6:00AM New York, 6:00PM Hong Kong - Hong Kong trade deficit increased to HK$27.4 billion in December. China trade surplus rises and GDP in 2007 rose at 11.4%. Inflation remains a major threat.

Stocks in Hong Kong plummeted on a government report showing that trade deficit widened and on rising expectations that credit market turmoil will persist.

In Hong Kong trading Hang Seng Index declined 2.3% or 550.90 at 23,539.27, while the China Enterprises Index plunged 2.61% at 12,933.20.

Daily turnover on the main-board was HK$142.4 billion compared to HK$156.4 billion yesterday.

The Hong Kong government reported on its website today that export shipments rose 8.2% year to HK$232 billion in December from a year ago, while imports soared 10.3% to HK$259.7 billion, yielding a trade deficit of HK$27.4 billion.

Exports to China spiked 21.7% in December from a year earlier.

According to the government report, cumulative exports last year gained 9.2% from a year earlier. However imports gained 10.3% driven by rising oil prices.

Trade deficit in 2007 stood at HK$180.5 billion.

National Bureau of Statistics reported today in Beijing that the China’s Gross Domestic Product in 2007 increased to 11.4% from the revised 11% in 2006 to 24.66 trillion yen ($3.41 trillion).

China’s foreign trade soared 23.5% to $2.17 trillion. Exports edged up 25.7% to $1.22 trillion, while imports grew 20.8% to $955.8 billion and trade surplus advanced 47.7% to $262 billion.

China’s industrial output in 2007 rose 3.7% to Rmb 2.89 trillion and 13.4% at Rmb 12.14 trillion, while the tertiary sector advanced to 9.63% at Rmb 9.63 trillion.

The statistics office also added that production at major enterprises, with annual sales of Rmb 5 million, surged 18.5% from a year ago, with aggregate profit reaching Rmb 22.95 trillion.

Spending on fixed assets in 2007 increased by 25.7% to Rmb 13.72 trillion.

Inflation remains a major threat to the Chinese economy. Inflation in 2007 tripled to 4.8% from 2006 on food price increase of 12.3% in 2007. Consumer price index in December fell to a growth of 6.5% from 6.9% in November and is running above the central bank target of 3%.


Financial stocks declined on remarks by Chief Executive of the Hong Kong Monetary Joseph Yam Chi-kwong today that notwithstanding the aggressive interest rate cut by the U.S. Federal Reserve it will take time before the situation normalizes.

Kwong added that the credit crunch is being caused by capital inadequacies at financial institutions rather than the pricing of credit.

Bank of China Communications shed 0.45% to HK$8.86, HSBC Holdings declined 0.69% at HK$115.40 and China Life slipped 3.3%.

The Hong Kong Exchanges and Clearing jumped 4.2% on speculation that China will permit mainland investors to invest in Hong Kong stocks in the second quarter.

China Oilfield Services slumped 12% after reporting today that it failed to expand offshore.