THE ECONOMY
Over the past two decades, there has also been a sharp increase in invisible trade and investment flows between Hong Kong and the Mainland. At present, Hong Kong is a major service centre for the Mainland generally and South China in particular, providing a wide array of financial and other business support services like banking and finance, insurance, transport, accounting and sales promotion. It is also a principal gateway to the Mainland for business and tourism. In 2001, 52 million trips were made by Hong Kong residents to the Mainland, 4 per cent more than in 2000. The number of trips made by foreign visitors to the Mainland through Hong Kong also went up, by 6 per cent to three million.
Hong Kong has been the largest source of external direct investment in the Mainland. According to an official source in the Mainland, the cumulative value of Hong Kong's realised direct investment there amounted to US$187 billion at end- 2001, accounting for about half of its total inward direct investment. Over the years, there has been a noticeable shift in the composition of Hong Kong's direct investment across the boundary, from industrial processing to a wider spectrum of business ventures such as hotels and tourist-related facilities, real estate and infrastructure development. Relative to other places in the Mainland, Hong Kong's economic links with Guangdong Province are much more intimate. At end-2000, the cumulative value of Hong Kong's realised direct investment in Guangdong was estimated at US$72 billion, accounting for nearly three-quarters of its total inward direct investment. Currently, over five million Chinese workers are said to be employed in the province by industrial ventures with Hong Kong interests. This is about 24 times the size of Hong Kong's own manufacturing workforce.
In the opposite direction, there has likewise been a sizeable flow of investment capital from the Mainland to Hong Kong over the past years. By end-2000, the Mainland had invested a total of US$143 billion in Hong Kong, making it one of the largest sources of external direct investment. More than 2 000 Mainland enterprises currently operate in Hong Kong. While these enterprises maintain high investment stakes in such traditional lines of business as import/export trade, wholesale/retail trade, banking, transport and warehousing, their investment has increasingly diversified into other spheres such as real estate, hotels, financial services and infrastructure development.
In tandem with the upsurge in cross-boundary flows of trade, investment and people, financial links between Hong Kong and the Mainland have also been growing at a generally strong pace over the past two decades. Yet affected by a slowdown in economic growth, there was a distinct slackening in 2001. Comparing end-2001 with a year earlier, external liabilities of Hong Kong's authorised institutions (AIs) to entities in the Mainland fell by 15 per cent to $334 billion, while external claims of Hong Kong's AIs on entities in the Mainland contracted by 10 per cent to $198 billion. Nevertheless, these external liabilities and claims against entities in the Mainland were still well above those of $125 billion and $135 billion respectively in mid-1991 when such statistics were first compiled.
The Bank of China (Hong Kong) is the second largest banking group in Hong Kong after the HSBC Group. It was established on October 1, 2001 through restructuring 10 member banks of the former Bank of China Group. It has taken on the issuance of Hong Kong dollar banknotes, as was hitherto performed by the former Bank of China since May 1994. (The other two note-issuing banks are the Hongkong and Shanghai Banking Corporation and the Standard Chartered Bank.)
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