TNAG-1762-FCO40-2516-Economic-situation-in-Hong-Kong-1988 — Page 45

G.F. 326

CONFIDENTIAL #B

Report on Capital Investment in Hong Kong

Fourth Quarter of 1987

Summary

While investment in plant and machinery in 1987 as a whole was generally bouyant, there was a sharp slow-down in growth in the fourth quarter of the year. Retained imports of capital goods

rose by about 26% in real terms in 1987. The

year-on-year growth rate of these retained imports accelerated from 18% in the first quarter to 32% in the second quarter and further to 49% in the third

quarter, but dropped to only about 10% in the fourth quarter. This drop was due partly to the relatively high base of comparison in the fourth quarter of 1986, and probably partly to an expected slow-down in the growth rate of the economy. In 1988, investment in plant and machinery is expected to show only moderate growth.

2.

As regards investment in property, planned developments of all major types of property, in terms of total usable floor area for

which consent to commence work had been given, showed a slight decline in the fourth quarter of 1987 over the same quarter in 1986. Nevertheless, for 1987 as a whole, building consents registered an increase of 11% over the preceding year.

3.

The property market remained generally

active throughout 1987, and the demand for most

types of property was strong. But there were signs of consolidation in the latter part of the year, particularly during the month immediately after the

CONFIDENTIAL # *

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