ENG-1989 — Page 71

THE ECONOMY

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Structure and Development of the Economy

Because of limited natural resources, Hong Kong has to depend on imports for virtually all its requirements, including food and other consumer goods, raw materials, capital goods, fuel and even water. It must, therefore, export on a sufficient scale to generate foreign exchange earnings to pay for these imports, and the volume of exports must continue to grow if the population is to enjoy a rising standard of living.

The externally-oriented nature of the economy can be seen from the fact that in 1989 the total value of visible trade (comprising domestic exports, re-exports and imports) amounted to 231 per cent of the GDP. If the value of imports and exports of services is also included, this ratio becomes 263 per cent. Between 1979 and 1989, Hong Kong's domestic exports grew at an average annual rate of about nine per cent in real terms, which was roughly twice the growth rate of world trade. The corresponding average annual increase was 25 per cent for re-exports and 14 per cent for imports. With a gross value of $1,136 billion in overall visible trade in 1989, Hong Kong ranks high among the world's trading economies.

Contributions of the Various Economic Sectors

The relative importance of the various economic sectors can be assessed in terms of their contributions to the GDP and to total employment.

Primary production (comprising agriculture and fishery, mining and quarrying) is small in terms of its contributions to employment and to the GDP.

Within secondary production (comprising manufacturing; the supply of electricity, gas and water; and construction), manufacturing accounts for the largest share in terms of both the GDP and employment. The contribution of the manufacturing sector to the GDP declined steadily from 31 per cent in 1970 to 21 per cent in 1982. It was 23 per cent in 1983, 24 per cent in 1984, and stabilised at around 22 per cent during the period 1985 to 1987, before decreasing to 20 per cent in 1988. The share of the construction sector in the GDP increased from four per cent in 1970 to eight per cent in 1981. It then declined to seven per cent in 1982 and six per cent in 1983, before settling at about five per cent during the period 1984 to 1988.

The contribution of the tertiary services sectors as a whole (comprising the wholesale, retail and import/export trades, restaurants and hotels; transport, storage and commu- nications; finance, insurance, real estate and business services; and community, social and personal services) to the GDP increased from 60 per cent in 1970 to 65 per cent in 1982. It fell to around 62 to 64 per cent during the period 1983 to 1986, before rising to 67 per cent in 1988.

The tertiary services sectors are highly diversified. The contribution of the wholesale, retail and import/export trades, restaurants and hotels to the GDP varied between 19 and 21 per cent in 1970 to 1983, before rising to 25 per cent in 1988. The contribution of the transport, storage and communication sector to the GDP was stable at around seven to eight per cent, before rising to nine in 1987 and 1988. The contribution of the finance, insurance, real estate and business services sector to the GDP experienced considerable fluctuation, however. It rose from 15 per cent in 1970 to 24 per cent in 1981, but fell to 16 per cent in 1984, mainly reflecting the slump in the property market. The contribution of this sector to the GDP then rose steadily, to 19 per cent in 1988.

With regard to employment, the most notable change since the early 1970s is that, whereas the manufacturing sector still takes up the largest proportion of the employed workforce, its share has been on a continuous decline, from 47 per cent in 1971 to 41 per cent in 1981, and further to 31 per cent in 1989. On the other hand, the share of the tertiary