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Hong Kong Economy Grows 12 Percent in 2nd Quarter - 2004-08-30

Hong Kong is celebrating better than expected economic figures while China has started its first financial bailout of a private company.

Hong Kong's economy grew a record 12.1 percent in the second quarter. Financial analysts credit strong regional exports for the growth.

It is the fastest growth in four years and suggests Hong Kong's economy is back on track after last year's SARS outbreak and a slump that began three years ago.

As further evidence of a rebound, Hong Kong's long streak of deflation has finally come to an end, as consumer prices rose almost one percent in July from a year ago.

Deflation is considered a sign of a weak economy. Hong Kong's deflationary cycle lasted 68 months.

Financial Secretary Henry Tang welcomed the return of inflation but with a few reservations. "A healthy dose of inflation is good for the economy but I certainly do not want to see it too fast nor too big," he said.

Elsewhere in Asia major economies posted similarly impressive gains. Malaysia's central bank announced eight percent GDP growth in the second quarter.

And in Singapore a surging electronics sector helped drive industrial production up 19 percent in July from July 2003.

Singapore Airlines is buying as many as 31 long-range jetliners from Boeing in the United States. The deal could be worth over $7 billion.

China's move toward a market economy has taken an unexpected turn.

The communist government announced plans to rescue a leading private company teetering on the edge of bankruptcy.

State officials say that Beijing will takeover D'Long International Strategic Investment Company. It was once China's biggest private stock market shareholder.

Economist Qu Hongbin at the bank HSBC in Hong Kong said Beijing will act quickly to prevent D'Long's problems from upsetting China's market reforms. "They believe that without government help, this particular case may have a potential risk for the market, also for the financial system," he said.

It is the first time Beijing has intervened to save a private company. According to local media reports, D'Long will be taken over by a state-owned management company that will overhaul its finances.