ENG-2007 — Page 90

50 The Economy

turned more evident in the latter part of the year, being dragged by its protracted housing market downturn and sub-prime mortgage problems. The financial market turmoil also weakened consumer confidence in the advanced economies. Reflecting this, the growth of total exports slowed modestly to 7.2 per cent year-on-year in the second half of 2007, from an average of 9.6 per cent in the first half. The Mainland's vibrant trade flows remained the key driving force for Hong Kong's exports. The general weakness of the US dollar, sustained steady expansion of the European Union (EU) and strong performance of many other Asian markets also rendered support to the export growth.

Re-exports continued to be the key growth driver and outperformed overall export growth, leaping by 9.9 per cent in real terms in 2007 after a 10.8 per cent increase in 2006. Strong growth momentum was maintained, though with some ease-back in the latter part of the year. Re-exports continued to benefit from the Mainland's strong trade flows as well as the robust intra-regional trade. The share of re-exports in total exports increased further to 95.9 per cent in 2007 from 94.5 per cent in 2006. In contrast, domestic exports fell distinctly by 19.8 per cent in real terms in 2007, reverting from a modest increase of 1.1 per cent in 2006 (Chart 7).

Chart 7

Hong Kong's visible trade

(year-on-year rate of change in real terms)

Per cent

25

20

15

10

5

0

-5

-10

-15

Total exports

of goods

Imports of goods

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Merchandise exports attained another year of notable growth in 2007.

The strong upswing of exports to the Mainland continued, posting double-digit growth for the sixth year in a row amid the Mainland's strong trade flows and robust

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