ENG-2014 — Page 73

The Economy

RQFII exchange traded funds (ETFs) adopted dual counter trading arrangements (ie RMB and HKD trading counters) with an aggregate net asset value of RMB53 billion. A wide range of RMB investment products, including listed and unlisted investment funds, insurance products, currency futures, real estate investment trusts, shares and derivative products, are available in the market. During the year, Hong Kong's market infrastructure for offshore RMB business development was further enhanced. First, the Hong Kong Monetary Authority (HKMA) designated seven banks in October as Primary Liquidity Providers. With access to a dedicated repurchase ('repo') facility provided by the HKMA, the Primary Liquidity Providers pledged to expand their market-making activities in Hong Kong for various offshore market instruments, and use the Hong Kong platform in promoting their global offshore RMB business. In addition, the HKMA launched the intraday repo under the RMB liquidity facility in November to assist banks in managing their RMB liquidity and to promote efficient payment flows in Hong Kong.

Economic co-operation with the Mainland has also been continuously enhanced through the broadening of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA). In December 2014, the 'Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong' was signed under the CEPA framework, opening up 153 services sub-sectors in Guangdong to the Hong Kong service industry, accounting for 95.6 per cent of all services sub-sectors according to the WTO's classification. The forthcoming establishment of the Guangdong Pilot Free Trade Zone (covering new areas of Nansha, Qianhai and Hengqin), as announced by the Central People's Government in December 2014, will also promote in-depth co-operation between Guangdong and Hong Kong.

The construction of the Hong Kong-Zhuhai-Macao Bridge (HZMB) and related local projects. continued in 2014. When completed, the HZMB will significantly reduce commuting time and transportation costs between Hong Kong and the western Pearl River Delta (PRD) region and help the flow of people and goods within the PRD. Construction of the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link also progressed. Upon completion, it will reduce the journey time between Guangzhou and Hong Kong to 48 minutes, and give passengers easy access to the Mainland's 16,000 kilometres high-speed railway network to all the major cities.

The Economy in 2014

External Trade

The subdued global demand conditions continued to constrain Hong Kong's external trade performance in 2014. Total exports of goods, compiled under the GDP accounts, grew by a meagre 1 per cent in real terms in 2014. On the basis of external merchandise trade statistics', after excluding the distortions by the fluctuations in exports of non-monetary gold, export growth of merchandise goods stayed modest at 1.5 per cent in real terms. While the US market improved, exports to the EU and Japan faltered, a reflection of the marked growth divergence among these advanced economies. Meanwhile, exports to Asia also exhibited a mixed

1 The real growth rates of merchandise trade are based on the new series of trade index numbers compiled using the

chain linking approach released in March 2015.

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