ENG-1992 — Page 64

THE ECONOMY

Hong Kong is a major funding centre for China. Most of China's fund-raising activities in Hong Kong have taken the form of syndicated loans. Although in some cases Hong Kong is not the direct source of funds, it serves as a window through which China can have access to external borrowing. These loans are mostly for financing China's own economic development, but some of them are used by China-interest companies in Hong Kong to finance their investment activities in Hong Kong or abroad. In addition to syndicated loans, China-interest banks and other enterprises have been making greater use of negotiable certificates of deposit, bonds, commercial paper, and share issuance to raise funds.

The prospects for further development of economic links between Hong Kong and China continue to be good, given the firm foundation that has been established over the years as well as the broadened open door policies, accelerated economic reforms and rapid economic growth in China.

The Economy in 1992

The economy continued to grow steadily in 1992. Re-exports surged further, while domestic exports recorded virtually no growth. Locally, both consumption and investment expenditures remained robust throughout the year.

Consumer price inflation was generally on a moderating trend in 1992. For 1992 as a whole, the rate of increase in the Consumer Price Index (A) averaged 9.4 per cent, appre- ciably lower than the 12 per cent recorded in 1991. The GDP deflator, as a broad measure of overall inflation in the economy, rose slightly faster than the consumer price indices, by 10.3 per cent in 1992. This faster increase was, however, largely due to an improvement in the terms of trade, with the prices of imports rising more slowly than those of exports.

According to the preliminary estimate, the growth rate in real terms of the GDP was 5.0 per cent in 1992, with increases of 4.9 per cent in the first half and 5.1 per cent in the second half. In 1990 and 1991, the GDP grew by 3.2 per cent and 4.2 per cent respectively in real terms.

External Trade

In 1992, re-exports grew markedly, by 29 per cent in value terms over a year earlier. After discounting for an estimated one per cent increase in prices, there was a 28 per cent increase in real terms. The corresponding growth rates in 1991 were 29 per cent and 26 per cent respectively. The robust performance of re-exports was in line with the on-going structural shift of domestic exports to re-exports.

China remained the largest source of, as well as the largest market for, Hong Kong's re-exports. Supported by the expansion of outward processing activities across the border and by the increase in China's external trade, re-exports involving China in both directions continued to rise rapidly in 1992. Meanwhile, re-exports not related to China showed a more moderate increase. The other major re-export markets were the United States, Japan, Germany, Taiwan and the United Kingdom. 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 consumer goods, and raw materials and semi-manufactures, which represented 55 per cent and 27 per cent respectively of the total value of re-exports in 1992. Analysed the major commodity

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