XN000022-1984-03-28 — Page 8

WEDNESDAY, MARCH 28, 1984

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CAPITAL INVESTMENT SLOWDOWN SERIOUS S.L. CHEN

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PRIVATE INVESTMENT EXPENDITURE WAS NOT MATCHING THE IMPROVEMENT IN EXPORT DEMAND, AND THIS WAS A VERY SERIOUS SITUATION+, THE HON S.L. CHEN SAID TODAY.

SPEAKING AT THE ANNUAL BUDGET DEBATE, HE WARNED THAT WITHOUT TIMELY AND ADEQUATE INVESTMENT IN NEW CAPITAL PLANT AND MACHINERY, AND IN ADVANCED TECHNOLOGY, HONG KONG'S INDUSTRIES WOULD SOON BOTH LOSE THEIR COMPETITIVE EDGE AND BECOME OBSOLETE.

+ IN TIME, THEY WOULD BE UNABLE TO MAINTAIN A FOOTHOLD IN THE WORLD MARKET, HE ADDED.

ON THE SUBJECT OF INFLATION, MR CHEN NOTED THAT THE FINANCIAL SECRETARY HAD SAID THAT INFLATION IN 1984, RUNNING AT ABOUT 12 PER CENT IN THE OPENING MONTHS OF THE YEAR, WAS EXPECTED TO TREND DOWN TO SEVEN PER CENT TOWARDS THE END.

+THE BASIS FOR THIS OPTIMISTIC OUTLOOK APPEARS TO HAVE BEEN HIS EXPECTATION THAT INFLATION WOULD FALL UNDER THE COMBINED INFLUENCE OF STABLE EXCHANGE RATE VIS-A-VIS THE US DOLLAR AND LOW INFLATION IN COUNTRIES WITH WHICH WE TRADE, HE ANALYSED.

HE POINTED OUT THAT THE DOLLAR LINK ESTABLISHED IN LAST OCTOBER, WHILE HELPING TO RESTORE CONFIDENCE IN HONG KONG CURRENCY, HAD MEANT IN REALITY NEARLY 17 PER CENT DEPRECIATION IN THE VALUE

HOWEVER, HE HAD DIFFERENT VIEWS, MR CHEN SAID,

OF OUR DOLLAR AND IMMEDIATE INFLATIONARY PRESSURE ON OUR ECONOMY.

+THE RESULT WAS MORE COSTLY IMPORT OF FOOD AND OTHER ITEMS OF NECESSITY FOR OUR DAILY LIFE, AND OF PLANT AND RAW MATERIALS FOR OUR INDUSTRIES, HE OBSERVED.

+ IT WOULD BE A LONG TIME BEFORE THE EFFECTS OF SUCH A HUGE CURRENCY DEPRECIATION WORK THEIR WAY THROUGH THE ECONOMY.

+CONSEQUENTLY, I AM OF THE OPINION THAT IN THE ABSENCE OF A RAPID RECOVERY IN THE VALUE OF OUR DOLLAR, THE FINANCIAL SECRETARY'S PREDICTION THAT INFLATION WOULD BE DOWN TO SEVEN PER CENT BY THE END OF THE YEAR WOULD APPEAR TO BE SOMEWHAT OPTIMISTIC,+ HE SAID.

TURNING TO THE BUDGET PROPOSALS, MR CHEN NOTED THAT PUBLIC SPENDING WAS STILL ON THE INCREASE, THOUGH AT A SLOWER PACE THAN A FEW YEARS AGO.

+ IN PARTICULAR, THE ALL IMPORTANT RECURRENT EXPENDITURE AS BUDGETED STANDS AT 15.7 PER CENT OVER THE PROVISION IN THE REVISED ESTIMATE FOR 1983/84, AND AT 72 PER CENT STILL UNCOMFORTABLY HIGH IN RELATION TO TOTAL EXPENDITURE, HE SAID.

THE BUDGETARY GUIDELINE REQUIRED THIS RATIO TO BE NOT MORE THAN 65 PER CENT, HE ADDED.

/+MOREOVER, WITHOUT

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