ENG-2020 — Page 72

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The Economy

Hong Kong possesses the world's largest offshore pool of Renminbi (RMB) liquidity, holding about RMB757 billion of RMB customer deposits and outstanding RMB certificates of deposit issued as at end-2020. RMB bank lending and outstanding RMB bonds stood at about RMB152 billion and RMB182 billion respectively. RMB trade settlements handled by banks in Hong Kong were about RMB6.3 trillion in 2020.

Hong Kong is also the largest offshore RMB investment product market. As at end-2020, there were 36 Securities and Futures Commission (SFC)-authorised, RMB-denominated unlisted funds primarily investing onshore via the Renminbi Qualified Foreign Institutional Investor, Stock Connect, Bond Connect and China's Interbank Bond Market, with an aggregate net asset value (NAV) of RMB16.8 billion, and 29 SFC-authorised, RMB-denominated exchange traded funds listed on the Stock Exchange of Hong Kong, primarily investing onshore via the same channels with an aggregate NAV of RMB55.4 billion.

The Economy in 2020

External Trade

Total exports of goods, based on external merchandise trade statistics, picked up over the course of 2020, but still fell 0.8 per cent in real terms for 2020 as a whole after a decline of 5.0 per cent in the preceding year. The fallout from the COVID-19 pandemic, including disruptions to the regional supply chains and global demand, was particularly evident in the first half of the year. Merchandise exports volume saw a visibly enlarged year-on-year decline of 9.1 per cent in the first quarter and continued to fall 3.5 per cent in the second quarter, before resuming growth of 2.3 per cent and 5.9 per cent respectively in the third and fourth quarters alongside the gradual recovery of the global economy led by the Mainland (chart 5). Analysed by major market, exports to the US and the European Union fell sharply for the year as a whole, while those to the Mainland rose notably. Exports to other Asian markets saw mixed performances.

Imports of goods fell 2.6 per cent in real terms in 2020, after a decline of 7.6 per cent in 2019. Retained imports, which refer to imports for domestic use and accounted for around one- quarter of total imports in 2019, declined noticeably by 8.8 per cent in 2020, reflecting subdued domestic demand amid austere economic conditions. Imports for subsequent re-export also fell for the year as a whole, though rose moderately in the second half along with the improvement in export performance.

Exports of services plummeted a record 36.1 per cent in real terms in 2020, having contracted 9.6 per cent in 2019 (chart 6). Exports of travel services fell drastically as the COVID-19 pandemic resulted in extensive travel restrictions, bringing inbound tourism to a standstill from February. Exports of transport services declined notably as passenger flows plummeted, but the pace of decline moderated somewhat in the second half of the year alongside the improvement in regional trade and cargo flows. Exports of business and other services also contracted amid the austere global economic environment. In contrast, exports of financial services expanded moderately thanks to active cross-border financial and fund-raising activities.

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