OF CONTROL OVER THE USE OF ITS FOREIGN EXCHANGE RESERVES.
COMPARING THE FIRST HALF OF 1986 WITH THE FIRST HALF OF 1985, RE-EXPORTS SHOWED NO CHANGE IN REAL TERMS, WITH A DECREASE IN RE-EXPORTS TO CHINA OFFSETTING THE INCREASES IN RE-EXPORTS TO OTHER MARKETS. HOWEVER, IMPORTS GREW BY ABOUT 5 PER CENT IN REAL TERMS, AND RETAINED IMPORTS GREW BY ABOUT 10 PER CENT IN REAL TERMS.
THE REPORT FURTHER POINTS OUT THAT OVER THIS PERIOD, THE GROWTH RATE OF THE VALUE OF IMPORTS, AT 9 PER CENT, WAS FASTER THAN THAT OF TOTAL EXPORTS (DOMESTIC EXPORTS PLUS RE-EXPORTS), AT 5 PER CENT.
A VISIBLE TRADE GAP (THE PROPORTION OF THE VALUE OF IMPORTS OF GOODS NOT COVERED BY RECEIPTS FROM EXPORTS OF GOODS) OF 4.0 PER CENT WAS RECORDED IN THE FIRST HALF OF THIS YEAR, COMPARED WITH A VISIBLE TRADE SURPLUS, EQUIVALENT TO 0.2 PER CENT OF THE VALUE OF IMPORTS, IN THE FIRST HALF OF 1985.
ON THE FINANCIAL SECTOR, THE REPORT NOTES THE FOLLOWING DEVELOPMENTS. FIRST, THE EXCHANGE RATE OF THE HONG KONG DOLLAR AGAINST THE U.S. DOLLAR REMAINED CLOSE TO THE LINKED RATE OF HK$7.80 TO U.S.$1 FOR MOST OF THE TIME DURING THE FIRST HALF OF 1986.
HOWEVER, REFLECTING THE CONTINUING DECLINE IN THE EXCHANGE RATE OF THE U.S. DOLLAR AGAINST OTHER MAJOR CURRENCIES, THE EFFECTIVE EXCHANGE RATE INDEX OF THE HONG KONG DOLLAR FELL BY 7 PER CENT OVER THE PERIOD.
SECOND, HONG KONG DOLLAR MONEY MARKET INTEREST RATES WERE FAIRLY STABLE THROUGHOUT THE FIRST HALF OF THE YEAR, EXCEPT FOR A SHORT PERIOD IN LATE APRIL WHEN THE FLOATATION OF THE CATHAY PACIFIC SHARES CAUSED CONSIDERABLE FLUCTUATIONS IN LOCAL INTEREST RATES, PARTICULARLY THOSE AT THE SHORTER END. HONG KONG DOLLAR INTEREST RATES WERE SLIGHTLY BELOW THOSE OF THE U.S. DOLLAR FOR MOST OF THE PERIOD.
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THIRD,
ADMINISTERED INTEREST RATES WERE REVISED ON TWO OCCASIONS: AN UPWARD REVISION IN EARLY APRIL AND A DOWNWARD REVISION IN MID-MAY, WITH THE CONSEQUENCE THAT AT THE END OF JUNE 1986 THEY WERE SLIGHTLY HIGHER THAN THE LEVELS AT THE END OF DECEMBER 1985.
FOURTH, CONSISTENT WITH THE RECOVERY IN ECONOMIC ACTIVITIES, THE DEMAND FOR LOANS BECAME FAIRLY BUOYANT IN THE FIRST HALF.
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