Exports rebounded to a two-year high in the second quarter, supported by growing demand from the mainland, figures from the Hong Kong Trade Development Council show.
Meanwhile, a survey by the council showed big changes over the past 25 years in the way the city's exporters operate.
The export index released yesterday showed it had risen to 53.4 from 49.5 in the first quarter and 31.6 in the fourth quarter of last year.
A reading above the 50-point level indicates expansion.
"Hong Kong's export business will continue to grow in the rest of the year, but the growth rate will be modest owing to the large base," said Daniel Poon, the council's principal economist.
The agency's research department forecast earlier that exports would grow 4 per cent this year.
Poon said that despite the improved numbers, the export sector still faced challenges.
"Demand from traditional trading partners such as the European Union and the US has been slipping," he said.
While overall exporter sentiment had improved, various industries were telling different stories, Poon said.
Electronics had been the best-performing sector, and jewellery and timepieces had also improved markedly, but clothing, toys and machinery had weakened during the quarter.
Offshore trade - in which Hong Kong-based companies manufacture elsewhere and export their products to markets abroad without going through the city - surged from 18.8 per cent of Hong Kong's overall commercial activity in 1988 to 65 per cent last year, the council's offshore trade survey showed.
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 offshore trade activity plays a decisive role in Hong Kong's economy."
The survey shows offshore trade accounts for more than 70 per cent of Hong Kong firms' exports of clothing, toys, household items and several other product categories, while in the stationery and packaging material sector, it makes up as much as 91.2 per cent.