ENG-1995 — Page 86

THE ECONOMY

Domestic exports recovered to an increase of about four per cent in value terms or about two per cent in real terms, in 1995. This represented a significant improvement from virtually no growth in 1992 and declines of four per cent in 1993 and two per cent in 1994. The performance of domestic exports in the first quarter was particularly robust.

Analysed by major market, there was an almost across-the-board improvement in all the major markets. Domestic exports to China resumed a positive growth, rising by about one per cent in real terms in 1995. A large proportion of these domestic exports were related to outward processing arrangements commissioned by Hong Kong companies. Domestic exports to the United Kingdom similarly recovered to show a positive increase, by about six per cent. Domestic exports to Japan rose by about nine per cent. Domestic exports to Singapore slowed down to almost zero growth in real terms, but those to many other economies in the Asia-Pacific region recorded significant growth. On the other hand, those to Germany and the USA were still weak, recording declines of about seven and two per cent in real terms, respectively.

Underpinned by the robust growth in re-exports and in retained imports, total imports showed a further significant increase in 1995, by 19 per cent in value terms or about 14 per cent in real terms. This followed an increase of 17 per cent in value terms or 14 per cent in real terms in 1994. Nevertheless, with retained imports of consumer goods slowing down over the year, imports decelerated in growth from 17 per cent in the first half of 1995 to about 11 per cent in the second half. The major sources of Hong Kong's imports were China, Japan, Taiwan, the USA, Singapore and the Republic of Korea.

Retained imports grew strongly, by about 13 per cent in real terms in 1995, following an increase of 14 per cent in 1994. The robust growth was attributable mainly to the larger import requirements for raw materials and capital goods for production and major public works. Reflecting this, the volume of retained imports of raw materials and semi-manufactures rose by about 15 per cent and capital goods by about 23 per cent in 1995. On the other hand, those of consumer goods slowed down considerably to virtually zero growth in real terms. Those of foodstuffs grew by about nine per cent in real terms.

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Reflecting in part the substantial rise in import requirements and in part the continued deterioration in the terms of trade, the visible trade deficit widened further to $147 billion in 1995, equivalent to 9.9 per cent of the total value of imports. This compared with the corresponding figures of $81 billion or 6.5 per cent recorded in 1994. But with a reduced intake of consumer goods along with the slow-down in consumer spending, and with a rebound in the Hong Kong dollar and a slower increase in world commodity prices, the visible trade deficit situation improved over the course of 1995.

Domestic Demand

Domestic demand grew by seven per cent in real terms in 1995, following an increase of 12 per cent in 1994. There was a continued robust growth in investment in machinery and equipment and intensive infrastructural construction in the public sector. But consumer demand moderated further.

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