ENG-1995 — Page 74

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THE ECONOMY

Structure and Development of the Economy

Hong Kong has a deep-water harbour and is strategically located on the inter- national time zone between Asia and Europe. It is close to China and has strong traditional links with the Southeast Asian economies. Hong Kong also has a low tax environment, free and fair market competition, a sound legal and financial framework, a fully convertible and secure currency, highly efficient transport and communication networks and, most importantly, a competent workforce and a pool of enterprising entrepreneurs. These have all contributed to the success of the Hong Kong economy.

Hong Kong is now ranked the eighth-largest trading entity in the world. It operates the busiest container port in terms of throughput. Its airport is the fourth-busiest in terms of the number of international passengers and the second-busiest in terms of the volume of international cargo handled. It is also the world's fifth-largest banking centre in terms of the volume of external banking transactions, and the fifth-largest foreign exchange market in terms of turnover. Its stock market is the second-largest in Asia in terms of market capitalisation. All these show that Hong Kong has firmly established itself as a major international trade and financial centre. The World Competitiveness Report 1995, published by the International Institute for Management Development and the World Economic Forum, ranks Hong Kong as the third most competitive economy in the world (compared with fourth last year), after the USA and Singapore. Hong Kong owes its strength to business- friendly government policies, sound economic fundamentals, a high degree of - internationalisation and cultural openness. The US Heritage Foundation also identified Hong Kong for the second consecutive year as the freest economy in the world.

Over the past two decades, the Hong Kong economy has more than quadrupled in size. With its GDP growing at an average annual rate of 7.5 per cent in real terms, Hong Kong has outperformed the Organisation for Economic Co-operation and Development (OECD) countries and has been growing more than twice as fast as the world economy. Per capita GDP has tripled in real terms, equivalent to an average annual growth rate of about six per cent in real terms. Valued at US$23,000 in 1995, Hong Kong's per capita GDP surpassed that of the United Kingdom, Canada and Australia, and was next only to Japan in Asia. Benefiting from this respectable economic performance, the local workforce has been able to enjoy a continuous rise in income, in money terms as well as in real terms.

As a small and open economy, Hong Kong's economic success owes a great deal to the remarkable performance of the external trade sector. Trade in goods expanded by more than 44-fold, and trade in services by more than 26 times over the past two decades. The total value of visible trade (comprising re-exports, domestic exports and imports) reached $2,840 billion in 1995, representing 256 per cent of the GDP. This compared with the corresponding ratios of 124 per cent in 1966, 148 per cent in 1980 and 221 per cent in 1990. Including also the value of exports and imports of services, the ratio was 297 per cent in 1995. The corresponding figures in 1966, 1980 and 1990 were 158 per cent, 181 per cent and 260 per cent.

Statistics compiled for the first time, putting all external transactions together (trade in goods and services plus external factor income flows), show a ratio to GDP of 344 per cent in 1993. Final GNP estimates for 1993 are $908 billion (at 1993