TNAG-2749-FCO40-3964-Economic-situation-in-Hong-Kong-1993 — Page 133

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MIPT: VISIT BY MR GOODLAD: 29 MAY 1 JUNE: THE ECONOMY

1.

HONG KONG'S ECONOMIC FUNDAMENTALS REMAIN STRONG AND SOUND. THE ECONOMY CONTINUED TO GROW STEADILY, WITH GDP GROWTH OF 5 PERCENT IN 1992. (GROWTH FOR 1991 WAS 4.2 PERCENT AND 1990 3.2 PERCENT.) STRONG RE-EXPORT PERFORMANCE AND BUOYANT DOMESTIC DEMAND PROVIDED THE KEY IMPETUS TO THIS GROWTH.

2. IN THE FIRST QUARTER OF 1993, RE-EXPORTS SURGED FURTHER BY ABOUT 27 PERCENT IN REAL TERMS OVER THE SAME QUARTER LAST YEAR. CHINA CONTINUES TO BE THE LARGEST MARKET FOR, AND SOURCE OF, HONG KONG'S RE-EXPORTS. (IN 1992, 86 PERCENT OF THE TOTAL RE-EXPORTS ORIGINATED FROM, OR WERE DESTINED, FOR CHINA.) THIS REFLECTS THE LARGE AMOUNT OF INVESTMENT BY HONG KONG COMPANIES IN MANUFACTURING VENTURES IN CHINA, MOSTLY IN GUANGDONG PROVINCE. ABOUT 80 PERCENT OF THE FOREIGN INVESTMENT IN THE PROVINCE COMES FROM HONG KONG. REFLECTING THE STRUCTURAL SHIFT TO RE-EXPORTS, DOMESTIC EXPORTS IN THE FIRST QUARTER OF 1993 SHOWED LITTLE CHANGE OVER THE PREVIOUS YEAR.

3. HONG KONG PEOPLE CONTINUED TO ENJOY FULL EMPLOYMENT AND REAL RISING INCOMES. (IN THE THREE MONTHS ENDING APRIL 1993, THE UNEMPLOYMENT RATE WAS 2.4 PERCENT.) REFLECTING THIS, CONSUMER SPENDING HAS CONTINUED TO INCREASE. WHILST IMPORTS INCREASED BY ABOUT 20 PERCENT IN REAL TERMS IN THE FIRST QUARTER OF 1993 OVER THE SAME PERIOD IN 1992, RETAINED IMPORTS ALSO RECORDED A SIGNIFICANT GROWTH OF ABOUT 10 PERCENT IN REAL TERMS.

4. INFLATION, MEASURED BY THE CPI(A), HAS BEEN DECREASING SINCE APRIL 1991. FROM A PEAK OF 13.1 PERCENT IN THE SECOND QUARTER OF 1991, IT EASED TO 9.4 PERCENT IN 1992 AND THEN TO 8.8 PERCENT IN THE FIRST QUARTER OF THIS YEAR. IN APRIL, IT STOOD AT 7.7 PERCENT.

ECONOMIC OUTLOOK FOR 1993

5. THE DYNAMIC ECONOMIC GROWTH IN CHINA AND IN THE ASIA-PACIFIC REGION GENERALLY, COUPLED WITH ECONOMIC RECOVERY IN THE UNITED

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