XN000022-1996-08-30 — Page 4

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Export growth is expected to pick up in the second half of this year. The following factors are relevant:

Barring a further strengthening of the US dollar, the adverse exchange rate effect on Hong Kong's export performance is likely to dissipate gradually.

Import demand in the United States is expected to revive, after going through the inventory adjustment in the early part of this year. As to the other major overseas markets, import demand is expected to hold steady or improve.

Robust consumer demand in China should continue to support the country's imports, apart from the on-going intake of material inputs and capital equipment for outward processing.

The surge in tourism should be sustained into the latter part of the year. This, together with the shift in the structure of trade towards more offshore trading and the continued increase in exports of financial and other business services, should contribute to a continued robust growth in exports of services.

Local consumption demand, having bottomed out in the early part of the year, is expected to revive further. The following factors are relevant:

Overall employment situation has been improving.

Earnings in most of the major sectors have continued to register notable increases in real terms.

A lower inflation helps real purchasing power, while the price discounts at many retail outlets also render some stimulus.

Revived activity in the stock and property markets should entail some positive wealth effect on consumption, while the increased take-up of flats should lead to more purchases of household durables.

Local investment demand is expected to maintain a strong growth momentum, in the light of the following developments:

Work on the major infrastructural projects, particularly those under the Airport Core Programme, is proceeding at a hectic pace.

Output is expanding under the Public Housing Programme.