TNAG-2217-FCO40-3184-Constitutional-development-in-Hong-Kong-1991 — Page 107

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Gross Domestic Product. The average annual growth rate of GDP

between 1961 and 1973 was 9.5 percent. It had moderated to 8.9

percent in the period between 1974 and 1983. In 1984-88, GDP had

risen by 8.1 percent a year. 22 In the last couple of years, the

growth rate had plummeted. It is estimated by the government that

GDP will grow by slightly more than 2 percent in 1990.23 At the

same time, the rate of inflation had jumped to around 10 percent

per year. Thus, Hong Kong finds itself in stagflation in a most

inopportune time.

Hong Kong has reached a stage of development where in order

to remain competitive in the world, its economy has to be

propelled by industries which are more capital- and technology-

intensive and which produce higher value-added commodities.

Furthermore, its service sector has to be enlarged and

upgraded. 24 To achieve these ends, long-term investments are

needed. Nevertheless, the 1997 problem has deterred local

capitalists from long-term and large-scale capital commitment. In

any case, being either traders or small manufacturers, most of

Hong Kong's entrepreneurs find it difficult to take on the

economic challenge of the future singlehandedly. Consequently,

Hong Kong's economic competitiveness has declined. Moreover,

capital outflow has weakened Hong Kong' economy, whose

difficulties are accentuated by the downturn of the Western

economies, international protectionism, and the rise of

22 Ken Davis, Hong Kong to 1994: A Question of Confidence (London: The Economist Intelligence Unit, 1990), pp. 12-22. 23 South China Morning Post, Business Post, November 24, 1990, p.

1.