Hong Kong's merchandise exports will continue to grow in 2004, but at a more modest pace than that in 2003, said the Trade Development Council's (TDC) Chief Economist Edward Leung here Monday.
Presenting the Council's report on Hong Kong's Trade Outlook for 2004, Leung said total merchandise exports in 2004 are expected to rise by 7 percent in value, or 7.5 percent in volume.
Leung said Hong Kong's export growth in 2004 would be driven bya faster global economic recovery fuelled by the United States.
"A resurgent US economy will in turn prop up progressive recovery in the EU and Japan. Global trade growth is also poised to accelerate. This is undoubtedly good news for export-oriented economies like Hong Kong," said Leung.
Hong Kong's export performance will also depend on the outlook for the market of Chinese mainland, which takes an approximately 40 percent share of Hong Kong exports.
While the economic fundamentals of the mainland economy will remain solid, Leung pointed out that a number of factors appeared to come into play in holding back the expansion of Hong Kong exports.
Foreign direct investment (FDI) inflows into the mainland, which have particularly bolstered Hong Kong's exports of electronics parts and components to the market, are likely to decelerate in 2004, following their rapid expansion in recent years.
According to the report, FDI to the mainland contracted by 41 percent in the third quarter of 2003, and by another one-third in October due in part to the delayed effect of SARS and in part to the Chinese government's recent efforts to contain credit growth.
As a result, trade flows through Hong Kong, which have been boosted not only by the mainland's demand for capital goods and materials, but also exports of products overseas and reverse imports into the home markets of foreign investors, are expected to grow at a slower clip.
The reduction in the mainland's export rebates from January 2004 will also slow Chinese exports, with an inevitable adverse knock-on effect on Hong Kong exports.
In the run-up to the presidential election in the United States next year, political considerations will have a strong influence over US trade policies, resulting in a greater protectionist spin amid substantial loss of manufacturing jobs and towering trade deficits with the mainland.
A prominent example is the recent announcement to impose safeguard actions on three categories of textile and clothing imports from the mainland.
Leung said although Hong Kong's direct export losses will not be significant, what is worrying are uncertainties over further safeguard measures against other textile and clothing products.
Hong Kong's domestic exports might benefit from the zero tariff access stipulated under the Closer Economic Partnership Arrangement (CEPA) from January 2004, especially with respect to niche and hi-tech products.
According to the report, CEPA will slow down the decline in Hong Kong's domestic exports to 4 percent in both value and real terms.
Re-exports are projected to increase by 8 percent in value and 8.5 percent in volume although offshore trade continues to expand.
On service exports, CEPA will have a profound and long-lasting impact on Hong Kong services companies' expansion in the mainland market.
While making further inroads into traditional markets, the TDC report encourages Hong Kong companies to develop other potential markets, especially the Chinese mainland where Hong Kong products have produced but not marketed extensively.
Statistics show that in the first 10 months of 2003, Hong Kong's total exports grew by 11.5 percent.