TNAG-2353-FCO40-3423-Visits-by-Lord-Caithness--Minister-of-State-for-Foreign-and--1991 — Page 179

CONFIDENTIAL

FM HONG KONG

TO DESKBY 19103OZ F C O TELNO 3645

OF 190915Z NOVEMBER 91

CONFIDENTIAL

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MDHIAN 2568

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MY FIRST IPT:

26 NOVEMBER

LORD CAITHNESS'S VISIT TO HONG KONG AND CHINA:

-

7 DECEMBER 1991: THE HONG KONG ECONOMY

A.

1.

1991.

CURRENT ECONOMIC SITUATION

ECONOMIC ACTIVITY HAS CONTINUED TO GROW STEADILY DURING

2. IN THE EXTERNAL SECTOR, RE-EXPORTS HAVE PROVIDED THE MAIN IMPETUS TO EXPORT GROWTH SO FAR THIS YEAR. THEIR YEAR-ON-YEAR GROWTH RATE IN REAL TERMS IN THE FIRST THREE QUARTERS OF 1991 WAS ABOUT 27 PER CENT. DOMESTIC EXPORTS ALSO RECORDED A SMALL INCREASE OF ABOUT 1 PER CENT OVER THE SAME PERIOD. THIS MODERATE RECOVERY IN DOMESTIC EXPORTS, DESPITE A SIGNIFICANT REDUCTION IN THE MANUFACTURING WORKFORCE, WAS A REFLECTION OF A SIGNIFICANT INCREASE IN LABOUR PRODUCTIVITY IN THE MANUFACTURING SECTOR.

3.

LOCALLY, INVESTMENT DEMAND GREW SIGNIFICANTLY, AS SHOWN BY THE MARKED INCREASE IN RETAINED IMPORTS OF CAPITAL GOODS IN RECENT QUARTERS, PARTICULARLY IN RESPECT OF INDUSTRIAL MACHINERY FOR MANUFACTURING USE.

4. CONSUMPTION DEMAND PICKED UP OVER THE COURSE OF THE YEAR. REFLECTING THIS, THE VOLUME OF RETAIL SALES HAS RECORDED APPRECIABLE GROWTH IN RECENT MONTHS.

5.

THE LABOUR MARKET SHOWED SOME EASING IN THE FIRST HALF OF 1991. IT THEN TIGHTENED UP SLIGHTLY IN THE THIRD QUARTER, AS ECONOMIC ACTIVITY REMAINED INTENSIVE. THIS PROVISIONAL UNEMPLOYMENT RATE FOR OCTOBER FELL TO 1.7 PER CENT.

6. REFLECTING THESE DEVELOPMENTS, GDP GREW BY 3.9 PER CENT IN REAL TERMS IN THE FIRST HALF OF 1991. THE LATEST FORECAST FOR THE

YEAR AS A WHOLE IS 4 PER CENT (THIS FIGURE WILL NOT BE RELEASED

PUBLICLY UNTIL 22 NOVEMBER).

B.

INFLATION