The Economy 45
353 per cent of GDP. As for gross external debt, which is the sum of the non-equity liability components in international investment, it stood at $3,464 billion at the end of 2005, equivalent to 251 per cent of GDP. Most of it arose from normal operations of the banking sector.
The Gross National Product (GNP), comprising GDP and net external factor income flows, stood at $1,385 billion in 2005. This was slightly higher than the corresponding GDP by 0.2 per cent. The difference represented a net inflow of external factor income. In gross terms, inflows and outflows of external factor income remained substantial in 2005, at $503 billion and $501 billion respectively, both equivalent to 36 per cent of GDP. This was related to the huge volume of both inward and outward investment in Hong Kong.
Meeting the Challenge of Structural Change
Structural change is nothing new to the Hong Kong economy. The past decades. have seen constant changes brought about by the rapid developments in the regional and global economic environment. In the 1950s Hong Kong was a thriving entrepôt but it swiftly remade itself into an important manufacturing base serving the world market in the 1960s and 1970s. It then further diversified and evolved into a regional financial centre and a business-cum-trading hub in the 1980s. It was also quick to recognise the opportunities presented by the opening up of the Mainland economy in the late 1970s and has played the key role of middleman between the Mainland and the rest of the world, channelling trade and investment flows into and out of the Mainland. In addition, by relocating production facilities across the boundary, as well as investing in this major economic hinterland on a large scale, Hong Kong entrepreneurs have helped transform South China into the world's largest and fastest growing 'factory'.
By meeting the challenges of rapid technological change and the increasingly intense competition brought about by globalisation, the Hong Kong economy has been moving up the value-added chain, shifting towards higher value-added services and more knowledge-based activities.
The rising living standards of Hong Kong people over the decades is a clear testament to their capacity to adapt to rapid changes with the support from sound and effective market institutions. Structural change is an ongoing process, especially with ever-expanding globalisation.
In recent years, the Hong Kong economy has continued to explore the advantages in 'leveraging the Mainland and engaging ourselves globally'. For instance, the focus of Hong Kong's trade has gradually shifted from re-exports to supply-chain management and high value-added logistics services, which has resulted in offshore trade flourishing. Hong Kong's financial markets have not only become the major fund-raising channel for Mainland enterprises, they are also playing a facilitating role in helping them upgrade corporate governance, enhance operational efficiency, promote brand names and go global. Hong Kong's professionals are playing an active role in providing professional services to the Mainland economy,