TNAG-2038-FCO40-2902-Ministerial-visits-from-the-UK-to-Hong-Kong-1991 — Page 34

Asia, after Japan and Brunei and compares very favourably with many industrialised countries.

4.

Very rapid growth in 1986 and 1987 (11% and 14%) has

been followed by a sharp slowdown. Growth in 1988 was 7.5%

and only 2.5% in 1989. The slowdown is partly due to capacity constraints, causing labour shortages and inflationary pressures. But external factors also played a

part. In particular the sharp slow down of the chinese

economy, much of whose trade passes through Hong Kong, has had a significant knock-on effect. A modest recovery is expected in 1990 with growth forecast at 3%. Inflation, which had been running at over 10% in 1989, should ease

slightly.

5.

External trade is of the greatest importance to Hong Kong. In 1989 growth, both of imports and exports, slowed rapidly. Domestic exports did not grow at all in real terms

compared to 9% in 1988. Re-exports, which now account for more than half of total exports, slowed from growth of 46%

in 1988 to 19%. However, as the growth in imports is also slowing, the overall trade account remains in roughly in balance, moving from a small deficit in 1988 to a small

surplus in 1989.

6. Hong Kong is almost totally lacking in natural resources and, relative to its population, is very short of usable land. The manufacturing sector is therefore completely dependent on imported raw materials and the bulk of

Hong Kong's requirements of foodstuffs and consumer goods is also imported.

7. The value of Hong Kong's exports of goods in 1989, including re-exports was HK$570.5 billion (approx £44.6 billion), a nominal increase of 15.4%. The principal domestic exports were:

BATAEM/2