ENG-1986 — Page 67

THE ECONOMY

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steadily from 31 per cent in 1970 to 21 per cent in 1982, but recovered to about 24 per cent in 1983 and 1984. For 1985, reflecting the fall in domestic exports, the contribution of the manufacturing sector to the GDP declined to 22 per cent. Despite this decline, the manufacturing sector was still the largest in terms of GDP contribution. The share of the construction sector in the GDP increased from four per cent in 1970 to eight per cent in 1981, before decreasing to about five per cent in 1984 and 1985 as building and construction activity slackened.

The contribution of the tertiary services sectors as a whole (comprising wholesale, retail and import/export trades, restaurants and hotels; transport, storage and communication; financial, insurance, real estate and business services; and community, social and personal services) to the GDP increased from 61 per cent in 1970 to 65 per cent in 1982. Its share in the GDP was stable at around 62 to 64 per cent during 1983 to 1985.

The tertiary services sectors are highly diversified. The contribution of the wholesale, retail and import/export trades, restaurants and hotels to the GDP was relatively stable during the past 15 years, at around 19 to 22 per cent. The contribution of the transport, storage and communication sector to the GDP was also stable at around seven to eight per cent.

The share of the financial, insurance, real estate and business services sector in the GDP, however, experienced considerable fluctuations. It increased from 15 per cent in 1970 to 24 per cent in 1981, but fell to 16 per cent in 1984, mainly reflecting the depressing effect of the slump in the property market. In 1985, its contribution to the GDP remained little changed at 16 per cent.

In terms of employment, the most notable change in recent years was that, whereas employment in the manufacturing sector still accounted for the largest share of the employed workforce, the share declined from 47 per cent in 1971 to 41 per cent in 1981 and further to 36 per cent in 1986. On the other hand, the share of the tertiary services sectors as a whole in the total employment increased from 41 per cent in 1971 to 47 per cent in 1981 and further to 55 per cent in 1986.

Nature and Relative Importance of Manufacturing

Though the 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 pro- tectionism and growing competition from other economies have intensified the efforts of local manufacturers to diversify, not only in respect of products but also in respect of markets. It is estimated that up to 90 per cent of Hong Kong's manufacturing output is eventually exported.

Firms in Hong Kong must be flexible and adaptable in order 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 has greatly facili- tated the necessary shifts in production and has helped to increase the flexibility of the economy. Because of the limited amount of usable land, Hong Kong's manufacturing industries are generally those which can operate successfully in multi-storey factory buildings. This, in practice, implies concentration in the production of light manufactures. Since the post-war years, many new industries have emerged and grown, the prominent ones being plastics and electronics. Other new industries include fabricated metal products, watches and clocks, toys, precision and optical instruments, and genuine and imitation jewellery.