TNAG-1604-FCO40-2211-Future-of-Hong-Kong-annual-reports-to-Parliament-on-Hong-Kon-1988 — Page 84

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FM HONG KONG

TO IMMEDIATE FCO

TELNO 4670

OF 10075OZ DECEMBER 87

INFO PRIORITY PEKING

CONFIDENTIAL

2011/4

05

040715

TOP CO

HRB 01114

RECEIVED IN

#STRY

16 DEC 1987

MDHIAN 9831

IND

MIPT : ANNUAL REPORT ON HONG KONG

FOLLOWING IS THE REVISED DRAFT OF PARAGRAPHS 27 TO 30 :

PERFORMANCE OF THE ECONOMY

(A) GENERAL SITUATION

27. THE ECONOMY GREW STRONGLY IN 1987, CONTINUING THE RECOVERY

WHICH BEGAN IN EARLY 1986. THE ESTIMATED GROWTH RATE OF THE GDP IN

1986 WAS 11 PER CENT IN REAL TERMS AND THE EXPECTED GROWTH RATE FOR 1987 IS AT LEAST 12 PER CENT. HOWEVER, EVEN BEFORE THE RECENT SHARP ADJUSTMENTS IN THE WORLD'S FINANCIAL MARKETS, THERE WERE

SOME SIGNS OF A GRADUAL SLOWING DOWN.

28. IN THE FIRST NINE MONTHS OF THE YEARS, DOMESTIC EXPORTS ROSE BY 26 PER CENT IN REAL TERMS COMPARED WITH THE CORRESPONDING PERIOD

IN 1986. OVER THE SAME PERIOD, RE-EXPORTS GREW BY 46 PER CENT AND IMPORTS BY 34 PER CENT. FOR 1986 AS A WHOLE, THE CORRESPONDING GROWTH RATES WERE 16 PER CENT, 14 PER CENT AND 14 PER CENT RESPECTIVELY. THESE STRONG GROWTH RATES FOR EXPORTS WERE THE RESULTS

OF SUSTAINED DEMAND FROM HONG KONG'S MAJOR TRADING PARTNERS AND THE RELATIVE COMPETITIVENESS OF HONG KONG'S PRODUCTS IN THE MAJOR

OVERSEAS MARKETS.

29. THE RAPID GROWTH RATE OF THE ECONOMY RESULTED IN A STRONG DEMAND FOR LABOUR. FOR MOST OF THE YEAR, UNEMPLOYMENT WAS AT A RECORD LOW RATE OF 1.8 PER CENT AND THE UNDEREMPLOYMENT RATE WAS ONLY ONE PER CENT. AS A RESULT EARNINGS HAVE RISEN SIGNIFICANTLY. IN THE TWELVE MONTHS ENDING IN JUNE, THE EARNINGS OF WORKERS IN MANUFACTURING AND SERVICES ROSE BY 13 PER CENT AND 12 PER CENT RESPECTIVELY IN MONEY TERMS, OR 7 PER CENT AND 6 PER CENT RESPECTIVELY IN REAL TERMS.

30. THE HIGH PRESSURE OF DEMAND IN THE ECONOMY, COULED WITH THE DEPRECIATION OF THE OVERALL VALUE OF THE HONG KONG DOLLAR, HAS INCREASED THE LEVEL OF INFLATION. IN THE FIRST TEN MONTHS OF 1987,

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