The Economy | 51
domestic demand. Exports to such emerging Asian markets as India, Malaysia, Thailand, Vietnam and Indonesia also saw notable expansion. By comparison, exports to the other major East Asian economies, such as Taiwan, Korea and Singapore, were rather lacklustre. Exports to the EU held firm, especially those to Germany, the Netherlands and France, in tandem with the steady expansion of the EU economy. The appreciation of the euro should have also rendered some support to Hong Kong's exports to the EU.
On the other hand, exports to the US reverted to a decline in 2007 with the setback concentrated in the second half of the year. This was conceivably due to the softness of the market in the wake of the housing market downfall and the turmoil arising from the sub-prime mortgage problem. Likewise, exports to Japan exhibited mild contraction in 2007 due to its weakness in import demand.
Imports of goods recorded a pronounced growth of 10.4 per cent in real terms in 2007, after an increase of 10.2 per cent in 2006. While the surge in goods intake for subsequent re-export continued, the goods imports retained for domestic uses rose visibly by 11.7 per cent in real terms in 2007. This reflected the prevailing strength of domestic demand on the back of strong consumer and investor confidence. Analysing the retained imports of goods by end-use categories, growth in retained imports of consumer goods and foodstuffs accelerated over the course of 2007, largely tallying with the strong performance of retail sales. Retained imports of raw materials and semi-manufactures were likewise on a surge during most of the year. Retained imports of capital goods, which usually exhibit a certain degree of volatility, rose notably further despite the high base of comparison in the previous
year.
Exports of services grew by 12.5 per cent in real terms in 2007, following a strong growth of 10.1 per cent in 2006. The growth was across-the-board throughout the four quarters of 2007. Exports of trade-related services, made up mainly of offshore trade and being the largest component of services exports, continued to surge as prompted by strong intra-regional trade and Mainland's robust trade flows. Exports of financial services performed spectacularly along with the buoyant financial market activities, so did exports of travel services which were boosted by rapid expansion in inbound tourism. The weakening of the Hong Kong dollar along with the US dollar rendered further boost to visitor spending. Meanwhile, exports of transportation services continued to do well, benefiting from the vivid trade flows and large number of incoming visitors.
Imports of services rose by 8.5 per cent in real terms in 2007, slightly faster than the 8.1 per cent growth in 2006. Imports of travel services continued on a steady. uptrend, reflecting the increase in the number of residents travelling abroad. Imports of transportation services and trade-related services grew strongly on the back of thriving trade flows. In tandem with the financial market boom and the continued robust business activities, imports of financial, business and other services recorded another year of distinct growth. (Chart 8).