The Economy | 49
The Manufacturing Sector
Manufacturing firms in Hong Kong are renowned for their versatility and flexibility in coping with changing demand conditions in overseas markets. Moreover, through increased outward processing arrangements in the Mainland, Hong Kong's productive capacity has effectively been expanded by multiples, which has helped uphold the price competitiveness of its products.
Apart from relocating the more labour-intensive production processes to the Mainland, Hong Kong's manufacturers have also been striving hard to diversify their products and markets, in response to the challenges from globalisation of trade and keen competition from other export producers. Concurrently, productive efficiency and product quality have been continuously upgraded by incorporating more advanced skills and technology.
Within the local manufacturing sector, printing and publishing, and textiles and clothing are the two most important industries. Other major industries include machinery and equipment, electrical and electronics products, food processing and metal products. Generally speaking, those manufacturing operations still remaining in Hong Kong are more knowledge-based with a higher value added and a greater technology content. Between 1994 and 2004, labour productivity in the local manufacturing sector, as measured by the ratio of the industrial production index to the manufacturing employment index, rose visibly, by an annual average of around 6 per cent.
In 2004, the United States and the Mainland were the two largest markets for Hong Kong's domestic exports, accounting for 31 per cent and 30 per cent, respectively, of the total. In recent years, new markets have been developed for Hong Kong's exports, including markets in the Middle East, Eastern Europe, Latin America and Africa.
Increasing Economic Links between the Hong Kong Special Administrative Region and the Mainland
Since the Mainland adopted its economic reform and open door policy in 1978, economic links between Hong Kong and the Mainland have gone from strength to strength. This has brought substantial economic benefits to both places.
Visible trade between Hong Kong and the Mainland has expanded rapidly since 1978, at an average annual rate of 22 per cent in value terms. But the pace of growth moderated in the more recent years, to an average annual rate of 8 per cent during 1994-2004, partly due to increased direct shipment of goods into and out of the Mainland upon enhancement of port facilities and simplification of customs procedures there. The Mainland remained Hong Kong's largest trading partner in 2004, accounting for 44 per cent of the total trade value in Hong Kong. The bulk (91 per cent) of Hong Kong's re-export trade was related to the Mainland, making it the largest market for and the largest source of Hong Kong's re-exports. Reciprocally, Hong Kong was the Mainland's third largest trading partner in 2004 (after the United States and Japan), accounting for 10 per cent of the Mainland's total trade value (Chart 6).