Territory big cog in cash machine
HONG KONG is set to cement its place at the hub of the Asia-Pacific economic powerhouse. Rapid economic development in China, explosive regional growth and determination to liberalise trade regulations should combine to ensure continued growth.
The Asia-Pacific is widely expected to be the most dynamic region in the world during the 1990s.
Countries in the region - excluding Japan - last year enjoyed economic growth of around seven per cent compared to 1.1 per cent for members of the Organisation for Economic Co-operation and Development (OECD).
This year the growth is expected to be around 6.4 per cent compared with the OECD's 2.1 per cent.
Most of this growth should come from the trade sector rather than investment from the West.
In the 13 years to last year, Hong Kong's trade with Asia-Pacific has been growing by an annual average of 22 per cent, compared with 19 per cent for the rest of the world.
According to Edward Leung, chief economist of the Hong Kong Trade Development Council, there are a range of factors which will keep Hong Kong at the centre.
Mr Leung believes the appreciation of the yen against the dollar will encourage Japanese companies to increasingly invest in overseas companies to maintain their competitiveness in the manufacturing sector.
In addition, trade liberalisation under the nascent Asia-Pacific Economic Co-Operation and the embryonic World Trade Organisation will remove the existing tariff barriers.
The challenges to growth are likely to come from eastern Europe as it claws itself from recession, while the impact of the North American Free Trade Association (NAFTA), which involves an agreement eliminating all trade barriers between the United States and Canada, is still unclear.
Mr Leung said: 'NAFTA creates more opportunities for trade but diverts it from the South Pacific to trans-America.' The surge in Asia-Pacific trade reflects Hong Kong's closer economic ties with the mainland and continuing diversification away from the United States and Europe.
The territory's total trade with the region increased by 13 per cent to US$177 billion last year and by 10 per cent over the first quarter of this year.
This means that Hong Kong's regional trade now accounts for about 65 per cent and the links established with the region's major trading nations, including China, Japan, Taiwan, Singapore and the Republic of Korea, should ensure that it continues to grow.
The hastening transition of Hong Kong from a manufacturing to a services-based economy is reflected in domestic exports last year which rose by only one per cent to $13.9 billion and fell by seven per cent during the first quarter.
This has led to greater investment in the region as manufacturers diversify their production to beat the rising cost of local labour and land.
China has been the main beneficiary (see table) followed by Thailand, Indonesia and Taiwan.
However, re-exports to the region increased by one-fifth last year to $55.5 billion, or 53 per cent, of the total. During the first quarter of this year, there was a 16 per cent rise.
The acceleration of intra-regional trade is evidenced by the increase of 12 per cent to $404 billion in 1992 compared with four per cent for trading within the European Union and seven per cent in North America.
Hong Kong has healthy and growing re-exports across Asia Pacific. Out of the territories total re-exports to the world of $105.5 billion in 1993, about 88 per cent either originates from or is destined to China.
A spokesman for the Hong Kong Trade Association said: 'China has been using Hong Kong to conduct its trade with most of its trading partners, including the United States, the European Union, Japan, Taiwan and other Asian countries.' There was a rise of 22 per cent - or $22.7 billion - in Hong Kong's re-exports to the Asia Pacific in 1993 destined for the US.
Of these, about 95 per cent were Chinese imports.
Hong Kong was also involved in around $4.4 billion of US products being re-exported to Asia via Hong Kong. This was a rise of 22 per cent compared to the previous year. The destination of these goods ranged from China, for 71 per cent, through to the Philippines for 3.4 per cent.
The European Union accounted for about one-sixth - or US$14.95 billion - of re-exports, an increase of about 15 per cent from the previous year.
The territory's importance as a regional trade centre means it is also a focus for international companies.
A spokesman for the Trade Development Council said: 'Of a total of 7,800 overseas companies known to be operating in Hong Kong, 624 served as regional headquarters and another 844 as regional offices. These companies play an instrumental role in Hong Kong's trade.' Of these, the US is the biggest player with 182 companies, followed by Japan with 88, Britain with 81 and China with 67.