The Hong Kong economy review 2005

According to statistics, the total GDP of Hong Kong grew by 6.2%, the GDP growth of the second season reached 7.3%, while the GDP in the third season experienced the growth by 8.2%, which ended up with the exciting preview from different research agencies with the expected GDP in the last season set as high as 7%, which was higher than expected by 1.5~2.5%.

Since Hong Kong’s jurisdiction returned to China in 1997, in the following six consecutive years, the Hong Kong economy experienced a long period of gloomy and hesitating situation. Until the year of 2004, the local economy finally started to recover with an exciting growth by 8.2%. Though the foundation for economy development for Hong Kong has been very high, the new round of rapid economy development has opened up a historical new page for the local development.

Generally, the economy growth was mainly driven by strong consumption and optimized structure of investment and exports, which allowed the Hong Kong economy growth to reach an in-depth and sustainable level.

In the first half of this year, the private consumption reached a growth by 3.5% compared to the same period last year, which further reached the growth by 4.6% in the third season. The total investment on fixed assets achieved a growth by 2.5%. The investment on enterprises was still lively. Both the international and domestic markets were prosperous. More and more tourists from the mainland China further promoted the exports of products and services made in Hong Kong. The exports on goods and products grew by 11.1% while the exported services reached a growth by 8.5%.

The full recovery of the market also promoted the job market. There are 220,000 new job positions opened this year with a total employee number of 3.42 million, which was the highest record in history. The unemployment rate was down to 5.3% at the end of October, which was also the lowest level in the past four years.

Meanwhile, the price level was under good control with only slight growth. In the first ten months of this year, the price index on average was 1%, the index reached 1.8% at the end of October. The inflation rate was down from 1.5% to 1.2%.

The recovery of the local economy allowed Hong Kong to face the oil price crisis and the US currency fluctuation with great confidence. The general economy operation achieved the situation of rapid in growth, low in inflation and low in unemployment rate, which further revealed the healthy structure of the local economy. The year 2005 witnessed a satisfying growth of local economy since Hong Kong returned to China.

According to the preview by the World Monetary Organization not long ago, the GDP of Hong Kong will reached a growth by 4.5% or 5%. The HSBC, the Hangseng Bank and the Bank of China all agreed though the economy growth in Hong Kong might slow down next year, the growing trend is still very strong.

After the 12 times of adjustment of the Hong Kong dollars under the influence from the US dollars, the currency rate is expected to drop gradually in the second half of the coming year 2006. As expected, the cooling down on the raise of currency rates will further release the stress for local consumption and capital market. Besides, the rapid economy recovery of the European Union, the resuscitation of the Japan economy and the stable development of the Southeastern countries will all help release the stress by the effects from the US currency and US economy.

The agreement on exports of textile and garment products between Hong Kong and the US, European Union to a large extent diminished the unstable factors for Hong Kong’s international trading environment. In 2006, the exports on Hong Kong goods and services are expected to achieve steady growth.

The CEPA (the Closer Economic Partnership Arrangement between the Mainland and Hong Kong) had very positive promoting effect for Hong Kong economy development. Since September 2004, the number of goods and products made in Hong Kong and exported to the mainland has been growing significantly. It is expected to see more benefits and investment on the agreement of the CEPA in 2006, which can have a far-reaching influence on the industry links of local Hong Kong business.

Tourism industry has been one of Hong Kong’s pillar industries. In 2006, Hong Kong will launch a series of tourist activities under the theme of “the Year of Tourism”, which will include the new wetland park, the Asian Exposition Fair and other newly developed tourism programs in order to attract more tourists from the mainland China. According to exports, the number of tourists visiting Hong Kong will set a new record in the year 2006 reaching 27.14 million person-times in total, which will at the same time greatly help the development of the retail and hotel business in Hong Kong.

Though the general situation for Hong Kong’s economy development in the coming year was upbeat, however, there are still a lot of unstable factors. The economy of Hong Kong has resuscitated, but the transformation was not necessarily 100% successful. New economic driving force and new advanced industries with competitive edge have not emerged yet. The local bird flu and other health issues are still bothering the local economy development, which reveals the vulnerability of the local economy.