44 The Economy
The Services Sector
The services sector has fared strongly on a broad front, along with the economy's structural transformation in the past two decades. Services related to trading and tourism; community, social and personal services; and finance and business services such as banking, insurance, real estate and a host of professional services, have all grown significantly.
Being a highly service-oriented economy, Hong Kong's services sector has been the dominant driving force behind the overall economic growth. Over the past five years, the value-added part of the services sector grew by a cumulative 39 per cent. in real terms, outpacing the corresponding 35 per cent growth of the economy. Among the constituent service sectors, financing and insurance showed the fastest cumulative growth of 94 per cent, a testament to Hong Kong's drive as an international financial centre. Import and export trade also performed impressively, with a 62 per cent increase in the value-added component of its trading activities over the period. This, together with a notable growth of 39 per cent in transport and storage services, reflected the generally favourable trading environment during most of the period and underlined the competitiveness of Hong Kong's trading and logistics sector. The increase of 36 per cent in wholesale and retail trades, as well as the steeper growth of 63 per cent in restaurants and hotels, was underpinned by the strengthening domestic demand and vibrant inbound tourism. For 2008 alone, the value-added part of the services sector grew by 3 per cent in real terms, a deceleration from 2007, as the financial tsunami emerged in the latter part of the year with a widespread impact across the real economy. Financing and insurance and real estate registered negative growth in the second half of the year; the wholesale and retail trades, restaurants and hotels likewise moderated as the negative wealth effect in the latter part of 2008 weighed heavily on consumer sentiment. Import and export trade and other service sectors also saw degrees of moderation during the year.
In 2007, the services sector contributed 92 per cent to GDP. The finance, insurance, real estate and business services became the largest service sector, accounting for 29 per cent of the GDP. This was followed by wholesale, retail and import/export trades, restaurants and hotels (27 per cent), community, social and personal services (17 per cent), and transport, storage and communications (9 per cent) (Chart 4). More specifically on the four key industries, trading and logistics accounted for 26 per cent of value-added contribution to GDP in 2007, financial services 19 per cent and tourism 3 per cent. The corresponding contribution of professional and other producer services was 11 per cent.
The profound structural change in the economy towards the services sector was also borne out by a shift in the sectoral composition of employment. Over the past two decades, the share of the services sector in total employment went up from 57 per cent in 1988 to 81 per cent in 1998 and 87 per cent in 2008. As for individual services, wholesale, retail and import/export trades, restaurants and hotels accounted for 34 per cent of the total in 2008. This was followed by community, social and personal services with a share of 27 per cent; finance, insurance, real estate and