TNAG-1413-FCO40-1889-Future-of-Hong-Kong-annual-report-to-Parliament-on-Hong-Kong-1985 — Page 182

IV.

STATE OF THE ECONOMY

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27.

The Sino-British Joint Declaration on the Future of Hong Kong removed much of the shadow of uncertainty which had hung over the ? Hong Kong economy in 1983 and most of 1984. But the

remained dependent on trade and hence vulnerable to external forces

outside Hong Kong's control.

28.

economy

After a year of strong export-led growth, the Hong Kong

economy showed signs of slowing down in 1985, in line with many

other economies. For 1985 as a whole the estimated growth rate of

rate Hong Kong's GDP was 41/2% to 5%, compared with 9.4% for 1984. The

future performance of domestic exports added an extra element of uncertainty to this forecast. Exports were increasingly affected by the growing threat of protectionism in Hong Kong's export markets, particularly in the United States.

29. The performance of

of the Hong Kong economy as a whole over the period of review was characterised by a fall in domestic exports,

counterbalanced by a substantial growth in re-exports, a unemployment, and a low rate of inflation.

30.

The fall in domestic exports was largely due to weak demand in Hong Kong's traditional export markets, notably the United States and the EEC. Hong Kong's domestic exports and re-exports to China, however, continued to show substantial growth. In addition to being 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

the property market showed clear signs of revival, reflecting a return 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 wa s 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 and construction was lower than in previous years, due to the completion

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CONFIDENTIAL