THE ECONOMY
service sectors as a whole in total employment increased from 41 per cent in 1971 to 47 per cent in 1981, and further to 58 per cent in 1989.
The Manufacturing Sector
Although Hong Kong's domestic exports are still concentrated in a number of major product groups, there has been considerable upgrading of quality and diversification of items within these groups. The pressure of protectionism and growing competition from other economies have resulted in local manufacturers intensifying their efforts to diversify, not only in respect of products but also of markets. It is estimated that about 80 per cent of Hong Kong's manufacturing output is eventually exported.
Manufacturing firms in Hong Kong must be flexible and adaptable in order to cope with the frequent changes in demand patterns and to maintain their external competitiveness. The existence of a large number of small establishments providing an extensive local sub-contracting system has greatly facilitated the necessary shifts in production and has helped to increase the flexibility of the economy. Moreover, increasing use has been made of the outward processing facilities in China for handling some of the production processes. Because of the limited amount of usable land, Hong Kong's manufacturing industries are generally those which can operate successfully in multi-storey factory build- ings. This, in practice, implies concentration in the production of light manufactures.
Over the past 30 years, many industries have emerged and grown, the most notable being plastics and electronics. The textiles and clothing industries remain prominent, however. Other developing industries include fabricated metal products, electrical appliances, watches, clocks, toys, jewellery, printing and publishing.
During the period 1973 to 1987, value of net output by the manufacturing sector grew at an average annual rate of 17 per cent, while manufacturing employment grew at a rate of only two per cent. Thus, a significant secular improvement in labour productivity was apparent, even though part of the increase in the value of net output was absorbed by increases in prices.
Within the manufacturing sector, the most significant change occurred in the textiles industry. The share of this industry in the net output of manufacturing declined from 27 per cent in 1973 to 17 per cent in 1987, and its share in manufacturing employment from 21 per cent to 14 per cent. Offsetting this decline was the expansion of the clothing, electrical appliances and electronics, and watches and clocks industries. Between 1973 and 1987, their shares in the net output of manufacturing increased from 20 per cent to 24 per cent, from nine per cent to 15 per cent, and from one per cent to three per cent respectively, while their shares in manufacturing employment increased from 26 per cent to 29 per cent, from 11 per cent to 14 per cent, and from one per cent to three per cent respectively.
Domestic exports in 1989 consisted principally of wearing apparel and clothing accessories (32 per cent of the total value), electronics (25 per cent), watches and clocks (seven per cent), textiles (seven per cent), plastic products (four per cent), metal products (three per cent) and electrical household appliances (two per cent). In terms of share in the total value of domestic exports, the most significant change over the past 10 years has been the decline in the relative importance of clothing, from 36 per cent in 1979 to 32 per cent in 1989. This decline was offset by increases in the relative importance of such commo- dities as telecommunications and sound recording and reproducing equipment, electrical machinery and appliances, and office machines and automatic data processing equipment. The combined share of these three commodity groups in the total value of domestic exports rose from 16 per cent in 1979 to 22 per cent in 1989.
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