bstantial growth in re-exports, a low rate of unemployment, and a low rate of lation.
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
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 underemployment rate was 1.4 per cent. The labour force effectively was fully employed. Continued expansion of the entrepot trade and of the financial and related services sectors provided additional employment opportunities. Both earnings and private consumption expenditure showed moderate growth.
33. The rate of inflation stayed low. By the end of the third quarter of 1985 the annual rate had dropped to about 3 per cent. This was due in part to the stability of the Hong Kong Dollar during its second year under the linked exchange rate system. Although there were occasions when the link with the US dollar at HK $7.80 came under pressure, the system held up well; it was instrumental in stabilising the exchange rate and restoring confidence in the Hong Kong Dollar. There are no plans to alter the link.
34. Buoyant revenue from an economy continuing to make steady progress and continued stringent control of public expenditure were expected to result in a smaller deficit for the 1985-86 financial year than had been originally forecast. The return to a balanced budget in 1986-87 thus became a realistic expectation. Despite some grey areas, the period under review saw Hong Kong return to "business as usual".
35. Looking ahead, Hong Kong's economy will continue to remain highly dependent on trade and manufacturing. Clearly, important factors will be consumer demand in Hong Kong's export markets and the willingness of other Governments to allow consumers freedom of choice. If the Thurmond/Jenkins Bill in the United States should be passed into law, Hong Kong's trade would be adversely affected. Otherwise, Hong Kong's economy is expected to hold up well. In the financial sector over the next 12 months the Government intends to develop further schemes for prudential supervision of banks and financial institutions.
11
No comments yet.
Private notes are available after approval.