TNAG-1372-FCO40-1818-Ministerial-visits-from-the-UK-to-Hong-Kong-1985 — Page 33

last six months.

the manufacturing sector have been recorded during the

Following three years of budget

to return to balanced

deficit, the Government expects

budgets in 1986.

13.

Government revenue in 1985/86 is estimated at

HK$36.2 billion (approximately £3.6 million), the majority of which

of which comes from direct and indirect taxes,

land transactions and payments for Government services.

Government expenditure will be HK$38.4 billion (approximately £3.8). To cover the deficit of HK$ 2.2

billion, the Financial Secretary intends to use HK$1

billion of fiscal reserves and will raise the remaining

HK$1.2 billion from increased revenue. The Hong Kong

Government hopes to return to balanced budgets in

1986-87. The main areas of Government spending include

social and community services (health, education, transport), security (defence, police, immigration) and economic and general services (ports and airports and

administration).

14. In the short term domestic exports are expected to

remain weak. However, the recent devaluation of the

dollar has already improved Hong Kong's competitiveness

in export markets and this should result in increased

demand for Hong Kong products, although this also depends upon improved demand in Hong Kong's major markets. Economic growth could also be put at risk by

the growing clamour for trade protectionist policies

particularly in the United States.

Despite the

expansion of trading links with China, Hong Kong's

economic dependence on the US economy as an export

market remains very important. Given that the Hong

Kong economy is small and the territory follows a policy of free trade, the rise in protectionism (see

below) is a source of great concern to the Hong Kong

Government.