46 The Economy
manufacturing arrangements in the Mainland, not only has Hong Kong's productive capacity been effectively expanded, its overall productive efficiency and product quality have also been upgraded by advances in technology and a shift towards production with a more knowledge-based and higher value-added content. It is also worth noting that although the direct value-added contribution of the manufacturing sector to the economy is not large relative to the services sector, its well-established linkages with the Mainland economy have provided ample business opportunities for supporting the growth of Hong Kong's services sector.
Economic Links between Hong Kong and the Mainland
Since the introduction of the Mainland's open door policy in 1978, the ongoing economic integration between the Mainland and Hong Kong has brought enormous. mutual benefits to both places. The huge flows of goods, services, people and capital between Hong Kong and the Mainland, as well as between the Mainland and the world through Hong Kong, have created remarkable growth in incomes and employment in both Hong Kong and the Mainland.
Visible trade between Hong Kong and the Mainland has soared by 256 times since 1978, at an average annual rate of 20 per cent in value terms. Despite the impact of the global economic downturn, visible trade with the Mainland still recorded a 5 per cent growth in 2008 (Chart 6). In 2008, Hong Kong and the Mainland were ranked the 13th and third largest trading entities in the world.
Chart 6
Visible Trade between Hong Kong and the Mainland
HK$ Billion
3,500
Total trade value (left scale)
Year-on-year rate of change (right scale)
3,000
2,500
2,000
1,500
1,000
500
0
Per cent
25
- 5
20
15
10
0
-5
-10
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Since the Mainland adopted economic reform and an open door policy in 1978, there has been a rapid expansion in merchandise trade, especially re-export trade, between Hong Kong and the Mainland.
The Mainland has long been Hong Kong's largest trading partner, accounting for 48 per cent of Hong Kong's total trade value in 2008. Ninety 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 fourth largest trading partner (after the European Union, United States