TNAG-1942-FCO40-2768-Internal-economic-situation-in-Hong-Kong-1989 — Page 31

Monthly Report on the Hong Kong Economy

Various indicators suggest chac the growth rate of economy has been slowing down. The growth rate of domestic exports was already moderate. Signs of slackening in growth was also apparent in respect of domestic demand, including both consumption expenditure and investment.

The repercussions of the events in China tend to reinforce this

overall trend.

2.

In June, the growth rate of domestic exports decelerated further, while that Of re-exports remained substantial. It appears that the unrest in China has not affected Hong Kong's trade with China to any significant degree SO far. In the local economy, the labour market remained generally tight despite some slow-down in activity, and the rate of consumer price inflation went up.

On the

3.

In the latter part of July, the property market showed early signs of recovery, while share prices in the local stock market registered fuccher increases. These two markets were both hard hit by the events in China in June. financial front, local money market interest rates fell during July. As the US dollar softened, the overall exchange value Of the Hong kong dollar, in terms of the effective

effective exchange rate index, also fell.

4.

Comparing June 1989 with June 1988, domestic exports grew by 5% in value terms, re-exports by 34%, and imports by 16%. For the first half of 1989 as a whole, the values of domestic exports and re-exports were 7% and 37% respectively higher than in the same period last year, while the value of imports rose by 25%.

5.

In real terms, domestic exports and re-exports rose by 4% and 30% respectively in the first five months of 1989 over the same period last year, while imports ware 22% higher.

6•

A visible trade deficit of $13,470 million, equivalent to 5% of the value of imports, was recorded in the first half of 1989. This compares with a deficit of $8,752 million, equivalent to 4% of the value of imports, recorded in the same period in 1988.

HKC090/2

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