ENG-1986 — Page 23

6

HONG KONG AS A PARTNER IN WORLD TRADE

Despite a growth in domestic exports of 5.5 times in two decades, as shown above, the contributions made by the various industrial sectors have not changed very greatly over this period. In particular, the clothing industry, which started from small beginnings, but before long had overtaken textiles (yarns, fabrics and made up goods) as the major export industry, has maintained that position throughout the period, with a relatively steady share of about 35 per cent of all domestic exports. The major changes have been the rise of the electronics industry, which now accounts for over 20 per cent of domestic exports and, to a lesser extent, toys and games (other than electronics), with about eight per cent. Textile yarns, fabrics and made ups, on the other hand, which led Hong Kong's industrial development in its early stages, now account for only six per cent of total domestic exports. Overall, however, Hong Kong's exports are still heavily dependent on light consumer goods industries and four major industries, namely clothing, electronics, toys and games and textiles, still account for some 70 per cent of the total.

This picture, nevertheless, belies the tremendous development which has taken place over the years in the quality and sophistication of the products produced by these industries. For instance, the clothing industry has steadily moved up market and much of its output is now at the top end of the ready-to-wear garment market. Indeed, some of its factories are currently at the forefront of technical development in this industry. Likewise, the elec- tronics industry has made tremendous strides since it started with the assembly of cheap transistor radios in the sixties. Such has been the advantage to Hong Kong of concentrating its industrial effort on what it is best able to make and sell competitively in world markets that the tiny territory is now the biggest exporter in the world by value of clothing and toys and, strangely also, of electric hairdressing apparatus, as well as the biggest exporter by volume of watches and radios.

Importance of Imports

Imports have been as essential to the development of the Hong Kong economy as have exports and, in some respects, more so. Imports and exports are not opposites in the sense of being opposed to each other. They are complementary. It is trade as a whole which helps to make the best use of economic resources and thereby speeds up economic growth and the creation of incomes and wealth. Hong Kong concentrates its resources on making the products which it can export to world markets at the best prices and the best profits. This then provides it with the resources to buy imports from the most advantageous sources at the lowest prices. In other words, Hong Kong exports to live, but lives on imports.

As it happens, the value of total imports of goods is usually greater than the value of total exports. In other words, there is usually a deficit on visible trade. The records show that, in the whole period since 1947, in only one year, 1985, has there been a surplus. This is partly because, equally consistently, Hong Kong has run a surplus on trade in services shipping, aviation, tourism, financial services and so on - the so called invisible transac- tions, and partly because the territory has usually attracted capital from outside, whether for direct investment or as a safe haven. Trade in goods and services and voluntary capital movements together have usually tended towards balance because of the link- ing of the internal economy to the balance of payments through the operations of the monetary system.

A glance at the composition of Hong Kong's imports will illustrate their crucial role in the life of the territory. The breakdown for 1985 is given as an example in Table 3.