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China and other economies in East Asia are forecast to generally sustain a strong albeit slightly reduced growth. For China in particular, the substantial lowering in its import tariffs, coupled with rising income and greater propensity to spend amongst its residents, should lead to a continuing surge in its import demand in the months ahead.
Reflecting these market influences as well as the on-going shift in the pattern of exports, re-exports are expected to show a better performance for the rest of 1996. As to domestic exports, the downward adjustment made to the forecast primarily reflects the poor performance in the first quarter.
Taking re-exports and domestic exports together, the forecast growth rate in real terms of total exports of goods in 1996 is revised slightly downwards, from 10% to 9.8%.
The current export forecasts continue to assume that China's Most Favoured Nation trading status in the United States will be renewed, and that the present dispute between China and the United States over intellectual property rights (the US Special 301 issue) will be satisfactorily resolved.
The forecast growth rate in real terms of imports of goods is also revised slightly downwards, from 7.8% to 7.6%. The slower import growth is attributable to the envisaged slow-down in inventory build-up after the substantial accumulation over the past two years. This should help to narrow the visible trade deficit over the course of 1996.
Exports of services are forecast to grow by 10% in real terms, same as the March forecast. Tourism picked up strongly in the first quarter, and is expected to maintain its momentum for the rest of the year.
The growing intra-regional trade and other business links should lead to greater exports of financial services as well as professional and other business services. The trend of further structural shift in Hong Kong's trade from re-exports to transhipment and offshore merchanting which was witnessed more recently is expected to continue.
Moreover, the Government's initiatives on promotion of services should in due course help to expand the service sectors generally and exports of services in particular.
Reflecting largely the expected pick-up in local demand, imports of services are forecast to grow by 7.5% in real terms, slightly faster than the 7% growth in the March forecast.