XN000022-1974-06-25 — Page 18

TUESDAY, JUNE 25, 1974

TO

"WORLD MARKETS HAVE BEEN AND STILL ARE UNCERTAIN AND ADJUSTING TO

NEVERTHELESS, I NEW MONETARY FINANCIAL AND ECONOMIC FACTORS. HAVE NEWS TO REPORT FROM HONG KONG THAT IS RATHER BETTER THAN YOU HUST HAVE EXPECTED. IN THIS NEW SITUATION, WHICH HONG KONG SHARES WITH THE REST OF THE WORLD, THE SINGLE-MINDEDNESS AND SPEED OF REACTION OF OUR BUSINESSMEN, AND THE HARD WORK, SKILL AND REALISM OF WAGE-EARNERS, HAVE BROUGHT HONG KONG THROUGH, SO FAR, BETTER

THE LATEST INDICATORS THAN MOST AND I SUSPECT AS WELL AS ANY.

SEVEN STILL SHOW A RATE OF ANNUAL GROWTH IN REAL TERMS OF ABOUT TO EIGHT PER CENT. THE QUANTITY OF EXPORTS MANUFACTURED IN HONG KONG IN THE LAST QUARTER IS THE HIGHEST EVER ACHIEVED, AS IS THE TONNAGE OF DOMESTIC MANUFACTURES SHIPPED,

"THE PROSPECTS ARE DIFFERENT IN DIFFERENT INDUSTRIES, BUT TAKING THE

SWINGS AS WELL AS THE ROUNDABOUTS INTO ACCOUNT. THE PROBABILITIES ARE THAT THIS SITUATION WILL TEND TO IMPROVE RATHER THAN DETERIORATE IN THE SECOND HALF OF THE FINANCIAL YEAR. THAT IS OF COURSE, ASSUMING THAT THE PROPHETS OF GLOOM ARE WRONG AND NO WORLD-WIDE RECESSION DEVELOPS. THE PLAIN FACT IS THAT AT THE

MOMENT HONG KONG INDUSTRY IS MORE COMPETITIVE THAN IT HAS BEEN FOR SOME YEARS. AND IT IS THEREFORE WELL PLACED TO TAKE ADVANTAGE OF WHATEVER DEMAND THERE IS IN THE REST OF THE WORLD.

"NEVERTHELESS THE GALES BLOWING IN WORLD MARKETS ARE TAKING THEIR TOLL IN HONG KONG AS ELSEWHERE. AN ECONOMIST MIGHT JUSTIFIABLY TAKE A COMPLACENT VIEW OF AN ECONOMY REACTING CORRECTLY AND SUCCESSFULLY TO A NEW AND DIFFICULT SITUATION, BUT IT MAY SEEM RATHER DIFFERENT TO THE PEOPLE AFFECTED. MOST INDUSTRIALISTS ARE ACHIEVING COMPARATIVE OVERALL SUCCESS, BUT THIS IS AT THE EXPENSE OF SQUEEZED MARGINS AND OF EXCEPTIONAL EFFORT AND ANXIETY. AT THIS PRICE MOST ARE RIDING OUT THE SWELL OR MAKING PROGRESS, BUT SOME, AND PARTICULARLY SOME SMALLER FIRMS WITH SMALL RESOURCES OF FINANCE OR MANAGEMENT ARE NOT.

"THE ASPECT 1 FIND MOST WORRYING IS THAT THOUGH EXPORTS ARE HIGH THEY HAVE NOT PRODUCED FULL EMPLOYMENT AS IN THE PAST. ON THE CONTRARY THE LABOUR MARKET IS COMPARATIVELY SLACK, AND THERE IS SOME UNEMPLOYMENT AND MORE UNDEREMPLOYMENT. AND THOUGH WAGES HAVE RISEN SIGNIFICANTLY, THEY HAVE NOT RISEN TO ANYTHING LIKE THE SAME EXTENT AS THE PRICES TO BE PAID FOR THE IMPORTED NECESSITIES OF LIFE.

"IN CONSEQUENCE AFTER TEN YEARS OF STEADY RISE IN REAL WAGES -

YEARS WHICH HAVE DRAMATICALLY TRANSFORMED THE STANDARD OF LIVING IN THE LAST YEAR THERE HAS BEEN A SIGNIFICANT FALL-BACK. MOST FAMILIES IN HONG KONG ARE NOW HAVING TO ECONOMISE AND WATCH THEIR EXPENDITURE IN A WAY THEY HAVE NOT HAD TO FOR SOME YEARS. BUT UNLESS SOME NEW TURN TO INFLATION IS GIVEN ELSEWHERE THAT AFFECTS PRICES IN HONG KONG. AND PROVIDED DEMAND FOR HONG KONG GOODS KEEPS UP 1 SHOULD EXPECT THIS SITUATION TO START CORRECTING ITSELF TOWARDS THE END OF THE YEAR.

"THE HONG KONG

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