CONFIDENTIAL
HONG KONG
I.
General
1.
THE ECONOMY
The combined impact of steeply-rising oil prices, sharp increases in the cost of imported raw materials and food and the decline in world trade has slowed down the growth of Hong Kong's economy. Industrial output is patchy and the supply of credit is tightening. In mid-November, the Hang Seng index of industrial share prices fell to its lowest level for four years. Nevertheless an increase of about 4% in GDP for 1974 is forecast (against an average annual increase, in real terms, of about 8% in recent years). Exports are still holding up and the official reserves are healthy, though in effect sufficient to meet the cost of only six months imports at current rates of consumption.
Wages and Employment
2.
It is estimated that in the twelve months to April 1974 real wages declined by about 12%. They have since either remained stagnant or, in some cases, declined even further. The consequent reduction in purchasing power has led to a marked fall-off in
retail sales.
3.
Employment in the manufacturing sector fell by more than 2% in the second quarter of 1974, bringing the drop in manufacturing employment during the first half of the year to 35,000, or close on 6% of the industrial labour force. The decline was particularly marked in the textiles, clothing and plastics industries (which are among Hong Kong's leading export earners); employment in the electrical appliances, electronics, scientific instruments and allied industries has on the other hand remained fairly steady. Employment in the service industries has also held up, though some deterioration has probably occurred since May.
CONFIDENTIAL
/Export Trade
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