THE Hongkong economy is expected to be powered even more by its China trade this year, given that US President Bill Clinton has retained its Most-Favoured Nation (MFN) trade status. Total re-exports in the first quarter grew 27 per cent compared with a forecast of 25 per cent. Of the total re-exports of $174.2 billion, 33 per cent was with China, compared with 29 per cent in the same quarter last year. The year-on-year growth rate in value terms was 42 per cent. The United States remained unchanged at 20 per cent of the total. The Government is remaining cautious about upgrading its predictions on re-exports because of the constraints that Beijing may now put on the overheating Chinese economy. But while re-exports were buoyant, Hongkong's domestic exports were virtually unchanged at $49 billion in the first quarter, while imports rose 18 per cent to $233 billion. The visible trade deficit for the period rose from $9.6 billion to $10.1 billion, but its percentage of the value of imports fell from five per cent to four per cent. In the home market, an unexpected surge in public sector building and construction has prompted the Government to revise sharply upwards its forecast of the speed at which the sector is growing. The latest official public construction sector is expected to grow 12 per cent this year, compared with the eight per cent forecast by Financial Secretary Hamish Macleod in his March 3 Budget speech. This compares with the expected fall in private sector activity, which is still expected to be down two per cent. The increase in the public sector work - only part of which is due to Chek Lap Kok airport, according to government sources - means that the whole building and construction sector is now believed to be on course for 2.8 per cent growth, against the budgeted 1.3 per cent. There has also been a significant upward revision to the expected performances of the public sector demand for machinery and equipment, which is now expected to be 15 per cent, compared with the predicted 10 per cent. The expected shift to public sector works is believed to have resulted from government contractors taking advantage of the slack in private sector construction and the opportunities to obtain some keener pricing. But the extra priming of the public pump is not expected to change the year-on-year growth in Hongkong, which is forecast to stay at the budgeted 5.5 per cent. This is in line with the performance for the first three months, which the Government now estimates to have seen a growth rate of between five per cent and 5.5 per cent. Despite the recent falls in inflation, the official forecast is still maintained at 9.5 per cent for the year, compared with a recorded average of 8.8 per cent in the first quarter over a year earlier in the CPI (A), which compares with 9.4 per cent in the last quarter of last year. The Government's unchanged forecast reflects the different pressures which will affect prices in the near future. It is expecting strains to start showing on local resources, particularly labour, as economic activity picks up, and the strengthening of the yen will mean higher import prices. Balancing these factors are the weakening of the yuan, and the easing of bottlenecks as investment on plant and machinery begins to pay off. The tightness of the labour market was shown by the unemployment figures in the first three months of the year. The number of jobless was 2.3 per cent of the workforce, a rise of 0.2 per cent on the previous quarter, but 0.1 percentage point lower than the same period last year.