TNAG-1413-FCO40-1889-Future-of-Hong-Kong-annual-report-to-Parliament-on-Hong-Kong-1985 — Page 91

CONFIDENTIAL

3198 - 1

EXTERNAL FORCES OUTSIDE HONG KONG'S CONTROL.

28.

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 HONG KONG'S GDP WAS 4 AND A HALF PER CENT TO 5 PER CENT,

COMPARED WITH 9.4 PER CENT 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.

29. THE PERFORMANCE 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 LOW RATE OF 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 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 WAS CONTINUED IMPROVEMENT IN THE TAKE-UP

RATE FOR ALL MAJOR TYPES OF FINISHED PROPERTY, AND YIELDS FROM

CROWN LAND AUCTION SALES WERE AT A SATISFACTORY LEVEL. PUBLIC

SECTOR EXPENDITURE ON BUILDING AND 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 PLANT AND

MACHINERY ALSO SHOWED SIGNS OF SLOWING DOWN, FOLLOWING

SUBSTANTIAL GROWTH IN 1984.

32. DESPITE THE FALL IN DOMESTIC EXPORTS, UNEMPLOYMENT AND UNDEREMPLOYMENT FIGURES REMAINED STABLE. IN THE THREE MONTHS

JUNE TO AUGUST, THE UNEMPLOYMENT RATE WAS 3.3 PER CENT AND THE

3

CONFIDENTIAL