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"Because imports of services grew at only 2%, the surplus on invisible trade was enough to offset a very large part of the deficit on visible trade," Mr. Tsang noted.

As regards exports of goods, a drop of 8% in domestic exports and an increase of 8% in re-exports were recorded. Mr Tsang said that a slowdown in the growth of exports was to be expected after the continuous double-digit expansion in the first half of the 1990s. The less favourable market conditions in the US and Germany and the new tax and customs measures in China also contributed.

Looking ahead, Mr Tsang said that 1997 would bring its special challenges and anxieties. He pledged that the Government would play its part by sticking firmly to its budgetary guidelines and maintaining tight control over government spending.

"The outlook which emerges from these forecasts is encouraging, and we are poised to achieve a 5.5% increase in GDP," he concluded.

End

Hong Kong Foreign Exchange Reserves at end-January 1997

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) that, as at the end of January 1997, Hong Kong's foreign reserves held in the Exchange Fund stood at US$65.9 billion, up from the corresponding figure at the end of December last year of US$63.8 billion. This reflected largely the increase of foreign reserves held in the Exchange Fund as backing for additional banknotes issued ahead of the Lunar New Year.

Including forward transactions to be settled, Hong Kong's foreign reserves at the end of January 1997 stood at US$71.1 billion, compared with US$69.6 billion at the end of December 1996.

This is the first time the HKMA moved on to monthly disclosure on foreign exchange reserves of Hong Kong, as part of the ongoing effort to increase transparency of the HKMA's operations. An HKMA spokesman cautioned, however, that "monthly figures are likely to show sharp seasonal variations."