TNAG-2749-FCO40-3964-Economic-situation-in-Hong-Kong-1993 — Page 134

CONFIDENTIAL

0743

MDHIAN 1458

STATES, POINT TO GOOD BUSINESS PROSPECTS FOR THE YEAR. GDP IS FORECAST TO GROW BY 5.5 PERCENT IN REAL TERMS IN 1993. AND CONTINUED STRONG EXPORT-LED GROWTH IS EXPECTED, DRIVEN MAINLY BY RE-EXPORTS, PARTICULARLY THOSE INVOLVING CHINA. THE MFN ISSUE IS, THEREFORE, OF PARTICULAR RELEVANCE AND CONCERN. IT IS ESTIMATED THAT LOSS OF MFN STATUS BY CHINA WOULD COST HONG KONG UP TO

70,000 JOBS AND UP TO THREE PERCENTAGE POINTS OF THE GDP GROWTH.

6. DOMESTIC DEMAND, IN BOTH CONSUMPTION AND INVESTMENT, IS ALSO EXPECTED TO CONTINUE TO SHOW SOLID GROWTH. BUT INFLATION IS FORECAST AT 9.5 PERCENT FOR THE YEAR. WHILE THE LEVEL OF IMPORTED INFLATION HAS BEEN GENERALLY VERY LOW (THE PRICES OF RETAINED IMPORTS, ON AVERAGE, FELL IN THE FIRST QUARTER), THE SHARP APPRECIATION OF THE YEN RECENTLY MAY LEAD TO SOME PICK-UP IN IMPORT PRICES IN DUE COURSE. THE TIGHT SUPPLY OF LABOUR AND LAND AND THE SHIFT FROM MANUFACTURING TO SERVICES WOULD CONTINUE TO GENERATE CONSIDERABLE INFLATIONARY PRESSURE IN CERTAIN SECTORS, SUCH AS SALARIES AND HOUSING RENTAL.

7. ALTHOUGH CHINA'S IMPORTANCE AS A SUPPLIER OF HONG KONG'S IMPORTS FOR LOCAL USE HAS DECLINED IN RECENT YEARS, IT IS STILL A MAJOR SUPPLIER OF FRESH FOODSTUFFS TO HONG KONG. THE MARKED DEPRECIATION OF THE RENMINBI SINCE LAST YEAR HAS, FORTUNATELY, LARGELY OFFSET THE IMPACT OF RISING INFLATION IN CHINA, THEREBY KEEPING THE PRICE OF FOODSTUFFS FROM CHINA STABLE IN RECENT MONTHS.

PATTEN

YYYY

ΜΑΙΝ

.HK POLICY

HKD

PUSD

FED

65

DISTRIBUTION

72

NTCD

PLANNERS

RAD

PS

LEGAL ADVISERS//MS

BARRETT

LEGAL ADVISERS//MISS BROOKS

LEGAL ADVISERS//MR GILES NEWS D

PS/MR GOODLAD

SIR J COLES

MR HUM

ADDITIONAL

7

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CAOFF//SIR R BRAITHWAITE (DIO)

CAOFF//MISS NEVILLE-JONES

CAOFF //MR SIBSON

PS/NO 10

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