XN000022-1987-09-21 — Page 3

MONDAY, SEPTEMBER 21, 1987

ON INFLATION, MR JACOBS FORECAST THE RATE OF INCREASE IN CONSUMER PRICE FOR 1987, AS MEASURED BY THE CONSUMER PRICE INDEX (A), TO GROW AT SIX PER CENT, COMPARED WITH 5.5 PER CENT IN HIS BUDGET.

CENT,

"AS THE CURRENT RATE IS STILL RUNNING AT AROUND FIVE PER I AM THUS FORECASTING SOME FURTHER ACCELERATION IN CONSUMER PRICES IN THE REMAINING MONTHS OF THIS YEAR, HE SAID.

BUT HE SAID AN INFLATION RATE OF THIS MAGNITUDE IS "TOLERABLE" AGAINST THE BACKGROUND OF RAPID ECONOMIC GROWTH,

LOOKING BACK ON THE ECONOMIC PERFORMANCE, MR "WHAT WE HAVE BEEN OVER THE PAST 12 MONTHS OR 90 13, IN MANIFESTATION OF GENUINE AND LONG-LASTING CONFIDENCE IN OF HONG KONG TO PERFORM WELL ON THE ECONOMIC FRONT.

JACOBS SAID: MY VIEW, A THE ABILITY

THE

HE ADDED THAT THIS PERFORMANCE HAS BEEN POSSIBLE. BECAUSK LOCAL ECONOMY HAS DISPLAYED MORE FLEXIBILITY AND RESILIENCE THAN WAS EXPECTED AT A TIME WHEN PRODUCTION WAS ALREADY RUNNING UP AGAINST CAPACITY.

AS TO THE OVERALL PERFORMANCE OF THE ECONOMY, APART FROM A SOMEWHAT HIGHER RATE OF INFLATION AND MARKET, THERE IS LITTLE TO COMPLAIN ABOUT.

MR

A

JACOBS SAID TIGHT LABOUR

HE ALSO WARNED THAT THERE ARE SOMB SIGNS OF THOUGH NOT SUFFICIENT TO CAUSE IMMEDIATE CONCERN.

OVERHEATING,

ON INTERNATIONAL TRADE, MR JACOBS SAID THERE HAS BEEN A SHIFT OF RELATIVE IMPORTANCE OF HONG KONG'S MAJOR MARKETS, ADDING THAT CHINA, THE FEDERAL REPUBLIC OF GERMANY AND JAPAN HAVE GAINED IN RELATIVE IMPORTANCE, AT THE EXPENSE OF THE UNITED STATES.

'WHILE THE RAPID GROWTH IN DOMESTIC EXPORTS TO CHINA HAS BERN PARTLY RELATED TO OUTWARD PROCESSING ACTIVITIES, GROWTH IN OUR EXPORTS TO BOTH THE FEDERAL REPUBLIC OF GERMANY AND JAPAN IS LARGELY ATTRIBUTABLE TO THE CUMULATIVE DEPRECIATION OF THE HONG KONG DOLLAR AGAINST THE DEUTSCHEMARK AND THE YEN, HE SAID.

HE ALSO SAID CHINA 19 NOW HONG KONG'S LARGEST TRADING PARTNER, INVOLVING IN NEARLY 80 PER CENT OF HONG KONG'S RE-EXPORTS, AND BECOMING THE SECOND LARGEST MARKET OF THE TERRITORY'S DOMESTIC EXPORTS AND THE LARGEST SUPPLIER OF ITS IMPORTS.

HE SAID RAPID EXPANSION OF OUTWARD PROCESSING ACTIVITIES IN CHINA HAS ALSO ENABLED LOCAL MANUFACTURERS TO OVERCOME SOME OF THEIR CAPACITY CONSTRAINTS. "THEY HAVE THUS DEMONSTRATED THEIR CONFIDENCE BOTH IN CHINA'S MODERNISATION PROGRAMMES AND THE ROLE TO BE PLAYED HONG KONG," HE ADDED.

BY

/BUT MR JACOBS