ENG-2009 — Page 97

The Economy | 49

(CEPA). In May 2009, the Hong Kong Government and the Central People's Government reached an agreement on further liberalisation measures under the Supplement VI of CEPA introducing 29 new liberalisation measures in 20 services. areas, including 18 existing CEPA and two new ones. As a result, the total number of services areas covered by CEPA expanded from 40 to 42.

In December 2009, the construction of the Hong Kong-Zhuhai-Macao Bridge commenced. Upon completion, the bridge will significantly reduce transportation costs and commuting time between Hong Kong and the Western Pearl River Delta (PRD) region. In addition, the Guangzhou-Shenzhen-Hong Kong Express Rail Link reached its final stage of pre-construction preparation during 2009. The improvement in cross-boundary infrastructure will enhance the flow of people and goods among Greater PRD and help expedite the integration of Hong Kong with its hinterland.

Hong Kong has the unique advantage of having the Mainland as its hinterland while maintaining an international outlook. With the increasing integration of the Mainland with the global economy, Hong Kong's role as an international financial, trade and shipping centre will continue to strengthen. Abundant opportunities will be available to support the development of Hong Kong's four conventional pillar industries as well as the six new industries.

The Economy in 2009

External trade

Merchandise exports suffered a severe blow from the slump in global demand and world trade in the aftermath of the financial tsunami, especially in late 2008 and early 2009. In 2009, total exports of goods (comprising re-exports and domestic exports) plunged by 12 per cent in real terms, compared with the increase of 2.9 per cent in 2008 (Chart 8). The decline in exports in the first quarter of 2009 was particularly great, 22.2 per cent in real terms over a year earlier, the largest decline since 1954.

This was nevertheless followed by smaller year-on-year declines of 10.8 per cent and 13.6 per cent respectively in the second and third quarters. The rate of decline tapered to 2.3 per cent in the fourth quarter (growth actually resumed in November and December), thanks to the further pick-up in Mainland demand and also the revival in intra-regional trade in Asia.

The global financial crisis evolved into the most severe global economic recession since World War II. Nevertheless, thanks to the massive fiscal stimulus and monetary easing policies implemented by governments and central banks, financial markets stabilised and the global economy also bottomed out in around mid-2009. This global recovery was however uneven across regions, with the emerging Asian economies, particularly the Mainland, taking the lead in the process.