Guided by the principles of "one country, two systems," and
"Hong Kong administrated by Hong Kong people," Hong Kong and the
Chinese mainland have established all-around, multi-faceted and
broad economic and trade cooperation ties under the Mainland and
Hong Kong Closer Economic Partnership Arrangement (CEPA).
Economic and trade cooperation between the mainland and Hong
Kong boosts the economy and comprehensive competitiveness of Hong
Kong, further enhancing its status as the international finance,
trade and transportation hub.
The mainland factor
So far, the "mainland factor" has been a major driving force
behind Hong Kong's economic development.
The opening up and economic reform, as well as the rapid
economic development on the mainland, has provided the Hong Kong
manufacturing industry with new opportunities. From 1980 to 1996,
the mainland economy grew 9.5 percent annually with 26.4 percent
growth in foreign trade, a key factor conducive to the Hong Kong
economy. For one thing, Hong Kong is an export-oriented economy and
foreign trade has an important influence on its economic
development. Trade volume between the mainland and Hong Kong jumped
to 104.982 billion Hong Kong dollars in 1996 from a mere 28.195
billion in 1980, with an annual growth rate of 25.4 percent. Since
then the Chinese mainland has become its biggest trading partner
and re-export source and destination. In 1996, the re-export volume
accounted for 84.8 percent of its total export volume. The mainland
made up 57.7 percent of its re-export volume.
Second, processing trade between the mainland and Hong Kong has
helped optimize the economic structure of Hong Kong. After the
reform and opening up of the mainland, the cheap prices and
favorable policies attracted the traditional manufacturing industry
in Hong Kong to transfer to the mainland. Hong Kong's direct
investment in the mainland reached $20.677 billion in 1996 from
$1.88 billion in 1990, increasing nearly 49.1 percent year on year.
Investment from Hong Kong accounted for nearly 50 percent of all
foreign direct investment (FDI) on the mainland. Hong Kong has
become the mainland's biggest FDI source.
Meanwhile, mainland companies have been entering the Hong Kong
market, becoming its largest overseas investor, outnumbering even
the United States and Japan. Mainland businesses are generally
involved in Hong Kong's service industries including finance,
retailing, transportation, storage, tourism and hotel. Chinese
capital has become one of the most important factors safeguarding
Hong Kong's prosperity and steady economic growth. From 1990 to
1996, Hong Kong maintained an economic growth rate of over 4
percent.