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2002 Hong Kong Exports: Mild Growth Expected

Hong Kong exports in 2002 could perform better than generally expected at this moment, said the Trade Development Council's Chief Economist, Mr. Edward Leung.

Presenting the Council's report on Hong Kong Trade Outlook 2002 today (December 20), Mr. Leung said total merchandise exports in 2002 are expected to rise by 2% in value, or 3% in volume.

Mr. Leung said: "The driving force will be the mild recovery of the world economy in mid-2002, possibly commencing in the US and trickling through to the EU and beyond."

He points out that given the low inventory level, import demand of these markets would rise following a pick-up in their economies.

"China's WTO entry is not a quick fix to Hong Kong's current difficulties. With the attendant market liberalisation and continued economic development, China will provide longer-term opportunities for Hong Kong."

Mr. Leung cautions that consumers spending pattern in major overseas markets is changing. "In face of the economic uncertainty, consumers generally tend to go for the basics and avoid extravagant items. Value-for-money is the watchword.

"Hong Kong companies, which export a wide range of value-for-money consumer products, are to be buffered on such developments. But they should adjust their product strategies, and pursue a balanced strategy for OEM, ODM and brand name businesses."

Mass merchandisers, discounters and specialty discount stores are capturing a growing slice of their domestic markets. They are disinclined to keep inventory. Margins will be under continued pressures, and there will be greater urgency to fill smaller-lot orders.

"The changing buying pattern will exert formidable pressures on prices of Hong Kong exports. Hong Kong companies have to realign their operations to meet the increasing demand in terms of quick response and delivery."

Mr. Leung drew attention to changes in the international regulatory framework which will have an important bearing on Hong Kong exporters.

With the implementation of the third stage of the Agreement on Textiles and Clothing (ATC) from January 2002, quota arbitrage for textiles and clothing will play a diminishing role in production and sourcing considerations.

Hong Kong textiles and clothing companies will be given more room to shift their production and sourcing to the Chinese mainland as China is now a WTO member who can benefit from the removal of quotas. Hong Kong companies can further enhance their price competitiveness and profitability.

As on the global electronics cycle, Hong Kong is undoubtedly in a better position. Hong Kong's more diversified export mix makes it less vulnerable to the ups and downs. Strong domestic demand of the Chinese mainland will somewhat serve as a buffer.

Commenting on Hong Kong's services sector, Mr. Leung said exports of services are more reliant on Asia than merchandise trade. Despite the expected continual rise in offshore trade, Hong Kong services exports are likely to post a moderate gain in 2002.

"A mild recovery in trading activities and an improvement in the tourism sector will be the main contributors."

The report says direct transportation links between the Chinese mainland and Taiwan may not materialise in the near future although both have become a WTO member.

"For 2002 as a whole, Hong Kong's existing role as the most important 'third territory' to facilitate cross-strait trade and passenger transit will remain intact."

The reports says the prevalence of direct shipments from the Chinese mainland to foreign markets will also remain a dampening factor for growth of Hong Kong re-exports, which are projected to register nominal and real growth rates of 3% and 4% respectively.

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For press enquiries, please contact Lawrence Yau of the TDC's Corporate Communication and Marketing Department at 2584 4510.

Content provided by Hong Kong Trade Development Council