XN000022-1991-11-06 — Page 14

WEDNESDAY, NOVEMBER 6, 1991

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IN GENERAL, HE NOTED, THE LESS WELL-OFF FELT THE PINCH OF INFLATION THE MOST SEVERELY.

"AN OVERALL ECONOMIC GROWTH RATE OF AROUND FOUR PER CENT WOULD IN MOST PLACES BE VERY RESPECTABLE. BUT INFLATION OF AROUND 11 PER CENT TO 12 PER CENT IS DISTINCTLY UNCOMFORTABLE, HE SAID.

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MR MACLEOD SAID THE GOVERNMENT'S AMBITION MUST BE TO DO ALL IT COULD TO RAISE GROWTH AND REDUCE INFLATION.

BUT HE WAS QUICK TO ADD THAT THERE WAS A LIMIT TO WHAT THE GOVERNMENT COULD DO.

INFLATION WAS A COMPLEX PROBLEM. HE CONTINUED, WHICH NO GOVERNMENT HAD FOUND EASY TO SOLVE.

HE SAID HONG KONG HAD TO FIND ITS OWN FORMULA FOR DEALING WITH

INFLATION.

"WE NEED TO MOBILISE HONG KONG'S BEST ECONOMIC MINDS," HE

STRESSED.

TO THIS END, A NEW ECONOMIC ADVISORY

ESTABLISHED WITH HIM AS THE CHAIRMAN, HE SAID.

COMMITTEE WOULD BE

ITS MEMBERSHIP WOULD INCLUDE PROMINENT HONG KONG ECONOMISTS, AND ITS TERMS OF REFERENCE WOULD BE BROAD ENOUGH TO ENABLE STRATEGIC ISSUES CONFRONTING THE ECONOMY TO BE DISCUSSED.

THE FINANCIAL SECRETARY ALSO OUTLINED THE MAIN ELEMENTS OF THE INFLATION PROBLEM.

FIRSTLY, HONG KONG HAD SUCCEEDED IN ACHIEVING A MAJOR STRUCTURAL CHANGE. THERE HAD BEEN A SHIFT FROM MANUFACTURING TO THE SERVICE SECTOR, COUPLED WITH A TRANSFER OF THE MORE LABOUR INTENSIVE MANUFACTURING TO SOUTHERN CHINA, TOGETHER WITH NEW INVESTMENTS FROM HONG KONG.

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"THIS HAS BEEN A WELCOME CHANGE, AND WE HAVE ACHIEVED A MAJOR UPGRADING OF OUR ECONOMY WITHOUT SIGNIFICANT UNEMPLOYMENT AN UNUSUAL FEAT, HE SAID.

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SECONDLY, THIS STRUCTURAL CHANGE HAD HAD A VARYING EFFECT ON THE LOCAL PRICE STRUCTURE.

ON THE ONE HAND, THE EXPANSION OF HONG KONG INDUSTRY INTO SOUTHERN CHINA IN TURN STIMULATED THE DEMAND FOR SERVICES IN HONG KONG, BUT UNFORTUNATELY IT ALSO PUSHED UP PRICES.

ON THE OTHER HAND, HONG KONG'S RESTRUCTURED INDUSTRY HAD ABLE ΤΟ KEEP ITS PRICES, DOWN, THROUGH A COMBINATION OF PRODUCTIVITY AND HAVING SOME PROCESSING DONE IN CHINA.

BEEN INCREASED

/AS A