Jake's View

Trade Development Council's sleight of hand counts China's exports as Hong Kong's

PUBLISHED : Sunday, 30 June, 2013, 12:00am
UPDATED : Sunday, 30 June, 2013, 4:05am

Nicholas Kwan, who joined the Trade Development Council as director of research last month, said many trading companies had set up factories on the mainland and exported the goods directly overseas. "Such exports are not included in Hong Kong's export data," Kwan said. "But all this trade activity plays a decisive role in Hong Kong's economy."

South China Morning Post, June 19

You have to give them an 'A' for effort at the Trade Development Council (TDC). They do a valiant job of pretending our economy has not changed over the last 40 years and that we still live by making things and selling them abroad.

It is surprising therefore to see Mr Kwan claim that goods made across the border in factories owned by Hong Kong entities are not included in the Hong Kong data, when our statisticians have recently gone to some trouble to describe a portion of this trade as Hong Kong domestic exports.

They've done it by calling into existence a category of trade called "merchanting", whereby an industrialist normally resident in one country exports from a second country to a third country without passing the goods through his country of residence, but does take an ownership stake in these goods. That's good enough to declare that they came from his country of residence, say the statisticians.

They forgot, however, to make the change in all the data series they concoct, which allows me to show you the difference in the first chart. Their new trick allows them to say they are signs of recovery in domestic exports. The straightforward way says there is no such thing.

The fact of the matter is, of course, that the new way is just hocus-pocus aimed at justifying the continued existence of a hoary old government creation, the TDC, that has long passed its sell-by date and should be closed down.

The second chart shows you the truth of the matter. Our economy has made a massive transition over the last 30 years away from manufacturing exports and into services.

Mr Kwan is quite right in saying that mainland exports play a decisive role in our economy but they do so in stimulating that trade in services. The TDC's difficulty with this is that it knows how to help sell watches and clocks but has no expertise in banking, insurance, shipping and all the other businesses that make up trade services.

This is not a problem for us. We have plenty of experts in these fields and they do a superb job without any direct help from the government.

But if the TDC were to admit this, it would have no reason to continue asking for a big public subsidy every year or to enjoy special sweetheart rates for the use of the Convention and Exhibition Centre. Thus it continues promoting mainland merchandise exports with specious arguments that they are really Hong Kong exports.


Here is a question to set things straight. Does the TDC consider Bangladesh garment exports to Europe as Hong Kong exports if a Hong Kong interest takes an equity stake in them?

I thought not.