GF 323
CONFIDENTIAL #2
機密
34
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48.
Despite the risks that Hong Kong will import some inflation from China, unless the problem of inflation. in China develops into widespread social unrest Hong Kong's trade with China is likely to continue to benefit from China's rapid economic growth and its need to import
(32) more from outside to satisfy its domestic demand The very rapid growth of Hong Kong's domestic exports and re-exports in the first three quarters of 1988 (paragraph 32) seems to provide evidence of such a development. 1988 as a whole, Hong Kong's domestic exports and re-exports to China are expected to reach HK$37 billion and HK$90 billion respectively. Those which are to meet China's domestic demand, rather than for outward processing, are believed to have grown rapidly compared
with 1987.
For
49.
The prospects for Hong Kong's exports to China in 1989 are nevertheless facing some restraint. Recently there have been a number of statements that the Chinese
authorities (at various levels) and enterprises should tighten their belts by cutting both recurrent and capital expenditure. Such policies of restraint are unlikely to be fully effective as provincial and county officials can often ignore instructions from the central government. But due to an acute shortage of energy and raw materials as well as a possible contraction in the overall credit supply system if the People's Bank of China refuse to validate loans extended to enterprises by the specialised
banks and their regional branches which are above quota,
the economic growth pace of China may slow down markedly
(32) But this rapid growth in Hong Kong's exports to China
might not be beneficial to Hong Kong as a whole considering the Hong Kong is now suffering from the inflationary consequences of excess demand for its products.
CONFIDENTIAL
機密
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