Regions and Countries

	Table of Contents
p. 4 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Hong Kong, China Republic of Korea Singapore Taipei,China Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia South Asia The Pacific

Hong Kong, China

Economic performance

Economic growth: Hong Kong, China’s 1999 recovery strengthened in 2000, as real GDP growth reached 10.5 percent in 2000, compared with 3.1 percent growth in 1999 and a contraction of 5.3 percent in 1998. Buoyant exports, spurred by a favorable global environment, fueled growth in both private consumption expenditure and domestic investment.

Domestic demand recorded solid growth in 2000, with private consumption rising by 5.4 percent in real terms, supported by improved real labor income and increased employment. Overall investment spending expanded by 8.8 percent in real terms because of strong growth in expenditure on machinery and equipment by the private sector. The contraction in private expenditure on building and construction moderated to 8.2 percent in real terms, which was more than offset by a revival in expenditure on machinery and equipment.

Employment: Labor market conditions improved in 2000, as the sustained economic recovery further strengthened demand for labor. With a seasonally adjusted unemployment rate of 4.4 percent in the fourth quarter of 2000, nominal wages and earnings rebounded to positive year-on-year growth by the second quarter of 2000, compared with modest declines in the first quarter of 2000 and for 1999 as a whole.

Inflation: Despite an upward trend in the world prices of some commodities (especially fuel) the composite consumer price index fell by 3.7 percent in 2000, mainly because of cost and price adjustments resulting from a stagnating property market and excess production capacity. The continuing freeze in government fees and in some public utility charges also contributed to the fall in price level. Nevertheless, the rate of decline in consumer prices slowed from 5.1 percent in the first quarter of 2000 to 4.5 percent in the second quarter, and further to 2.8 and 2.2 percent in the third and fourth quarters, respectively.

Fiscal balance: The overall fiscal balance unexpectedly recorded a surplus of Hong Kong dollars (HK$)10.0 billion in FY2000 (ending 31 March), in contrast to a projected deficit of HK$36.5 billion, thereby reducing the urgency of implementing new revenue-raising measures. Therefore, the Government's budget for FY2001 did not include major initiatives to increase consumption or corporate taxes. The unexpected surplus reflected not only low levels of government spending but also strong revenue inflows generated by investing the Government’s fiscal reserves within a buoyant stock market in 1999.

External sector: Total exports of goods surged by 17.1 percent in real terms in 2000, mainly reflecting a broad-based strengthening of import demand in major overseas markets, and improved price competitiveness of domestic exports, resulting from downward adjustments in prices and production costs in the local economy. Total imports also grew markedly by 18.1 percent in real terms in 2000 because of significant reexport growth and an increase in retained imports. For invisible trade, export of services remained robust, rising by 14.3 percent in real terms in 2000, amid continued increases in exports of trade-related services, offshore trading activities, and inbound tourism. Import of services registered a relatively moderate increase of 2.6 percent in real terms during the same period. Despite a widening visible trade deficit, the current account surplus in the first three quarters of 2000 was about HK$68.6 billion, equivalent to 5.4 percent of GDP.

Domestic policies: Several policy measures for improving the competitiveness of the banking subsector were undertaken by the Hong Kong Monetary Authority. The first phase of the interest rate deregulation for time deposits with a maturity of less than seven days was implemented in July 2000. The second phase is planned for 2001. A detailed study of the feasibility of establishing an explicit deposit protection scheme in Hong Kong, China was conducted in the first half of 2000; the purpose of the scheme is to provide protection to small depositors, thereby contributing to the stability of the financial system. The Securities and Futures Bill, introduced into the legislature in November 2000, will consolidate all existing relevant legislation, and make the regulatory framework for the securities and futures markets consistent with international standards and practices. Merger of the two stock exchanges and three clearinghouses into a single holding company—the Hong Kong Exchange and Clearing Limited—was undertaken in 2000, which in the long run will facilitate on-line trading.

The Mandatory Provident Fund (MPF) System was launched on 1 December 2000 to provide retirement protection for the workforce in Hong Kong, China. The MPF System will help alleviate the financial burden of a rapidly aging population on future generations. In addition, accumulating a large pool of long-term saving will facilitate developing the local capital market, particularly the bond market.

Back Newly industrialized economies	Next Republic of Korea