ENG-2006 — Page 76

48 The Economy

Chart 6

Visible trade between Hong Kong and the Mainland

2,500

HK$ Billion

Total trade value (left scale)

—

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

Per cent

40

2,000

1,500

1,000

500

0

www.li

H

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

30

20

10

0

-10

Since the Mainland adopted 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.

The Mainland has long been Hong Kong's largest trading partner, accounting for 46 per cent of Hong Kong's total trade in 2006. Ninety-one per cent of Hong Kong's re-export trade was related to the Mainland in 2006, making it the largest market for as well as the largest source of Hong Kong's re-exports. On the other hand, Hong Kong was the Mainland's fourth largest trading partner after the European Union, United States and Japan, accounting for 9 per cent of the Mainland's total trade in value terms in 2006.

Hong Kong is also the main gateway to and from the Mainland for business and tourism. The number of trips made by foreign visitors to the Mainland through Hong Kong rose by a cumulative 85 per cent in the past 10 years, or at an average annual growth rate of 6 per cent, representing 4.2 million trips in 2006. Conversely, the number of trips made by Mainland residents to or through Hong Kong rose more than five-fold, at an average annual growth rate of 19 per cent, equivalent to 13.6 million trips in 2006.

Hong Kong continues to be the largest external investor in the Mainland. According to the Mainland statistics, the cumulative value of Hong Kong's realised direct investment in the Mainland reached US$280 billion at the end of 2006, accounting for 41 per cent of total inward direct investment there. Over the years, Hong Kong had shifted gradually from investing in manufacturing on the Mainland to investing in a wider spectrum of business ventures such as hotels and tourist-related facilities, real estate and infrastructure development. Hong Kong has closer economic links with Guangdong than other places on the Mainland. By the end of 2005, the cumulative value of Hong Kong's realised direct investment in Guangdong was US$105 billion, or 65 per cent of the province's total inward direct investment.