ENG-1997 — Page 88

THE ECONOMY

increases on the output value, the improvement in labour productivity was still remarkable.

Chart 6

Output per employee in the manufacturing sector (March 1991=100)

Index

300

250

200

150

100

50

48

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997*

Output per employee in the manufacturing sector has been on a general uptrend over the years.

'Average of Q1 to Q3 1997.

*

The Mainland was the largest market for Hong Kong's domestic exports, accounting for about 30 per cent of domestic exports in 1997. This was followed by the USA (26 per cent). The shares of the UK, Japan and Germany were all at 5 per cent. Hong Kong's exports have also diversified into new markets in recent years, including countries in the Middle East, Eastern Europe, Latin America and Africa.

Increasing Economic Links between the HKSAR and the Mainland

Economic links between the HKSAR and the Mainland have grown from strength to strength, since the Mainland adopted economic reform and open-door policy in 1978. This has brought about substantial economic benefits to both places.

Specifically, visible trade between Hong Kong and the Mainland has grown at an average annual rate of 28 per cent since 1978. In 1997, the two-way trade continued to grow, albeit only moderately, by 6 per cent. Re-exports and domestic exports to the Mainland were up by 6 per cent and 4 per cent respectively in 1997, while imports from the Mainland rose by 7 per cent. The Mainland remained Hong Kong's largest trading partner in 1997, accounting for 36 per cent of Hong Kong's total trade. The share of the Mainland in Hong Kong's re-export trade was even higher, at 90 per cent, making it both the largest market for and source of Hong Kong's re-exports. Reciprocally, Hong Kong was the Mainland's second-largest trading partner in 1997 (after Japan), accounting for 16 per cent of the Mainland's total trade.

Over the past two decades, there has also been a substantial increase in invisible trade and investment flows between Hong Kong and the Mainland. Hong Kong is a major service centre for the Mainland generally and South China in particular, providing a wide range of financial and business support services like banking and finance, insurance, accounting, transport, warehousing etc. It is also a principal gateway to the Mainland for business and tourism. In 1997, Hong Kong residents