XN000022-1985-03-07 — Page 4

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T NORAY, MARCH 7, 1985

HE SAID THAT ECONOMIC LINKS WITH CHINA HAD ALREADY DEVELOPED IN AREAS BEYOND MERCHANDISE TRADE.

+CO-OPERATION IN SUCH MATTERS AS JOINT VENTURES, DIRECT INVESTMENT, PROVISION OF FINANCIAL SERVICES AND MANAGEMENT CONSULTANCY, AND TECHNOLOGY TRANSFER, IS ALREADY FIZZING WITH VITALITY, AND WILL FURTHER BENEFIT BOTH ECONOMIES IN THE YEARS AHEAD, SIR JOHN SAID.

+IN PARTICULAR CLOSE CO-OPERATION IS ALREADY WELL DEVELOPED AND SHOULD DEVELOP FURTHER IN THE SHENZHEN SPECIAL ECONOMIC ZONE, + HE ADDED.

SIR JOHN EXPECTED THAT THERE WOULD CONTINUE TO BE A RAPID INCREASE IN EXPORTS TO CHINA OF BOTH GOODS AND SERVICES, ESPECIALLY BUSINESS-RELATED SERVICES.

HE ALSO BELIEVED THAT IN GENERAL ECONOMIC LINKS WITH CHINA WOULD GROW STRONGER IN THE FUTURE AND THAT, RATHER THAN SUPPLANTING EXISTING LINKS WITH THE REST OF THE WORLD, THESE EXPANDED LINKS WOULD ADD A VALUABLE NEW DIMENSION TO HONG KONG'S ECONOMIC DEVELOPMENT.

THE FINANCIAL SECRETARY SAID THE ECONOMY WAS DOING WELL AT PRESENT. DOMESTIC EXPORTS GREW RAPIDLY IN 1983 AND 1984, WHICH HAD LED TO A RESURGENCE OF THE MANUFACTURING SECTOR. BY THE FOURTH QUARTER OF 1984 THE UNEMPLOYMENT RATE WAS 3.8 PER CENT

THIS COMBINATION AND THE UNDEREMPLOYMENT RATE WAS 0.8 PER CENT. PROBABLY REPRESENTED EFFECTIVE FULL EMPLOYMENT. THE INFLATION

IN TERMS OF CPI (A) RATE HAD ALSO DECREASED TO A LOW LEVEL -- FROM A YEAR-ON-YEAR OF 12.4 PER CENT IN JANUARY 1984 TO 3.3 PER CENT IN JANUARY 1985.

TURNING TO LIKELY DEVELOPMENTS IN MAJOR COMPONENTS OF THE GDP IN THE NEXT FIVE YEARS, SIR JOHN SAID EXPORTS OF GOODS, WHICH WOULD CONTINUE TO BE A MAJOR DETERMINANT OF HONG KONG'S ECONOMIC GROWTH, WOULD INEVITABLY STILL BE SUBJECT TO THE INFLUENCE OF THE VARIABLE WORLD DEMAND FOR OUR GOODS, PARTICULARLY FROM THE U.S.

THE ECONOMIC PERFORMANCE OF THE U.S. IN 1984 WAS EXTREMELY GOOD BUT MIGHT NOT BE SUSTAINABLE. AN AVERAGE OF SEVERAL FORECASTS WAS THAT THEIR GNP WOULD GROW AT BETWEEN THREE PER CENT AND FOUR PER CENT IN REAL TERMS IN 1985, HE SAID.

ALTHOUGH THERE WERE NO INDICATIONS AT PRESENT OF ANOTHER SEVERE RECESSION, SUCH AS THAT EXPERIENCED IN 1982, SIR JOHN SAID THIS REPRESENTED A SLOWING DOWN COMPARED WITH THE MOST RECENT PERFORMANCE.

/+PREVIOUS EXPERIENCE,