XN000022-1975-12-12 — Page 5

community what it should be. But these things are being, and will

continue to be, provided, and on an ever increasing scale, until the

deficiencies forced on Hong Kong by the influx of population have been

eliminated.

"Hong Kong has stability and its relations with China have

never been better, and its prospects are excellent. It is immediately

vulnerable in one respect only - it is totally dependent on its exports

and thus on both access to markets and on the level of demand in them.

Its competitiveness, and the ability it has shown to tighten its belt

in bad times as well as to improve its living standards in good, assure

it a market wherever demand exists, provided no artificial barriers are

raised against it. But against crude protectionism or preferences

accorded to its competitors it is powerless. All that it asks and

all that it needs to assure its future is freedom to trade with those

who wish to buy.

"Like other places, Hong Kong has had its difficulties in

this recession period, with a high level of unemployment and considerable

distress. But the economy succeeded in adjusting downwards to the new

situation and it has been a remarkable and most helpful fact that the

indices of both cost-of-living and wage rates have been virtually static

for the last year. In consequence Hong Kong has been and is in a

highly competitive situation. Its exporters were thus able to take

advantage of such demand as there has been in world markets, and to react

quickly to the first impulses of economic revival. The Government was

also able to assist the economy by maintaining its expenditure at a

comparatively high level but without affect on either inflation -

which has been nil over the last year

—

or on the parity of the Hong Kong

dollar which has remained steady to strong. The economy bottomed up in

the second quarter.

Exports have been improving in the third and fourth

/quarters