ENG-2001 — Page 88

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THE ECONOMY

In 2001, the Mainland regained its position as the largest market for Hong Kong's domestic exports (with a share of 32 per cent), just ahead of the United States (31 per cent). Other major markets were distinctly behind, including the United Kingdom (6 per cent), Germany (4 per cent), Taiwan (3 per cent) and Japan (3 per cent). In the more recent years, new markets were also developed for Hong Kong's exports, including markets in the Middle East, Eastern Europe, Latin America and Africa.

Increasing Economic Links between the HKSAR and the Mainland

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

Visible trade between Hong Kong and the Mainland has expanded rapidly since 1978, by an annual average of 23 per cent in value terms. However, the growth in two-way trade moderated visibly in the more recent years, from an annual average of 16 per cent in value terms during 1991-1996 to that of 3 per cent during 1996–2001, amidst increasing direct shipment of goods into and out of the Mainland upon the enhanced port facilities and simplified customs procedures there. This notwithstanding, the Mainland remained as Hong Kong's largest trading partner in 2001, accounting for 40 per cent of Hong Kong's total trade value. The bulk (specifically, 90 per cent) of Hong Kong's re-export trade was related to the Mainland, making it the largest market for as well as the largest source of Hong Kong's re-exports. Reciprocally, Hong Kong was the Mainland's third largest trading partner in 2001 (after Japan and the United States), accounting for 11 per cent of the Mainland's total trade value (Chart 7).

Chart 7

Hong Kong's visible trade with the Mainland

2000

HK$ Billion

Total trade value (left scale)

1 500

1 000

500

0

-Year-on-year rate of change (right scale)

Per cent

40

30

20

10

0

-10

-500

1991 1992 1993 1994 1995 1996 1997 1998

1999 2000

2000 2001

Since the Mainland adopted an open door policy and economic reform in 1978, there has been a rapid expansion in merchandise trade, especially re-export trade, between Hong Kong and the Mainland.