54
THE ECONOMY
Between 1981 and 1991, exports of services rose at an average annual rate of nine per cent in real terms, while imports of services were higher by 11 per cent. The major components of Hong Kong's trade in services are shipping, civil aviation, tourism and various financial services. The shares of transportation services in total exports and total imports of services were 46 per cent and 34 per cent respectively in 1990. Travel services accounted for 37 per cent of the total value of exports of services and 46 per cent of the total value of imports of services. The corresponding shares for financial and banking services were five per cent and three per cent respectively.
Increasing Economic Links between Hong Kong and China
Since the adoption of open-door policies by China in late 1978, Hong Kong's economic relations with China have undergone rapid growth and development.
Hong Kong and China are now each other's largest trading partner. In 1991, the total value of visible trade between Hong Kong and China amounted to $501 billion, representing an increase of 27 per cent over 1990. This rapid growth reflected partly a more liberal approach to imports adopted by the Chinese government and partly the continuous growth in outward processing trade. However, the growth rate in 1991 was significantly lower than the average annual increase of 35 per cent between 1978 and 1990.
Apart from being the second largest market for Hong Kong's domestic exports (accounting for 24 per cent of the total in 1991), China is particularly important in Hong "Kong's re-export trade. China is the largest market for, as well as the largest supplier of, Hong Kong's re-exports. More than 80 per cent of the goods re-exported through Hong Kong are destined for, or originated from, China.
In addition to trading in goods, Hong Kong also serves as an important services centre for China generally and South China in particular, including the provision of in- frastructural facilities such as the port and airport, and institutional support such as financial and related business services. This is evidenced, among other things, by the increasing importance of Hong Kong as a centre for entrepôt, transhipment and other supporting activities involving China.
Hong Kong has always been a convenient gateway to China for business and tourism. In 1991, 19 million trips to China were made by Hong Kong residents, and another 1.4 million trips to China were made by foreign visitors through Hong Kong. These represented increases of 14 per cent and 12 per cent respectively over 1990.
Besides visible and invisible trade, Hong Kong is also the most important source of external investment in China, accounting for about two-thirds of the total. While Hong Kong's direct investment in China has been concentrated in light manufacturing industries, investment in hotels and tourist-related facilities and in infrastructure has also been undertaken. As can be expected, Guangdong occupies a highly important position in this respect. It has been estimated that, in the Guangdong Province, around three million people are working for Hong Kong companies either through joint ventures or in tasks commissioned by Hong Kong companies in the form of outward processing arrangements and compensation trade. Thus, besides constituting an important source of demand for goods and services produced in Hong Kong, China is also very important as a source of supply of goods and productive capacity to Hong Kong.
On the other hand, China has also invested heavily in Hong Kong, particularly since 1978. Its investment in Hong Kong ranges from traditional activities like banking,