ENG-1993 — Page 78

THE ECONOMY

54

In 1993, the total value of visible trade between Hong Kong and China amounted to $740 billion, representing an increase of 18 per cent over 1992. This rapid growth reflected partly the buoyant economic conditions in China and partly the sustained growth in outward processing trade.

China was the largest market for Hong Kong's domestic exports during the year, accounting for 28 per cent of the total. China was also the largest market for, as well as the largest supplier of, Hong Kong's re-exports. About 88 per cent of the goods re-exported through Hong Kong were destined for, or originated from, China.

In addition to trade in goods, Hong Kong also serves as an important service centre for China generally and South China in particular. This includes the provision of infrastructural facilities such as the use of the port and airport, as well as institutional support such as financial and related business services. This is evidenced, among other things, by the increasing importance of Hong Kong as a centre for entrepôt, trans- shipment and other supporting activities involving China.

Hong Kong has always been a convenient gateway to China for business and tourism. In 1993, 23 million trips to China were made by Hong Kong residents, and another 1.9 million trips to China were made by foreign visitors through Hong Kong. These repre- sented increases of eight per cent and 10 per cent, respectively, over 1992.

Besides visible and invisible trade, Hong Kong is also the most important source of _external investment in China, accounting for about two-thirds of the total. While Hong Kong's direct investment in China has been concentrated in light manufacturing industries, investment in hotels and tourist-related facilities, property and infrastructure has also been increasing. As can be expected, Guangdong Province occupies an important position in this respect. It has been estimated that, in Guangdong, more than three million people are working for Hong Kong companies, either through joint ventures or in tasks commissioned by Hong Kong companies in the form of outward processing arrangements and compensation trade. This, in effect, provides Hong Kong with a substantial production base.

Concurrently, China has also been investing heavily in Hong Kong. Its investment ranges from traditional activities such as banking, importing and exporting, wholesaling and retailing, and transportation and warehousing to newer areas such as property develop- ment, provision of financial services, manufacturing and involvement in infrastructural projects.

Increasing financial links between Hong Kong and China are reflected by the rapid growth in financial transactions with China in recent years. The Bank of China Group is now the second largest banking group in Hong Kong, after the Hongkong Bank Group. The latter group is among the best-represented foreign banks in China; others include the Bank of East Asia and the Standard Chartered Bank.

Hong Kong is a major funding centre for China. Most of China's fund-raising activities. in the territory have taken the form of syndicated loans. Although in some cases Hong Kong is not the direct source of funds, it serves as a window through which China can gain access to external borrowings. These loans are mostly for financing China's own economic development, but some are used by China-interest companies in Hong Kong to finance their investment activities in the territory or abroad. In addition to syndicated loans, China-interest banks and other enterprises have been making greater use of negotiable certificates of deposit, bonds, commercial paper and the issue of shares to raise funds. A