TNAG-1762-FCO40-2516-Economic-situation-in-Hong-Kong-1988 — Page 8

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GOVERNMENT SECRETARIAT

LOWER ALBERT ROAD

HONG KONG

5-8102685

Mr Wright

Ermonic Advises

Mr. Christopher Hum,

Grathul for any comments.

Hong Kong Department,

Foreign and Commonwealth Office.

London, SW1A 2AH,

2 December 1988.

Natman

9/12 Mr For Wal

Formen

U.K.

Dear Mr. Hum,

W9/12

I attach for your information a copy of

the report on capital investment in Hong Kong for the third quarter of 1988.

Yours faithfully,

Kiniland

( K.Y. Tang )

for Secretary for Economic Services

Encl.

سالتی کمار

17/1

64/89

Arn

1912

HKC090/1

.{

CONFIDENTIAL #

Report on Capital Investment in Hong Kong

- Third Quarter of 1988 -

Summary

Investment in plant and machinery

grew significantly in the first three

quarters of 1988, albeit less rapidly than in the preceding year. As an indication, retained imports of capital goods grew by 14%

in real terms over the same period last year;

the corresponding growth rate for 1987 as a

whole was 26%. In the third quarter of 1988,

retained imports of industrial machinery for

manufacturing use grew by 18% in real terms

over a year earlier. The growth rate of

retained imports of other capital goods

remained significant in both the second and third quarters. The generally satisfactory

business conditions and the tight labour

market, which have prompted businessmen to

adopt more labour-saving devices, have helped

to maintain investment at a high level.

2.

As regards investment in property, planned developments, in terms of the usable

floor area of projects for which consent to

commence work was given, recorded an increase

of only 2% in the first three quarters over the same period last year, compared with

increases of 31% in 1986 and 11% in 1987.

Meanwhile, substantial increases in building

G.F. 326

CONFIDENTIAL #

J

CONFIDENTIAL #32

2

completions, particularly for commercial and

industrial property, were recorded in the

third quarter compared with the same quarter

last year.

3.

The property market remained active

in the third quarter of 1988. The demand for residential property was strong, although prospective buyers of small to medium sized residential flats have apparently become more cautious. The increased demand for shop space was supported by a high level of retail

sales to both local residents and tourists.

The demand for office space also rose,

reflecting the flourishing entrepôt trade and

the increasing importance of Hong Kong as а major commercial and financial centre in the

region. However, the demand for industrial

property, particularly in the more remote

areas, showed signs of consolidation. Prices

and rentals particularly for residential and

commercial property recorded significant increases over the course of the year.

G.F. 326

CONFIDENTIAL # 3