TNAG-0938-FCO40-1157-Visit-of-John-Nott--Secretary-of-State-for-Trade--to-Hong-Ko-1980 — Page 258

Background Paper No 1

SECRETARY OF STATE'S VISIT TO HONG KONG, 26–30 JANUARY 1980

BACKGROUND PAPER: THE HONG KONG ECONOMY

1.1

Since 1950 Hong Kong has been transformed from a trading entrepôt into a

major industrial, financial and communications centre, with one of the

highest standards of living in Asia. In the virtual absence of natural

resources, this success has been largely due to capitalising on the advantages of a versatile and industrious work-force, a highly developed and sophisticated commercial structure, a generally favourable investment climate and a consistent pursuit of free trade and economic policies.

1.2 The Government sees its major role as providing a stable framework in which

private enterprises can function efficiently. This includes, for example, the formation of land, road construction and the provision of a major social services programme. Government intervenes in economic processes only when very serious economic or social developments occur; other than these, the private sector's economic activities are neither protected nor subsidised.

1.3 Hong Kong has made an impressive recovery from the recession of 1974-75, with

very rapid economic growth (over 10% per annum) during the past four years, based on a vigorous export sector and a boom in domestic demand. Subsequent

overheating of the economy is causing some concern and the Government has

taken measures to reduce demand.

Prospects

1.4 The Governor has recently indicated that the short-term outlook is reasonably optimistic, despite an expected slowing-down in economic growth of Hong Kong's major markets in 1980 and in the volume of world trade in manufactured

goods.

1.5 Pospects for economic growth in the medium term appear to be good, although

the growth rate is unlikely to exceed the past long term rate of about 9% por

Soue constraining factors however, ray be: