TNAG-1640-FCO40-2287-Economic-situation-in-Hong-Kong-1987 — Page 38

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HỒ 1987-86 Foodstuffs

Consumer

Fuels Raw materials

Goods

and semi- manufactures

Capital goods

+

Imports:

Total

Retained

6.

7.

10 7

39 10

65

The figures on retained imports indicate:

i.

ii.

40

30

36

25

strong consumer demand (foodstuffs and consumer goods);

firm order book positions and a good outlook for domestic exports (raw materials and semi-manufactures); and

iii.

a continuing high level of capital investment (capital goods); retained imports of machinery for manufacturing use grew by 19%.

Re-exports grew faster than domestic exports (at 49%) with trade with China the predominant factor. The PRC is the destination of 32% of re-exports from Hong Kong and is the source of 46% of goods re-exported from Hong Kong (the value of these re-exports originating in China grew by 72%).

8. The value of total exports (domestic plus re-exports) grew by the same amount as imports in the first half of the year, so the visible trade gap remained at the same level. The usual seasonal pattern (with a surplus on the second half of the year) would suggest a rough balance on visible trade for 1987 as in 1986.

Financial

9. The HK$, as noted above, has depreciated against most major currencies, with the trade-weighted index falling from 64.8 at the end of 1986 to 61.4 at the end of June.

10. Rapid growth in the economy and relatively low interest rates have led to strong loan demand. Outstanding loans grew by 20.4% over the first six months of 1987, having increased by 13.3% during 1986. The corresponding rise in bank deposits has led to a rise in the widest measure of the money supply of 11.2% during the first half, with the HK$ component growing by 10.2%.

11. With speculation during January and February that the HK$ was to be revalued against the US$, HK$ interest rates fell below the corresponding US$ rates as a result of speculative pressure by as much as 3 percentage points. With the end of this pressure the differential has fallen to about 1/4 percentage point.

12. Firm property prices and expectations of increases in corporate profits have led to a continuing rise in the Hang Seng Index of stock exchange prices, which reached a historic closing level on 24 June.

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