ENG-2002 — Page 79

THE ECONOMY

(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 2002 (after Japan and the United States), accounting for 11 per cent of the Mainland's total trade value (Chart 7).

Chart 7

Visible trade between Hong Kong and the Mainland

HK$ Billion

2,000

1,500

1,000

500

0

Total trade value (left scale)

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

Per cent

40

30

20

20

10

0

-500

-10

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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

In the more recent years, there has been an increasing shift in the mode of Hong Kong-Mainland trade from re-exports to offshore trade. Between 1990 and 1995, Hong Kong's exports of trade-related services grew by an average of 5 per cent per annum in real terms, much slower than the growth in re-exports involving the Mainland, at an average of 22 per cent per annum in real terms. The growth pattern was reversed during 1995 to 2002, when exports of trade-related services surged by an average of 14 per cent per annum in real terms, outpacing the growth in re-exports involving the Mainland, at an average of 6 per cent per annum in real terms (Chart 8). Over the past two decades, there has also been a sharp increase in service and investment flows between Hong Kong and the Mainland. At present, Hong Kong is a major service centre for the Mainland generally and South China in particular, providing a wide array of financial and other business support services such as banking and finance, insurance, transport, accounting and sales promotion. It is also a principal gateway to the Mainland for business and tourism. In 2002, 56 million trips were made by Hong Kong residents to the Mainland, representing an increase of 7 per cent over 2001. The number of trips made by foreign visitors to the Mainland through Hong Kong also went up, by 9 per cent to three million.

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