CONFIDENTIAL
the largest source of goods re-exported through Hong Kong, China has
become the largest market for Hong Kong's re-exports.
31.
In the domestic sector, the property market showed clear signs
of revival, reflecting a re turn of confidence in Hong Kong following
the Joint Declaration and the fact that prices and rentals were at
more realistic levels. Over the period covered by this report there
was continued improvement in the take-up rate for all major types of
finished property, and yields from Crown land auction sales were
a satisfactory level. Public sector expenditure on building
construction was lower than in previous years, due to the completion
of a number of large capital works projects including the major part
of
the Island Line of the Mass Transit Railway. Investment in plan t
and machinery also showed signs of slowing down, following
substantial growth in 1984.
32.
Despite the fall in domestic underemployment figures remained stable.
to August, the unemployment rate
rate was 1.4%.
at
and
unemployment and
The labour
the three
3.3% and was
effectively force
exports,
In
June
months
the underemployment
was fully employed.
Continued expansion of the entrepot trade and of the financial and
related
services
sectors
provided
opportunities.
Both earnings and private
additional
consumption
employment expenditure
showed moderate growth.
33.
quarter
the
rate
This was
The
of inflation stayed low. rate
By the end of the third
of 1985 the annual ra te had dropped to about 3%. due in part to the stability of the Hong Kong dollar during its
year under
linked exchange
system. Although there
occasions when the link with the US dollar at HK $7.80 came
the
in it
instrumental well; sys tem stabilising the exchange rate and restoring confidence in the Hong
Kong dollar. There are no plans to alter the link.
second
were
under
pressure,
held
up
was
to
year
result in a smaller deficit
than
had been originally forecast. budget in 1986-87 thus became a realistic expectation.
34.
Buoyant
from revenue
an
economy
continuing
to
make steady
progress and continued stringent control of public expenditure were
expected
The
re turn
to
for the 1985-86 financial
balanced
Despite some
a
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CONFIDENTIAL
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