TNAG-1951-FCO40-2779-British-capital-investment-in-Hong-Kong-1989 — Page 77

CONFIDENTIAL & B

G.F. 326

Report on Capital Investment in Hong Kong

Third Quarter of 1989

Summary

Investment in plant and machinery weakened

further in the third quarter. Retained imports of

capital goods decreased by about 9% in real terms in the third quarter of 1989 compared with the same

quarter last year. Taking the first three quarters

together, these retained imports recorded an increase

of only about 4% in real terms over the same period

last year.

The corresponding increase for 1988 as a

whole was 17%. The sluggish domestic export performance, the continued slow-down in overall

economic activity, and the impact on investor

confidence of the June events in China have

contributed to the slackening in investment demand.

2.

In the property market, activity has been reviving since late July, although the degree of

recovery varied between sub-sectors. Support has re-emerged from end-users of small to medium-sized

residential flats, and to some extent also from buyers of luxury flats. The leasing market for office space has been affected least. As for shopping space, demand has weakened due to a slackening in the tourist trade and in local consumption expenditure. The demand for industrial premises has remained moderate.

CONFIDENTIAL # 3