ENG-2006 — Page 73

The Economy | 45

The Services Sector

The services sector has not only flourished but also diversified to match the economy's structural transformation. Trade-related and tourism-related services, community, social and personal services, and finance and business services such as banking, insurance, real estate and a host of related professional services have all grown significantly over the past two decades. Information technology (IT) has also expanded considerably in more

more recent

recent years especially IT related to telecommunications services and internet applications in line with the shift in the economic structure towards more knowledge-based activities.

Because Hong Kong is a highly service-oriented economy, its services sector has long been the dominant driving force of overall economic growth. Over the past five years, the value-added component of the services sector as a whole grew by a cumulative 39 per cent in real terms, surpassing the corresponding 31 per cent growth of the economy. Among the constituent service sectors, financing and insurance showed the fastest cumulative growth of 89 per cent, reflecting the increasingly prominent role of Hong Kong as an international financial sector. Import and export trade also performed impressively, registering an 81 per cent jump in value during the period. This, together with the notable growth of 37 per cent in transport and storage services, reflects Hong Kong's competitive edge in the trading and logistics sectors, riding on the back of the Mainland's vibrant trade flows. The communications sector also fared strongly, showing a cumulative 68 per cent growth in added value bolstered by rapid technological advancement in this sector and also by Hong Kong's role as a communications-cum-business hub in the region.

In 2006, the value-added part of the services sector as a whole rose by 9 per cent in real terms. Financing and insurance, communications, and import and export trade continued to be the best performers. Restaurant and hotel business also grew notably due to stronger domestic demand and a further rise in the number of visitors to Hong Kong.

In 2005, the services sector's contribution to GDP was 91 per cent. The wholesale, retail and import/export trades, restaurants and hotels continued to be the largest services sector, accounting for 29 per cent of value-added contribution to GDP. This was followed by finance, insurance, real estate and business services, which amounted to 22 per cent; community, social and personal services, 19 per cent; and transport, storage and communications, 10 per cent (Chart 4). As for the four key industries, trading and logistics accounted for 29 per cent of value-added contribution to GDP in 2005; financial services, 13 per cent; and tourism, 3 per cent. The corresponding contribution of professional and other producer services was 11 per cent.