TNAG-1343-FCO40-1773-Visit-by-Margaret-Thatcher--UK-Prime-Minister--to-Beijing-fo-1984 — Page 226

CONFIDENTIAL

PRIME MINISTER'S VISIT TO CHINA AND HONG KONG,

18-21 DECEMBER 1984

HONG KONG

BRIEF NO 5: BACKGROUND

C: HONG KONG'S ECONOMY AND FOREIGN TRADE

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 United States were Hong Kong $ 18,230 million (US $ 2,337 million) or 46 per cent of total domestic exports: to China Hong Kong $2,957 million (US $379 million) or 7.5 per cent of the total, and to the UK Hong Kong $2,889 million (US dollars 370 million) or 7.4 per cent of the total.) Comparing the first nine months of 1984 with the same period last year, domestic exports increased by 22 per cent in real terms

in real terms, re-exports

by 31 per cent, and imports by 17 per cent. 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 8 per cent in real terms, implying a GDP of Hong Kong dollars 242.8 billion (US $31.1 billion) or Hong Kong $45,292 per head (US $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 higher real earnings for manufacturing workers. In the third quarter the unemployment rate stood at 3.5 per cent and the under employment rate

employment rate at 1.0 per cent. This combination indicates effective full employment in Hong Kong's circumstances.

4.

The rate of inflation (in terms of the Consumer Price Index)

CONFIDENTIAL