ENG-2015 — Page 70

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The Economy

Hong Kong remained the largest offshore RMB investment product market in 2015. At the end of the year, there were 71 Securities and Futures Commission-authorised RMB Qualified Foreign Institutional Investor Scheme (RQFII) and RMB Stock Connect unlisted funds with an aggregate net asset value of RMB20.8 billion, and 24 SFC-authorised RQFII exchange traded funds (ETFs) adopted dual RMB and HKD counter trading arrangements with an aggregate net asset value of RMB32.7 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 enhanced further. After the Shanghai-Hong Kong Stock Connect was launched in November 2014, the Mainland-Hong Kong Mutual Recognition of Funds was introduced in July 2015, signifying another breakthrough in the opening up of the Mainland's capital account and marking an important step in the internationalisation of RMB. The mutual recognition would enrich the types of fund products offered in the two places and deepen the mutual access between the Hong Kong and Mainland financial markets.

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). On the basis of the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong, signed in 2014, both sides signed the Agreement on Trade in Services in November 2015, extending the geographical coverage of basic liberalisation of trade in services to the whole Mainland to help Hong Kong enterprises capitalise on the enormous Mainland market.

Meanwhile, the construction of several major cross-boundary infrastructure projects continued in 2015, including the Hong Kong-Zhuhai-Macao Bridge and the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link. Upon completion, these infrastructures will facilitate the flow of people and goods, thereby further deepening the economic and trade. relations between Hong Kong and the Mainland.

The Economy in 2015

External Trade

External demand deteriorated visibly in 2015, with the slowdown of the global economy making a serious dent in regional trade flow and manufacturing activity. Total exports of goods, on a merchandise trade statistics basis, fell 1.7 per cent in real terms after 1.5 per cent growth in 2014. This was the worst performance since 2009. Exports to the European Union and Japan remained lacklustre alongside subdued economic activity in both places. Exports to the US, though faring better, registered only slight growth as the market weakened in the second half of the year amid softer economic growth and sagging industrial production in that country. With global demand sluggish, exports to the Mainland and many other Asian markets worsened. Exports to India and Vietnam were the major exceptions, posting notable growth in 2015 as a whole. In terms of the quarterly profile, except for a modest year-on-year growth of 0.7 per cent in the first quarter, merchandise exports declined in the rest of the year, by 3.0 per cent, 3.8 per cent and 0.5 per cent respectively in the second, third and fourth quarters (chart 6).

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