TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 243

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first half of 1987. It is doubtful, however, whether

such high growth rate of China's exports can be

sustained for much longer as domestic inflation is likely to have the effect of shifting resources to the domestic sector from the external sector. other hand, more imports may be allowed to enter

China in order to meet part of the unsatisfied

domestic demand (paragraphs 10 to 13).

On the

(5) Money supply and loans have been growing rapidly in

the first half of 1988, accommodating the rapid growth of the economy and the high rate of inflation (paragraphs 14 to 16). The unofficial exchange rate of Renminbi depreciated sharply over the same period

(paragraph 17).

(6)

(7)

With a growth rate in real terms of 31.1%, Guangdong

was the fastest growing province in terms of gross industrial output in the first half of 1988. But the problem of over-heating has also become more serious

as demand continued to increase despite serious

bottlenecks on the supply side. There is also a danger of over-expansion of outward processing capacity (paragraphs 21 and 22). Shenzhen's economy also grew rapidly as measured by all its major economic indicators (paragraph 23).

Hong Kong's domestic exports and re-exports continued to grow rapidly in the first half of 1988. A large proportion of this growth was related to the strong

growth of domestic consumption in China. Outward

processing activities may have grown more slowly in

1988, given the slow-down in the growth rate of Hong

Kong's domestic exports to its overseas markets

(paragraphs 25 and 26).

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