TNAG-1339-FCO40-1771-Visit-by-Margaret-Thatcher--UK-Prime-Minister--to-Beijing-fo-1984 — Page 312

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FM HONG KONG 06094OZ DEC 84

TO IMMEDIATE FCO

TELEGRAM NUMBER 3727 OF 06 DECEMBER

INDEX

YOUR TELNO 2414: PRIME MINISTER'S VISIT TO HONG KONGL

BRIEFING

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PA

juken

FOLLOWING IS NOTE ON HONG KONG'S ECONOMY AND FOREIGN TRADE :

BEGINS.

1. THE HONG KONG ECONOMY EXPERIENCED A SECOND YEAR OF EXPORT-LED

GROWTH IN 1984, LARGELY DUE TO THE STRONG RECOVERY IN THE UNITED STATES (HONG KONG'S LARGEST DOMESTIC EXPORT MARKET) AND THE IMPROVEMENTS IN THE ECONOMIES OF OTHER MARKETS. DOMESTIC EXPORTS TO CHINA ALSO INCREASED RAPIDLY, SO THAT CHINA IS NOW THE

SECOND LARGEST MARKET FOR DOMESTIC EXPORTS (IN THE FIRST NINE MONTHS

OF 1984 DOMESTIC EXPORTS TO THE US WERE DOLLARS 18,230MN (USD 2,337MN) OR 46 PERCENT OF TOTAL DOMESTIC EXPORTS: TO CHINA HKS 2,957MM (USD 379MN) OR 7.5 PERCENT OF THE TOTAL, AND TO THE UK HKD 2889MN (USD 370MN) OR 7.4 PERCENT OF THE TOTAL.) COMPARING THE FIRST NINE MONTHS OF 1984 WITH THE SAME PERIOD LAST YEAR, VDOMESTIC EXPORTS INCREASED BY 22 PERCENT IN REAL TERMS, RE-

EXPORTS BY 31 PERCENT, AND IMPORTS BY 17 PERCENT. LARGELY AS A RESULT OF THE RAPID GROWTH RATE OF EXPORTS, THE GROWTH RATE OF THE GROSS DOMESTIC PRODUCT IN 1984 IS EXPECTED TO BE ABOUT 2 PERCENT

IN REAL TERMS, IMPLYING A GDP OF HKD 242.8 BN (USD 31.1 BN) OR

HKD 45,292 PER HEAD (USD 5,807).

2. INVESTMENT IN PLANT AND MACHINERY HAS ALSO PICKED UP SINCE THE BEGINNING OF THIS YEAR. THE LOCAL PROPERTY SECTOR, ON THE OTHER HAND, HAS REMAINED WEAK, EXCEPT FOR AN IMPROVEMENT IN THE RATE OF TAKE-UP OF FINISHED PROPERTY, REFLECTING FALLING PRICES

AND RENTALS.

3. THE RECOVERY OF THE EXPORT SECTOR HAS CREATED MORE JOB OPPORTUNITIES AND RESULTED IN HIGER REAL EARNINGS FOR MANUFACTURING WORKERS. IN THE THIRD QUARTER THE UNEMPLOYMENT RATE STOOD AT 3.5

PERCENT AND THE UNDEREMPLOYMENT RATE AT 1.0 PERCENT. THIS COMBINATION INDICATES EFFECTIVE FULL EMPLOYMENT IN HONG KONG'S

CIRCUMSTANCES.

4. THE RATE OF INFLATION (IN TERMS OF THE CONSUMER PRICE INDEX) HAS FALLEN STEADILY, FROM OVER 12 PERCENT IN JANUARY 1984 DOWN TO 6.5 PERCENT IN THE THREE MONTHS ENDING OCTOBER. THE STRENGTH OF THE HONG KONG DOLLAR UNDER THE LINKED EXCHANGE RATE SYSTEM INTRODUCED IN 10/83 HAS BEEN A MAJOR CONTRIBUTORY FACTOR.

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