ENG-1983 — Page 79

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THE ECONOMY

Hong Kong's next three most important markets also improved. Domestic exports to the United Kingdom, West Germany and China increased by nearly 12 per cent, eight per cent and 50 per cent respectively. Their corresponding growth rates in real terms in 1982 were -10 per cent, -3 per cent, and 20 per cent. In terms of major commodities, in 1983 domestic exports of textiles increased by about 30 per cent and of clothing by roughly seven per cent in real terms. Domestic exports of products other than textiles and clothing also increased by about 16 per cent in real terms on average. The increase was mainly concentrated in domestic exports of watches and clocks, electronic components, and domestic electrical appliances.

The entrepôt trade also showed a significant improvement in 1983, with re-exports growing by about 15 per cent in real terms. China was the largest market, followed by the United States, Singapore, Indonesia, Taiwan and Japan. China remained also the most important source of goods re-exported through Hong Kong, followed by Japan and the United States. The major categories of re-export products included textile yarn, fabrics and made-up articles, industrial and electrical machinery, clothing, and watches and clocks.

Imports grew by about 10 per cent in real terms. As the growth rate of imports was lower than that of total exports in value terms, the visible trade gap narrowed. Domestic demand, apart from private consumption, was, however, relatively weak in 1983. Comparing 1983 with 1982, the growth rate of domestic demand in real terms was about three per cent, which was considerably lower than the growth rates of domestic exports and of total exports (domestic exports plus re-exports).

Although the depressed property and stock markets continued to exert an unfavourable influence on wealth, private consumption expenditure picked up in the second half of 1983, following the general improvement in economic activity. While private sector investment in building and construction declined, public sector investment showed some increase. Overall expenditure on plant and machinery also fell slightly.

Influenced by a number of unfavourable economic and political factors, the Hong Kong dollar came under heavy downward pressure during the first nine months of the year, particularly in the third quarter. Through its impact on import prices, the depreciation had an adverse effect on the rate of inflation.

Labour Market

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As the labour force participation rate remained relatively stable, the increase in the population of working age became the major factor contributing to the small increase in the supply of labour during 1983. Nevertheless, reflecting the recovery of the export sector, the demand for labour increased slightly more rapidly. Thus, for the labour force as a whole, the unemployment and underemployment situation improved greatly. The seasonally adjusted unemployment rate and the underemployment rate both fell to end the year at 4.1 per cent and 1.4 per cent respectively. The corresponding figures recorded at the beginning of the year were 5.1 per cent and 2.5 per cent. Given that the employed labour force was growing less rapidly than the GDP, labour productivity, defined as GDP per person employed, increased. The fall in underemployment was probably partly responsible for this growth in productivity.

Comparing September 1983 with September 1982, manufacturing employment rose by one per cent, recording a year-on-year increase for the first time since December 1981. Employment in the wholesale, retail and import and export trades, and in restaurants and hotels, continued to grow, albeit at a slower rate than earlier. However, employment in the finance, insurance, real estate and business services sector showed a slight decrease. This