XN000022-1985-11-25 — Page 3

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MONDAY, NOVEMBER 25, 1985

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ON THE EXTERNAL SECTOR, THE REPORT NOTES THAT WITH THE MAJO- EXCEPTION OF CHINA, DOMESTIC EXPORTS TO ALL MAJOR MARKETS DECLI....=. IN THE THIRD QUARTER OF 1985 OVER THE SAME PERIOD LAST YEAR. DOMESTIC EXPORTS TO CHINA GREW BY ABOUT 21 PER CENT IN REAL TERMS, THOSE TO THE UNITED STATES, THE UNITED KINGDOM, THE FEDERAL REPUBLI OF GERMANY AND JAPAN DECLINED BY ABOUT 11 PER CENT, 22 PER CENT, 18 PER CENT AND 15 PER CENT RESPECTIVELY IN REAL TERMS.

THE RELATIVELY HIGH VALUE OF THE U.S. DOLLAR AND THUS THE KONG KONG DOLLAR AND THE RELATIVELY LOW GROWTH RATES OF MAJOR OVERSEAS ECONOMIES, PARTICULARLY THE UNITED STATES, IN THE FIRST THREE QUARTERS OF THIS YEAR LARGELY CONTRIBUTED TO THESE DECLINES.

THERE WAS A SHARP DECELERATION IN THE YEAR-ON-YEAR GROWTH KATE IN REAL TERMS OF DOMESTIC EXPORTS TO CHINA DURING THE COURSE OF THE FIRST NINE MONTHS OF 1985, FROM 96 PER CENT IN JANUARY TO AN ESTIMATED NINE PER CENT IN SEPTEMBER, REFLECTING CHINA'S RECENT TIGHTENING OF CONTROL OVER ITS FOREIGN EXCHANGE SPENDING,

COMPARING THE THIRD QUARTER OF 1985 WITH THE THIRD QUARTER OF 1984, IMPORTS GREW BY ABOUT TWO PER CENT IN REAL TERMS. REFLECTING THE FASTER GROWTH IN IMPORTS FOR SUBSEQUENT RE-EXPORT, RETAINED IMPORTS DECLINED BY AN ESTIMATED NINE PER CENT IN REAL TERMS.

THE THE REPORT FURTHER POINTS OUT THAT OVER THE SAME PERIOD, VALUE OF TOTAL EXPORTS (DOMESTIC EXPORTS PLUS RE-EXPORTS) SHOWED NO CHANGE WHILE THAT OF IMPORTS DECREASED BY TWO PER CENT. A VISIBLE TRADE SURPLUS, WHICH WAS EQUIVALENT TO EIGHT PER CENT OF THE VALUE OF IMPORTS, WAS RECORDED IN THE THIRD QUARTER OF THIS YEAR, AGAINST A SURPLUS OF FIVE PER CENT IN THE THIRD QUARTER 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 WAS SLIGHTLY STRONGER THAN THE LINKED RATE OF HK$7.80 TO U.S.$1 IN JULY AND FOR MOST OF AUGUST, BUT WAS GENERALLY CLOSE TO IT THROUGHOUT THE THIRD QUARTER.

SECOND, THERE CONTINUED TO BE AMPLE LIQUIDITY IN THE HONG KONG DOLLAR MONEY MARKET, WHICH EXERTED DOWNWARD PRESSURE ON LOCAL INTEREST RATES. THIS WAS PARTICULARLY SO IN JULY AND EARLY AUGUST, DURING WHICH THE OVERNIGHT INTERBANK RATE FELL AT TIMES TO BELOW TWO PER CENT. ADMINISTERED INTEREST RATES WERE ADJUSTED DOWNWARDS TWICE IN JULY AND, DESPITE AN UPWARD REVISION IN EARLY SEPTEMBER, WERE STILL LOWER AT THE END OF SEPTEMBER THAN AT THE END OF JUNE.

THIRD, AS BOTH THE MONEY MARKET RATES AND THE DEPOSIT RATE SET BY THE HONG KONG ASSOCIATION OF BANKS WERE CONSISTENTLY BELO.. THE U.S. DOLLAR INTEREST RATES. THE GROWTH RATE OF HONG KONG DOLLAR DEPOSITS WAS LOWER THAN THAT OF FOREIGN CURRENCY DEPOSITS.

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