TNAG-1050-FCO40-1300-Economic-policy-in-Hong-Kong-1983 — Page 8

1976

Summary of DTIC_Industrial Investment Promotion Activities 1976-81

Ancor toxicke

Appendix I

No. of indu-

No. of Outward Missiona

strial or

No. of

seminars

technology

No. of Inwerd Missions

No. of conseq

No. of such

quent enquiri companies

es handled

transfer

(overseas &

fairs attend local)

Europe

USA Australia Japan

Total

ed

which com-

menced manu- facturing

operation in Hồng Kong

ام

1

1

1

0

3

1977

2

اسم

1

0

O

3

1

210

11

1

206

14

1978

2

2

о

2

6

1

1979

2

3

2

1

8

4

1980

3

3

1

2

9

O

a

2

225

5

3

615

12

10

701

5

1981

1

2

الاسم

(Jan-June)

1

1

5

1

3

6

391

Ly

Source: records of the Department of Industry

MIK

09011

PA

6

Pascola

Mr. Edgar

over

fum brighy

deft for Mr. Athing

HONG KONG ECONOMY: PROBLEMS AND PROSPECTS

18/2

1 Hong Kong's economic performance has been outstanding in recent years. Real GDP grew by 10% in 1980, the 5th year running at or near this rate, and per capita income has risen by more

than a half during this period despite a massive influx of

immigrants which has helped to increase the labour force at

around 8% in each of the last two years. These achievements

have been all the more notable in view of the restrictions

placed abroad on imports of Hong Kong's main product, textiles, and demonstrate the economy's exceptional resilience and ability

to adapt.

2

Nevertheless, several developments this year suggest that

Hong Kong is going through a difficult patch:

3

1

the trade deficit has widened, to HK$12bn (£1.1m) in

the first 7 months of 1981, from HK$8.3bn in the same

period last year

growth in exports has slowed down, and may be inhibited

further by developments in Hong Kong's main market,

the US

-

the inflation rate around 15% pa

rising a little

appears to be

the value of the HK$ has fallen by some 17% this year

interest rates are at record levels

the Hong Kong stock market has fallen some 200 points

from its record level of 1700 2 months ago

money and credit are growing rapidly.

These developments are, of course, closely interrelated. The

decline in the HK$ is probably the result not only of the larger

trade deficit, but also to the fact that Hong Kong's interest rates

were not raised as sharply as US rates, and are still scarcely

positive in real terms. Moreover, the decline against the US$ largely paralleled the decline in other currencies; only in the last month has the HK$ weakened slightly against other currencies also.

Interest rates have evidently been insufficiently high to deter

the rapid growth in credit, which has helped to finance a property

/and

-2-

and stock market boom. The recent weakness in the stock market

so far represents no more than a correction, and has been exacerbated by a heavy programme of rights issues and disappointment at the failure of US interest rates to fall. The decline in the rate has also exacerbated inflation, but

should help Hong Kong's export industries to remain competitive.

4 It is always dangerous to make predictions about Hong Kong's highly volatire economy, but it would be premature to foresee a collapse in the HK$ or in domestic activities. Nevertheless, it may be necessary for the vans to aim to tighten domestic credit conditions somewhat, with some adverse impact on domestic

activity and employment.

21 September 1981

SH Broadbent

ESID