ENG-1989 — Page 76

THE ECONOMY

declines were recorded in domestic exports of radios (by about 41 per cent in real terms) and domestic electrical appliances (by about 26 per cent). Domestic exports of metal manufactures also decreased by about 12 per cent in real terms.

At 26 per cent in value terms, or about 29 per cent in real terms, the growth rate of re-exports in 1989 was still substantial, although much lower than the increase of 51 per cent in value terms, or 46 per cent in real terms, recorded in 1988. A large proportion of the re-exports were related to conventional entrepôt trade with China in particular and with the Asia-Pacific region generally.

China remained the largest source of, as well as the largest market for, Hong Kong's re-exports. The value of re-exports of China origin continued to grow rapidly in 1989, while the value of re-exports to China showed much slower growth during the year. Meanwhile, the value of re-exports not related to China also grew significantly. Besides China, the other major re-export markets were the United States, Japan, Taiwan, the Republic of Korea and the Federal Republic of Germany. The major suppliers of Hong Kong's re-exports, apart from China, were Japan, Taiwan, the United States and the Republic of Korea.

Analysed by end-use categories, Hong Kong's re-exports comprised mostly raw materials and semi-manufactures, and consumer goods, which represented 35 per cent and 48 per cent respectively of the total value of re-exports in 1989. Re-exports of footwear, textile fabrics, electrical machinery and appliances, clothing and radios showed more rapid increases than those of other commodity items.

Imports grew by 13 per cent in money terms or by about nine per cent in real terms in 1989, compared with corresponding increases of 32 per cent and 27 per cent in 1988. The major sources of Hong Kong's imports were China, Japan, Taiwan, the United States, the Republic of Korea and Singapore. A large part of this growth was attributable to the surge in re-export trade. As regards retained imports, there was virtually no increase in real terms in 1989. Retained imports of fuels, foodstuffs, and of raw materials and semi-manufactures grew by about 14 per cent, six per cent and five per cent respectively in real terms over 1988. However, reflecting a slackening in domestic demand, retained imports of consumer goods and capital goods fell by about 12 per cent and two per cent in real terms, respectively.

As the value of total exports (domestic exports plus re-exports) was larger than that of imports, a visible trade surplus of $7,728 million, equivalent to 1.4 per cent of the total value of imports, was recorded in 1989. If an estimate of the imports of gold for industrial and commercial use is included, the surplus would have been $5,271 million. This compares with a deficit of $5,729 million (or a deficit of $8,105 million after a similar adjustment for gold imports) recorded in 1988. As the prices of imports increased at a slower rate than those of total exports in 1989, there was a small improvement in the terms of trade.

Domestic Demand

As the pace of economic growth moderated further, the growth rate in real terms of domestic demand slowed down from seven per cent in 1988 to one per cent in 1989. Private consumption expenditure grew by three per cent in real terms in 1989, having increased by six per cent in 1988, while government consumption expenditure grew by nine per cent in real terms, having increased by five per cent in 1988. Investment demand, measured in terms of gross domestic fixed capital formation, grew by only one per cent in real terms in 1989, slower than the corresponding increase of six per cent in 1988. Among its main components, expenditure on building and construction grew by five per cent in real terms in 1989, having increased by one per cent in 1988. Expenditure on plant, machinery and

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