XN000022-1985-08-27 — Page 3

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TUESDAY, AUGUST 27, 1985

ON THE EXTERNAL SECTOR, THE REPORT NOTES THAT APART FROM CHINA, DOMESTIC EXPORTS TO ALL MAJOR MARKETS DECLINED. WHILE DOMESTIC EXPORTS TO CHINA CONTINUED TO GROW RAPIDLY, BY ABOUT 69 PER CENT IN REAL TERMS IN THE FIRST HALF OF 1985 OVER THE SAME PERIOD LAST YEAR, THOSE TO THE UNITED STATES, THE UNITED KINGDOM, THE FEDERAL REPUBLIC OF GERMANY AND JAPAN DECLINED BY ABOUT 11 PER CENT, 18 PER CENT, 21 PER CENT AND 11 PER CENT RESPECTIVELY IN REAL TERMS.

THE SHARP SLOWING DOWN IN THE GROWTH RATE OF THE UNITED STATES ECONOMY IN THE FIRST HALF OF THIS YEAR AND THE RELATIVE STRENGTH OF THE HONG KONG DOLLAR DURING MOST OF 1984 AND IN THE EARLY MONTHS OF 1985 BOTH CONTRIBUTED TO THESE DECLINES.

OVER THE SAME PERIOD, IMPORTS GREW BY ABOUT NINE PER CENT IN REAL TERMS. REFLECTING THE FASTER GROWTH IN IMPORTS FOR SUBSEQUENT RE-EXPORT, RETAINED IMPORTS DECLINED BY FIVE PER CENT IN REAL TERMS.

THE REPORT FURTHER POINTS OUT THAT COMPARING THE FIRST HALF OF 1985 WITH THE FIRST HALF OF 1984, THE GROWTH RATE OF THE VALUE OF TOTAL EXPORTS (DOMESTIC EXPORTS PLUS RE-EXPORTS), AT 13 PER CENT, WAS FASTER THAN THAT OF IMPORTS, AT SEVEN PER CENT. IN CONSEQUENCE, A VISIBLE TRADE SURPLUS, EQUIVALENT TO 0.2 PER CENT OF THE VALUE OF IMPORTS, WAS RECORDED IN THE FIRST HALF OF THIS YEAR, COMPARED WITH A VISIBLE TRADE GAP OF FIVE PER CENT IN THE FIRST HALF OF 1984.

ON THE FINANCIAL SECTOR, THE REPORT NOTES THE FOLLOWING DEVELOPMENTS:

FIRST, THE EXCHANGE RATE OF THE HONG KONG DOLLAR AGAINST THE U.S. DOLLAR MOVED FOR MOST OF THE TIME DURING THE FIRST HALF OF 1985 CLOSE TO THE LINKED RATE OF HK$7.80 TO US$1, ALBEIT ON A SLIGHTLY FIRMER TONE TOWARDS THE LATTER PART OF THE PERIOD.

SECOND, THERE CONTINUED TO BE AMPLE LIQUIDITY IN THE HONG KONG DOLLAR MONEY MARKET DURING MOST OF THE FIRST HALF, WHICH

ADMINISTERED EXERTED DOWNWARD PRESSURE ON LOCAL INTEREST RATES. INTEREST RATES WERE ADJUSTED DOWNWARDS SIX TIMES IN THE FIRST HALF AND TWICE AGAIN IN JULY.

THIRD, AS BOTH THE MONEY MARKET RATES AND THE DEPOSIT RATES SET BY THE HONG KONG ASSOCIATION OF BANKS WERE CONSISTENTLY BELOW THE U.S. DOLLAR INTEREST RATES, THE GROWTH RATE OF HONG KONG DOLLAR DEPOSITS DURING THE FIRST HALF OF THIS YEAR WAS LESS THAN THAT FOR THE PREVIOUS SIX-MONTH PERIOD, AS WAS THE GROWTH RATE OF THE HONG KONG DOLLAR MONEY SUPPLY.

ON THE LABOUR SECTOR, THE REPORT OBSERVES THAT TOTAL EMPLOYMENT SHOWED SOME INCREASE IN MARCH 1985 OVER MARCH 1984. OVER THIS PERIOD, EMPLOYMENT IN THE SERVICES SECTOR - PARTICULARLY IN THE WHOLESALE, RETAIL, IMPORT AND EXPORT TRADES - INCREASED, EMPLOYMENT IN MANUFACTURING SHOWED NO CHANGE, WHILE EMPLOYMENT ON BUILDING AND CONSTRUCTION SITES CONTINUED TO DECLINE.

THE REPORT