ENG-2002 — Page 69

THE ECONOMY

Over the past two decades, the Hong Kong economy has more than doubled in size, with GDP growing at an average annual rate of 5.1 per cent in real terms. This outpaces considerably the growth of the world economy and the Organisation for Economic Cooperation and Development (OECD) economies. Over the same period, Hong Kong's per capita GDP has doubled, giving an average annual growth rate of 3.8 per cent in real terms. Its level at US$23,800 in 2002 was amongst the highest in Asia, next only to Japan.

In line with the increased external orientation of the Hong Kong economy, trade in goods expanded by eight times and trade in services by three times in real terms over the past two decades. In 2002, the total value of visible trade (comprising re-exports, domestic exports and imports of goods) reached $3,164 billion, corresponding to 251 per cent of GDP. This was distinctly larger than the ratios of 138 per cent in 1982 and 235 per cent in 1992. If the value of exports and imports of services is also taken into account, the ratio is even greater, at 295 per cent in 2002, compared with 173 per cent in 1982 and 275 per cent in 1992.

As another indication of the high degree of external orientation, the stock of inward direct investment in Hong Kong amounted to $3,270 billion in market value at end- 2001, equivalent to 257 per cent of GDP. Hong Kong is the second most favoured destination for inward direct investment in Asia, next only to the Mainland. The corresponding figures for the stock of outward direct investment in Hong Kong were likewise substantial, at $2,749 billion and 216 per cent, much larger than those for many other economies in Asia. As a major financial centre in the region with huge. cross-territory fund flows, Hong Kong's external financial assets and liabilities were also substantial, at $8,351 billion and $6,283 billion respectively at end-2001. The corresponding ratios to GDP in that year were 658 per cent and 495 per cent. Reflecting Hong Kong's sound international investment position, net external financial assets amounted to $2,068 billion at end-2001, equivalent to 163 per cent of GDP. As to gross external debt, which is the sum of the non-equity liability components in international investment, it stood at $2,740 billion at end-2002, equivalent to 217 per cent of GDP. Yet the major proportion of it arose from normal operations of the banking sector, and the Government incurred no external debt at all.

The Gross National Product (GNP), comprising GDP and net external factor income flows, stood at $1,287 billion in 2002. This was higher than the corresponding GDP by 2.2 per cent, owing to the sustained net inflow of external factor income. In gross terms, inflows and outflows of external factor income remained substantial in 2002, at $324 billion and $297 billion respectively, equivalent to 26 per cent and 24 per cent of GDP. This was related to the huge volume of both inward and outward investment in Hong Kong.

Contributions of the Various Economic Sectors

Primary production (including agriculture, fisheries, mining and quarrying) is now trivial in Hong Kong, in terms of both value-added contribution to GDP and share in total employment. This reflects the predominantly urbanised nature of the economy. Secondary production (comprising manufacturing, construction, and supply of electricity, gas and water), which constituted a significant contributor to GDP up to the early 1980s, has diminished in relative importance since then. Within this broad sector, the value-added contribution from manufacturing shrank noticeably, from 23

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