XN000022-1985-09-23 — Page 3

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MNDAY, SEPTEMBER 23, 1985

* CAUTIONED THE PUBLIC ABOUT THE +STRUCTURAL IMBALANCE

THAT COULD RESULT+ IF THE LOW LOCAL INTEREST RATES +ENCOURAGED PROPERTY SPECULATION TO AN EXTENT UNJUSTIFIED BY THE BASIC ECONOMIC FUNDAMENTALS+;

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DISCLOSED THAT, AFTER LENGTHY AND CAREFUL CONSULTATION WITH THE FINANCIAL COMMUNITY, AND SUBJECT TO EXECUTIVE COUNCIL'S ADVICE, AMENDMENT BILLS WOULD BE INTRODUCED INTO THE LEGISLATIVE COUNCIL AT THE END OF THE YEAR FOR FURTHER IMPROVEMENTS IN THE SYSTEM OF PRUDENTIAL SUPERVISION OF BANKS AND DEPOSIT-TAKING COMPANIES;

WARNED ABOUT THE THREAT OF CALLS FOR FURTHER PROTECTIONIST MEASURES, IN PARTICULAR THE CONTROVERSIAL JENKINS BILL WHICH, IF PASSED INTO LAW, WOULD UNDERMINE NOT ONLY WORLD TRADE IN THE TEXTILES SECTOR, BUT ALSO THE MULTI FIBRE ARRANGEMENT AND THE GATT ITSELF BECAUSE IT CONTRAVENED SOME OF THE VITAL PRINCIPLES UNDERLYING THESE AGREEMENTS, AND

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SAID THAT THERE WERE INDICATIONS OF A PROBABLE IMPROVEMENT IN THE GOVERNMENT'S ACCOUNTS COMPARED WITH THE BUDGETED DEFICIT OF $1 BILLION FOR 1985-86.

DISCUSSING HONG KONG'S ECONOMIC PERFORMANCE IN THE FIRST HALF OF THIS YEAR, SIR JOHN SAID IT HAD BEEN CHARACTERISED BY A FALL IN DOMESTIC EXPORTS BY SIX PER CENT; A LARGER INCREASE IN RE-EXPORTS - BY 36 PER CENT; A LOW RATE OF INFLATION AND VIRTUALLY NO UNEMPLOYMENT, AT THREE PER CENT.

COMPARED WITH THE FIRST HALF OF LAST YEAR, IN REAL TERMS TOTAL EXPORTS, COMPRISING DOMESTIC EXPORTS AND RE-EXPORTS, GREW BY NINE PER CENT.

DOMESTIC EXPORTS TO CHINA, HE SAID GREW BY 70 PER CENT, REFLECTING THE ADOPTION BY CHINA OF MORE LIBERAL ECONOMIC POLICIES, AND IN PARTICULAR THE FOUR MODERNISATIONS PROGRAMME.

A VISIBLE

TOTAL IMPORTS GREW BY NINE PER CENT IN REAL TERMS. TRADE SURPLUS OF $278 MILLION OR 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.

+THE LAST TIME A HALF-YEARLY VISIBLE TRADE SURPLUS WAS RECORDED WAS IN 1951. IN THE 12 MONTHS TO JULY 1985, THERE WAS A FAVOURABLE TRADE BALANCE OF $5.3 BILLION. IN THE PREVIOUS 12 MONTHS THE ADVERSE BALANCE WAS $10.5 BILLION.

+THIS IS AN AMAZING SWING,+ SIR JOHN SAID.

/DOMESTIC CONSUMER