TNAG-1711-FCO40-2389-Future-British-Consulate-General-in-Hong-Kong-HMS-Tamar-1987 — Page 119

Economic Development

3

After a pause in growth during 1985, the Hong

Kong economy rebounded sharply during 1986. Domestic

exports, in particular, staged a strong recovery and grew

by 16% during the year. Both the unemployment rate and

the rate of inflation remain low. The growth rate of the

gross domestic product (GDP) in 1986 was just under 9% and

is forecast to be about 6% in 1987.

The depreciation of the US dollar, and hence of

the Hong Kong dollar due to the linked exchange rate

system, since March 1985 has helped the domestic export

performance, through improving the export competitiveness.

of Hong Kong's products. Domestic exports and re-exports

to China, however, continue to be affected by that

country's efforts to conserve foreign exchange.

Except for a few years, external demand has been

the principal source of growth in the economy during the

past decade, and Hong Kong has adjusted well to changing

conditions in the world markets. The dependence of the

economy on the external sector is well illustrated by the

significant increase in the ratio of total visible trade

to the GDP, from 136% in 1975 (already large by

international standards) to 176% in 1985. At the same

time, there was a shift in the composition of visible