THE ECONOMY
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1 105 per cent in value terms over the past eight years. Since 1985, China has been Hong Kong's largest trading partner. In 1987, the value of visible trade between Hong Kong and China amounted to $205 billion. China was the largest supplier of goods to Hong Kong (accounting for 31 per cent of Hong Kong's total import value in 1987), and was the second largest market for Hong Kong's domestic exports (accounting for 14 per cent of the total domestic export value).
In respect of Hong Kong's entrepôt trade, China was Hong Kong's largest re-export market as well as the largest source of goods re-exported through Hong Kong. In 1987, nearly 80 per cent of Hong Kong's entrepôt trade was related to China, either as a market or as a source of supply. Although the growth rates of some of these trade flows slowed down in 1986 as a result of China's tightening of control on its imports since early 1985, overall trade with China grew rapidly in 1987.
Besides merchandise trade, various forms of invisible trade between Hong Kong and China also increased. These included tourism and travel services, transport services, financial services, and professional and other business services.
In 1987, 14.1 million trips were made to China by Hong Kong residents. Another 800 000 trips were made to China through Hong Kong by foreign visitors, reflecting Hong Kong's position as a convenient gateway to China for business and tourism.
In line with the growth in trade and in passenger movements, the demand for transport services connecting Hong Kong with China has grown substantially in recent years. For cargo transport, the average annual growth rates in tonnage terms between 1979 and 1987 were about 12 per cent for inward cargo from China and about 51 per cent for China- bound outward cargo. Parts of these cargo movements were transhipments. Most of the cargo was transported by sea, although an increasing proportion of it was carried by road and by rail. Passenger traffic grew by an average of 21 per cent per annum between 1979 and 1987. The increase was mainly in trips by rail and, only to a lesser extent, by sea and air.
Reflecting the increasing financial links between Hong Kong and China in recent years, external liabilities of Hong Kong's financial institutions to banks in China grew by 227 times, from $213 million at end-1979 to $48.4 billion at end-1987. During the same period, external claims of Hong Kong's financial institutions on banks and other enterprises in China grew by 11.2 times from $5.9 billion to $65.8 billion. Apart from being a source of funds, Hong Kong also provided China with access to the world's major financial markets. The business of the Bank of China Group in Hong Kong has grown substantially since the late 1970s, as reflected by its much enlarged retail banking network and the increasing variety of financial services it offers.
With regard to investment, Hong Kong's direct investment in China has been concen- trated in hotel and tourist-related facilities, and in light manufacturing industries, such as electronics, plastics, textiles and wearing apparel. Most of the investment has been in the form of joint ventures with Chinese enterprises. Moreover, many Hong Kong manufac- turers have established compensation trade and outward processing arrangements with Chinese enterprises particularly in the Shenzhen Special Economic Zone and in the Pearl River Delta area. At the same time, enterprises involving Chinese interests have increased their investment in Hong Kong, and their activities have diversified from trading to such areas as property development, manufacturing, supermarkets, hotels and infrastructural projects.
The increasing economic relations between Hong Kong and China have been mutually beneficial, and have added a new dimension to Hong Kong's economic growth.
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