ENG-2018 — Page 72

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The Economy

Economic Links between Hong Kong and Mainland

Cross-boundary economic ties between Hong Kong and the Mainland are stronger than ever. The flow of goods, services, people and capital between the two places, and between the Mainland and the world through Hong Kong, have been flourishing alongside the continued reform and opening up in the Mainland. The vibrant activities have brought significant mutual benefits to both Hong Kong and the Mainland.

With its total trade surging from US$324 billion in 1998 to US$4.6 trillion in 2018, the Mainland plays a prominent role in driving global economic growth. Hong Kong has benefited substantially from the Mainland's phenomenal trade growth. In 2018, visible trade between Hong Kong and the Mainland was more than four times that of 20 years ago, representing growth of 8 per cent per annum in value terms (chart 4). The Mainland was the world's largest merchandise trading entity while Hong Kong ranked seventh.

Chart 4

Goods Trade between Hong Kong and Mainland

HK$ Billion

4,500

Total trade value (left scale)

4,000

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

3,500

3,000

2,500

2,000

1,500

1,000

اس

500

Per cent

35

30

25

20

15

10

5

0

-5

-10

-15

-20

-25

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Merchandise trade between Hong Kong and the Mainland grew notably in the past two decades.

The Mainland has long been Hong Kong's largest trading partner, contributing to more than half of Hong Kong's total merchandise trade value. At the same time, Hong Kong was the Mainland's fourth largest trading partner in 2018 after the United States, Japan and Korea, accounting for about 7 per cent of the Mainland's total trade value. More than half of Hong Kong's exports to the Mainland, which were mainly re-exports, involved raw materials and semi-manufactures, reflecting both the latter's role as a production hinterland and the highly integrated production network within Asia. Goods of Hong Kong origin exported to the Mainland can fully enjoy zero tariffs through an enhanced arrangement for rules of origin from 1 January 2019, thanks to the Agreement on Trade in Goods signed in December 2018 under the framework of the Mainland and Hong Kong Closer Economic Partnership Arrangement.

Meanwhile, the Mainland economy's increasing emphasis on high-quality development and greater roles for domestic consumption and services in driving economic growth has unleashed enormous demand for various services. Hong Kong, being highly competitive in many high-end services, has risen with the tide. Indeed, its exports of services to the

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