ENG-1988 — Page 72

THE ECONOMY

55

the flexibility of the economy. Moreover, increasing use has been made of the outward processing facilities in China for handling some of the production processes. 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.

Over the past 30 years, many industries have emerged and grown, the most notable ones being plastics and electronics. The textiles and clothing industries, however, remain prominent. Other developing industries include fabricated metal products, electrical appliances, watches and clocks, toys, jewellery, and printing and publishing.

During the period 1973 to 1986, the value of net output by the manufacturing sector grew at an average annual rate of 16 per cent, while manufacturing employment grew at an average annual rate of only three per cent. Thus, a significant secular improvement in labour productivity was apparent, even taking into account the price factor in the value of net output.

Within the manufacturing sector, the most significant change occurred in the textiles industry. The share of this industry in the net output of manufacturing declined from 27 per cent in 1973 to 18 per cent in 1986, and its share in manufacturing employment from 21 per cent to 14 per cent. Offsetting this decline was the expansion of the clothing, electrical appliances and electronics, and watches and clocks industries. Between 1973 and 1986, their shares in the net output of manufacturing increased from 20 per cent to 23 per cent, from nine per cent to 14 per cent, and from one per cent to three per cent respectively, while their shares in manufacturing employment increased from 26 per cent to 30 per cent, from 11 per cent to 13 per cent, and from one per cent to three per cent respectively.

Domestic exports in 1988 consisted principally of wearing apparel and clothing acces- sories (31 per cent of the total value), electronics (26 per cent), watches and clocks (eight per cent), textiles (seven per cent), plastic products (five per cent), electrical household appliances (three per cent), and metal products (three per cent). In terms of the shares in the total value of domestic exports, the most significant change over the past ten years has been the decline in the relative importance of clothing, from 39 per cent in 1978 to 31 per cent in 1988. This decline was offset by increases in the relative importance of such commodities as telecommunications and sound recording and reproducing equipment, electrical machinery and appliances, and office machines and automatic data processing equipment. The share of these three commodity groups in the total value of domestic exports rose from 15 per cent in 1978 to 22 per cent in 1988.

J}

Market diversification is the combined result of the initiatives taken by local manufac- turers and exporters, and the promotion efforts financed by the government. Since the late 1950s, the United States has been the largest market for Hong Kong's domestic exports, in place of the United Kingdom and the Commonwealth countries. Gradually, the share of domestic exports going to such countries as the Federal Republic of Germany, Japan, Canada and Australia, and to South East Asian economies has also increased. In recent years, China has become the second largest market for Hong Kong's domestic exports. In addition, Hong Kong has diversified further into new markets, including countries in the Middle East, Eastern Europe, Latin America and Africa.

Financial Institutions

Hong Kong's financial sector comprises an integrated network of institutions and markets which, under various forms of regulation, provide a wide range of services and products to both local and international customers and investors.