ENG-1984 — Page 118

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THE ECONOMY

financing, insurance, real estate and business services sector increased significantly from 17 per cent in 1971 to 24 per cent in 1981, falling to about 19 per cent in 1983.

In terms of employment, the most noticeable change in recent years is that employment in the manufacturing sector, though still accounting for the largest share of the total employed labour force, has declined in relative terms from 47.0 per cent in 1971 to 41.2 per cent in 1981 and to 37 per cent in 1984, while the share of the tertiary services sectors increased from 44 per cent in 1971 to 50 per cent in 1981 and to 54 per cent in 1984.

Nature and Relative Importance of Manufacturing

Though trade statistics indicate that Hong Kong's domestic exports are still dominated by a few major product groups, there has been considerable upgrading of quality and diversification within these product groups. The increasing pressure of protectionism and growing competition from other economies have resulted in efforts to diversify, not only in respect of products but also markets. It is estimated that up to 90 per cent of Hong Kong's manufacturing output is eventually exported. In 1984, manufactured goods accounted for 95 per cent of total domestic exports by value.

Hong Kong firms must be flexible and adaptable to cope with the frequent changes in demand patterns and to maintain their external competitiveness. The existence of many small establishments and an extensive sub-contracting system have greatly facilitated the necessary shifts in production and increased the flexibility of the economy. Because of the limited amount of usable land, manufacturing industries in Hong Kong are generally those which can operate successfully in multi-storey factory buildings. In practice, this has meant a concentration on the production of light manufactures.

Since the post-war years, many new industries have emerged and grown, the more prominent being plastics and electronics. Other new industries include fabricated metal products, watches and clocks, toys, precision and optical instruments, and genuine and imitation jewellery.

Between 1973 and 1982, the average annual growth rate of net output by the manu- facturing sector was 14 per cent, while the growth rate of employment was four per cent. During this period, the most significant change was the textiles industry's declining share in the net output by manufacturing, from 27 per cent to 12 per cent, and in manufacturing employment, from 21 per cent to 12 per cent. The decline was largely matched by the relative expansion of the clothing, electrical and electronics, and professional and scientific equipment (including watches and clocks) industries. Their shares of net output increased from 20 per cent to 26 per cent, from nine per cent to 16 per cent, and from one per cent to five per cent respectively; and their shares of employment increased from 26 per cent to 31 per cent, from 11 per cent to 14 per cent and from two per cent to five per cent respectively. Domestic exports in 1984 consisted principally of articles of apparel and clothing accessories (34 per cent of the total value), electronics (18 per cent), plastic products (nine per cent), textiles (six per cent), watches and clocks (six per cent), electrical household appliances (four per cent) and metal products (three per cent). In terms of domestic export shares, the most significant changes in the past 10 years relate to the decline in relative importance of clothing (from 45 per cent in 1974 to 34 per cent in 1984) and textiles (from nine per cent in 1974 to six per cent in 1984), and the increase in relative importance of electronics (from 13 per cent in 1974 to 18 per cent in 1984), and watches and clocks (from two per cent in 1974 to six per cent in 1984).

Market diversification, partly as a result of the promotion efforts of the government, has long ended the predominance of the United Kingdom and Commonwealth countries as