XN000022-1982-05-26 — Page 7

WEDNESDAY, MAY 26, 1982

ON THE EXTERNAL SECTOR, THE REPORT POINTS OUT THAT AS EXPECTED, GIVEN THAT THE YEAR-ON-YEAR GROWTH RATE OF RETAINED IMPORTS OF RAW MATERIALS AND SEMI-MANUFACTURES IN REAL TERMS FELL IN THE FOURTH QUARTER OF 1981, DOMESTIC EXPORTS IN VALUE TERMS GREW SLOWLY DURING THE FIRST QUARTER OF 1982. BUT, IN VIEW OF THE ECONOMIC SITUATION IN HONG KONG'S MAIN MARKETS, THE ZERO GROWTH RATE OF DOMESTIC EXPORTS IN REAL TERMS WAS NOT TOO DISCOURAGING. THERE ARE, HOWEVER, NO CONCRETE SIGNS YET OF ANY SIGNIFICANT IMPROVEMENT IN EXPORT PERFORMANCE: MANUFACTURING EMPLOYMENT DOES NOT SEEM TO HAVE INCREASED DURING THE FIRST QUARTER, AND THE RETAINED IMPORTS OF RAW MATERIALS AND SEMI-MANUFACTURES AS WELL AS OF CAPITAL GOODS CONTINUED TO DECLINE FOR THE SECOND CONSECUTIVE QUARTER. FURTHER, DOMESTIC EXPORT PERFORMANCE RELIES VERY MUCH ON THE ECONOMIC SITUATION IN HONG KONG'S MAIN MARKETS, PARTICULARLY THE UNITED STATES, BUT THE LATEST VIEWS ARE THAT RECOVERY IN THE UNITED STATES WILL COME LATER THAN PREVIOUSLY EXPECTED.

THERE WAS A DECLINE IN THE GROWTH RATE OF IMPORTS: THE GROWTH RATES OF IMPORTS SUBSEQUENTLY RE-EXPORTED AND OF IMPORTS RETAINED IN HONG KONG BOTH SLOWED DOWN SUBSTANTIALLY. HOWEVER, SINCE THE SLOW DOWN IN THE GROWTH RATE OF IMPORTS WAS FASTER THAN THAT OF TOTAL EXPORTS (DOMESTIC EXPORTS PLUS RE-EXPORTS), THE VISIBLE TRADE +GAP+ (THAT IS, THE PROPORTION OF THE VALUE OF IMPORTS NOT COVERED BY THE VALUE OF TOTAL EXPORTS) IN THE FIRST QUARTER OF 1982 NARROWED WHEN COMPARED WITH THAT IN THE CORRESPONDING QUARTER OF 1981.

ON THE FINANCIAL SECTOR, THE REPORT OBSERVES THE FOLLOWING DEVELOPMENTS. FIRST, THE ABOLITION OF THE WITHHOLDING TAX ON INTEREST ON FOREIGN CURRENCY DEPOSITS, ANNOUNCED BY THE FINANCIAL SECRETARY IN HIS BUDGET SPEECH ON FEBRUARY 24, HAS RESULTED IN A SUBSTANTIAL INCREASE IN SUCH DEPOSITS. IN CONSEQUENCE, TOTAL M3 GREW WHILE HK$M3 FELL SLIGHTLY DURING THE FIRST QUARTER. SECOND, THE AMENDMENT TO THE INTEREST RATE RULES WITH EFFECT FROM MARCH 1 BY THE HONG KONG ASSOCIATION OF BANKS ENABLES BANKS TO COMPETE FREELY IN TERMS OF THE INTEREST RATES THEY OFFER FOR DEPOSITS OF HK$500 000 OR MORE, WITH AN ORIGINAL TERM TO MATURITY OR PERIOD OF CALL OR NOTICE OF LESS THAN THREE MONTHS. THIS CHANGE HAS CONTRIBUTED TO A SHIFT OF DEPOSITS FROM DEPOSIT-TAKING COMPANIES TO BANKS, WITH THE RESULT THAT M2 GREW FASTER THAN M3 DURING THE FIRST QUARTER. THE REPORT ALSO NOTES THAT THE INTEREST RATES IN HONG KONG REMAINED GENERALLY STABLE THROUGHOUT THE FIRST QUARTER, AND THE EXCHANGE VALUE OF THE HONG KONG DOLLAR, AS MEASURED BY THE TRADE-WEIGHTED EXCHANGE RATE INDEX, HELD UP WELL.

ON THE LABOUR SECTOR, THE REPORT POINTS OUT THAT OVERALL EMPLOYMENT GREW FAIRLY RAPIDLY IN 1981 ALTHOUGH THERE WAS SOME SLOWING DOWN IN THE LAST QUARTER OF THE YEAR. AS THE UNEMPLOYMENT RATE FELL DURING THE YEAR, MANUFACTURING WAGE RATES STARTED TO RISE IN REAL TERMS. THE TERTIARY SERVICES SECTOR CONTINUED TO REGISTER THE FASTEST RATE OF GROWTH IN EMPLOYMENT.

THE REPORT INDICATES THAT THE GROWTH RATE OF THE SUPPLY OF LABOUR IN THE FIRST QUARTER OF 1982 CONTINUED TO SLOW DOWN AS A RESULT OF LESS NET IMMIGRATION AND FALLING LABOUR FORCE PARTICIPATION RATE. THIS WAS ACCOMPANIED BY A SLOWING DOWN IN THE GROWTH RATE OF DEMAND FOR LABOUR DUE TO A GENERAL FALL IN THE GROWTH RATES OF CONSUMER DEMAND AND OF EXPORT DEMAND.

/ON