PUBLICATIONS & REPORTS

Contents Introduction

This paper surveys the continuing role of Hong Kong in China’s economic development after Hong Kong’s return to Chinese sovereignty in 1997. Focus is placed on three areas. First, the growing economic integration with Guangdong Province, especially the Pearl River Delta, in the development of an export oriented light industrial manufacturing platform. Figures from a recently conducted survey find that Hong Kong based manufacturing and import/export companies employ over 11 million workers in the Chinese Mainland, and is responsible for intermediating 40 percent of China’s external trade and one-third of total foreign direct investment flows into the Mainland in 2000. Second, export of services account for an increasingly large share of Hong Kong’s total exports and amount to one-quarter of Hong Kong’s GDP. Service exports serve an important as producer services in support of the export oriented manufacturing base in Guangdong Province. The service is provided for goods that are routed through Hong Kong as re-exports or for offshore trade that does not pass through Hong Kong. Hong Kong’s role as a regional headquarter for foreign businesses operating in Asia has therefore been growing. Third, Hong Kong’s role as China’s international financial center does not appear to have been eclipsed after its return to Chinese sovereignty. Shanghai’s role as an international financial center is growing but the gap between the two cities remain considerable and Hong Kong continues to have an important role to play in managing China’s financial resources and risks.