ENG-1994 — Page 90

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THE ECONOMY

Over the years, the pressures of protectionism in a number of major markets and growing competition from other economies in East Asia have led to even greater diversification of both products and markets. This has been attributed to the initiative of local manufacturers and exporters, as well as promotion efforts with the support of the government. To maintain competitiveness, there has also been a continuous upgrading of product quality.

In consequence, many industries have emerged and grown, the most notable ones covering toys and electronics. The textiles and clothing industries remain prominent, despite their continuous decline in relative importance. Other industries of importance include plastic products, fabricated metal products, electrical appliances, watches and clocks, jewellery, and printing and publishing.

Of particular note is the significant improvement in labour productivity within the manufacturing sector. During the period from 1980 to 1993, the value of net output by the manufacturing sector grew at an average annual rate of nine per cent, while manufacturing employment fell at an average annual rate of four per cent. Even after taking into account the effect of price increases on the output value, a significant improvement in labour productivity was evident.

On market diversification, China's share of the territory's exports has been rising steadily. Since 1993 it has become the territory's largest market. The shares of exports to a number of other economies in the Asia-Pacific region have also risen. Hong Kong's exports have also diversified into new markets, including countries in the Middle East, Eastern Europe, Latin - America and Africa.

Increasing Economic Links between Hong Kong and China

Economic relations between Hong Kong and China have grown rapidly over the years. From these growing economic relations, both places have derived substantial benefits. The prospect for even closer economic links is promising.

In 1994, the total value of visible trade between Hong Kong and China amounted to $855 billion, representing an increase of 15 per cent over 1993. China was the second largest market for Hong Kong's domestic exports, accounting for 27 per cent of the total. China was the largest market for, as well as the largest supplier of, Hong Kong's re-exports. About 89 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 port and airport, as well as service support covering a wide range of financial and business services. Hong Kong is also a convenient gateway to China for business and tourism. In 1994, 25 million trips to China were made by Hong Kong residents, and another two million trips to China were made by foreign visitors through Hong Kong. These represented increases of seven per cent and one per cent, respectively, over 1993.

Besides visible and invisible trade, Hong Kong is also the most important source or conduit of external investment in China, accounting for about two-thirds of the total. While the territory's direct investment in China has been concentrated in light manufacturing industries, investment in hotels and tourist-related facilities, property and infrastructure has 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

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