TRADE'S contribution to economic growth is dwindling as domestic exports level off and demand for imports intensifies, according to an economic report by Bank of East Asia. Hongkong's huge appetite for imported goods - partly a reflection of limited supply within the territory and partly to do with increased domestic demand for importable goods - has prompted a widening in the trade deficit. That is taking its toll on grossdomestic product growth. According to the bank, the merchandise trade sector contributed 2.8 percentage points to the territory's GDP growth in 1983. Since 1990, its contribution has turned negative and dropped to minus 5.8 percentage points in 1992. The ballooning trade gap is being partially offset by burgeoning growth in re-exports. Annual growth in re-exports has consistently achieved double-digit figures during the last 10 years. This trend makes Hongkong's dependence on continuing reform and stability in China that much tighter - about 90 per cent of re-export trade is China-related. The report's authors warn: ''China's trade policy as well as its relations with other major trading partners, in particular the United States, will not only affect China itself, but also have a dramatic impact on Hongkong's trade performance.'' Bank of East Asia calculates GDP growth by adding domestic demand - including consumption and investment - and total net exports, in both services and goods. The report states: ''Once the engine of the territory's economic growth, the relative importance of domestic exports has declined while re-export trade has assumed increasing significance. ''Growth in domestic exports dropped from a 10-year high of 23.1 per cent in 1987 to 0.1 per cent in 1992. ''This decline could be attributed to the recessionary situation of Western economies in recent years, and the reduced price competitiveness of domestically produced exports.'' Growth in service exports hit a post-1987 high of 0.9 per cent in 1992, while growth in goods exports dropped 5.8 per cent. On the plus side, Hongkong is creaming off bigger margins on re-exports. This added value on imported goods can come from the cost of transport, storage, insurance and fees charged by go-betweens, as well as extra expenditure on minor processing. The contribution of the re-export margin to GDP growth has increased from 0.3 percentage points in 1983 to five percentage points last year. The report says: ''Although the re-export margin's contribution can compensate for the lacklustre growth of domestic exports, the overall contribution of the export sector to GDP growth has been flat in recent years.'' Retained imports have risen rapidly due to the constraints of domestic supply and relatively high domestic inflation - up 29 per cent during the three-year period from 1990 to 1992. In 1992, although domestic exports and the re-export margin added 5.1 percentage points to GDP growth, they failed to compensate fully for the 10.9 percentage point loss for retained imports. The report says: ''In the current year, imports are anticipated to grow by 22.2 per cent, which is still faster than the estimated 21.6 per cent growth of exports. ''Based on these projections, the merchandise trade deficit will increase by 40 per cent. The evolution of the export structure from domination by domestic exports to domination by re-exports will continue, while the propensity to import is expected to remain high.''