FDI

Hong Kong is one of the world’s major recipients and suppliers of FDI and is the Mainland’s single largest source of overseas direct investment. Guangdong, as the Mainland’s province enjoying the largest share of FDI, is becoming a favourite location for investment from developed countries, in addition to investment from Hong Kong.

According to the UNCTAD World Investment Report, Hong Kong was the largest largest source of outward foreign direct investment (FDI) in Asia and the 7th in the world in 2004. Hong Kong also ranked as the second largest recipient of inward FDI in Asia and the 7th in the world. FDI inflows to Hong Kong rose to (from US$13.6 billion in 2003).

In the past 20 years, the inflow of direct foreign investment to Guangdong has increased rapidly. Foreign investment in Guangdong is mainly in manufacturing, and most of the investments, like the majority of investment in the entire Mainland, originate from Hong Kong. By the end of 2004, among all the overseas-funded projects registered in the Chinese Mainland, 47% were tied to Hong Kong interests

By the end of 2004, among all the overseas-funded projects registered in the Chinese Mainland, 47% were tied to Hong Kong interests. The stock of contracted and utilised capital inflow from Hong Kong amounted to US$ 464.7 billion and US$ 241.6 billion, accounting for 42.4% and 43% of the national total, respectively

At the same time, investment in Guangdong from U.S. enterprises has been increasing. Direct investment from foreign investors are concentrated in the Greater Pearl River Delta region – the mountainous and remote areas not appealing, partly due to geographical limitations. It is hoped that with new policies like CEPA, such relatively untapped areas, will increase in popularity with foreign investors.

According to a recent government survey, Hong Kong's total stock of inward direct investment was estimated at US$ 379.5 billion at the end of 2003, corresponding to 243% of GDP in that year. One distinct feature of such direct investment was the indirect channelling of capitals from non-operating companies in tax haven economies. Excluding tax haven economies, the Chinese mainland was the most important source of direct investment in Hong Kong, accounting for 26% of the total.

The majority of the stock of investment was related to service industries including investment holding, real estate and business services; wholesale, retail and trading; banking, finance and insurance; and transport and communications. There are currently 26 Chinese banks and seven representative offices operating in Hong Kong. The Bank of China is now the second largest banking group in Hong Kong after HSBC. Regulations are changing to make more business in renminbi easier in Hong Kong.



International trade

The Pearl River Delta Economic Zone continues to be the leading exporter and importer among the major regions of the Mainland. The GPRD is even more of a trading powerhouse. Exports from the GPRD jurisdictions to economies other than Hong Kong, Macao and the Mainland can be estimated at US$160.13 billion in 2002.

In 2003, the total import and export amount of Guangdong Province was US$283.646 billion, representing 33.3% of national import and export total and making Guangdong Province the number one province nationwide for 18 consecutive years. In the same year, the total export of foreign trade amounted to US$152.944 billion, representing 34.9% of the national total.

Electrical and electronic products constitute the major part of foreign trade of Guangdong Province with the total amount of import and export trade reaching US$173.847 billion in 2003, representing 61.3% of total trade amount. The growth of trade in hi-tech and innovative products was significant, the figures in 2003 exceeded that of the previous year by 47.3%, amounting to US$93.58 billion; and constituting 33% of total trade amount currently. The amount of trade between Guangdong and its major trading partners in 2003 are: Hong Kong US$59.256 billion, United States US$44.541 billion, Japan US$34.598 billion and EU US$30.606 billion respectively, increasing by 24.4%, 22.8%, 29.6% and 30.6% respectively as compared with last year.

In 2003, among the import and export trade of Guangdong Province, the amount of processing trade comprises 70.21%, while that of import and export trade of foreign-funded enterprises comprises 61.6%, mostly made up by investing enterprises of Hong Kong. Such a picture reflects that a good number of Hong Kong companies have established manufacturing and possessing factories in Guangdong Province and operating the labour of division for manufacturing and processing.

Hong Kong is the most important entrepot for the mainland of China. About 30% of the Mainland's foreign trade is handled via Hong Kong, comprising products sourced from and destined for the Mainland. As reflected in Hong Kong's merchandise trade statistics, in 2003, 60% of re-exports were of China origin and 44% were destined for the Mainland. According to the Mainland's Customs statistics, Hong Kong (the 10th largest trading economy in the world) ranked the third largest trading partner of the Mainland after Japan and the US, accounting for 10.3% of its total trade in 2003.

Hong Kong's major export markets are the mainland of China, the US, the EU and Japan. They respectively made up 43%, 19%, 13% and 5% of Hong Kong's total exports in 2003. During the period, Hong Kong's total exports to the Mainland surged by 21.1%. Hong Kong's trade performance is in part fuelled by outward processing activities in Guangdong where the majority of Hong Kong companies have extended their manufacturing base.