ENG-1992 — Page 61

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THE ECONOMY

other economies have resulted in local manufacturers intensifying their efforts to diversify, in respect of not only products but also markets. A major proportion of Hong Kong's manufacturing output is eventually exported.

Manufacturing 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 a large number of small establishments providing an extensive local sub-contracting system has greatly facilitated the necessary changes in production and has helped to increase the flexibility of the manufacturing sector. Moreover, increasing use has been made of the outward processing facilities in China for handling the relatively labour-intensive production processes. Because of the land and space constraint, Hong Kong's manufacturing industries are mostly 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 remain prominent despite their continuous decline in relative importance. Other industries of importance include fabricated metal products, electrical appliances, watches and clocks, toys, jewellery, and printing and publishing.

Of particular note is the significant upgrading in labour productivity within the manufacturing sector over the years. During the period 1973 to 1990, the value of net output by the manufacturing sector grew at an average annual rate of 15 per cent, while manufacturing employment grew at an average annual rate of less than one per cent. Even after taking into account the effect of price increases on the output value, a significant secular improvement in labour productivity was evident.

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 15 per cent in 1990, while its share in manufacturing employment fell from 21 per cent to 15 per cent. Against this decline was the expansion of the electrical appliances and electronics, and watches and clocks industries. Between 1973 and 1990, their shares in the net output of manufacturing increased from nine per cent to 12 per cent, and from one per cent to three per cent respectively. In terms of employment, the share of the former, however, decreased slightly from 11 per cent in 1973 to 10 per cent in 1990, while that of the latter increased from one per cent to two per cent.

Domestic exports in 1992 consisted principally of wearing apparel and clothing accessories (33 per cent of the total value), electronics (26 per cent), textiles (seven per cent), watches and clocks (seven per cent), plastic products (three per cent), metal products (three per cent), and electrical household appliances (one per cent). In terms of the share in the total value of domestic exports, the most significant change over the past decade was the decline in the relative importance of clothing, from 35 per cent in 1982 to 33 per cent in 1992. On the other hand, increases were recorded in the relative importance of such commodities as telecommunications and sound recording and reproducing equipment, electrical machinery and appliances, and office machines and data processing equipment. The combined share of these three commodity groups in the total value of domestic exports rose from 17 per cent in 1982 to 23 per cent in 1992.

Market diversification over the years has been the combined result of initiatives taken by local manufacturers and exporters, and promotion efforts supported by the government.