ENG-1998 — Page 82

THE ECONOMY

and with a higher value-added content, along with continued mechanisation and wider application of computer-aided technologies in the production process.

Coupled with increasing capital intensity in production, labour productivity in the manufacturing sector was able to improve significantly over the years. During the 10 years 1989 to 1998, labour productivity in the local manufacturing sector, as measured by the ratio of the industrial production index to the manufacturing employment index, increased by an average of around 11 per cent a year.

Chart 6 Output per person engaged in the local manufacturing sector

Index

(March 1991 = 100)

300

250

200

150

100

50

46

0

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998*

Labour productivity in the local manufacturing sector has been on a general uptrend over the years. * Average of Q1 to Q3 1998.

The Mainland was the largest market for Hong Kong's domestic exports, accounting for about 30 per cent of the total in 1998. This was followed by the USA (29 per cent), the UK (5 per cent), and Germany (also 5 per cent). In the more recent years, new markets were developed for Hong Kong's exports, including markets in the Middle East, Eastern Europe, Latin America and Africa.

Increasing Economic Links between the Hong Kong Special Administrative Region and the Mainland

Since the Mainland adopted economic reform and open-door policy in 1978, economic links between Hong Kong and the mainland of China have grown from strength to strength. This has brought about substantial economic benefits to both places.

Specifically, visible trade between Hong Kong and the Mainland has grown strongly since 1978, at an average annual rate of 26 per cent in value terms. However, reflecting the increasing trend of direct shipment of goods into and out of the Mainland along with the enhanced port facilities and simplified customs procedures