Monday, 29 December 2008

trade and financial activities in Hong Kong

Trade is the buying and selling of goods and services between different countries or places. Parties involved can obtain goods or services that they need. Import -- Buying and Importing from foreign countries→local consumption or re-export. Export -- Selling and exporting of domestic good to foreign for profit. Re-export -- Import from foreign, and sell it to another country without processing. Processed imported goods are treated as import and export but not re-export. Visible (merchandise) trade -- It’s the buying and selling of physical commodities. The situation of merchandise trade Import -- Hong Kong lacks on natural resources but the demand on food, fuel and other consumer good is huge because the rapid growth of population and industries. Hong Kong mainly import raw materials, semi-finished good, machines, food, fuel and other consumer goods. They mainly imported from mainland, Japan, Taiwan and US. Domestic export -- Since 1980s, Hong Kong’s manufacturing industry is declining due to the high production cost, immature high-tech. industries and the structural change of economy in Hong Kong. Hong Kong mainly export clothes, electrical machinery, jewellery, clock and watches and they will be exported to the mainland, US, UK and Germany. Re-export -- Since the open door policy was adopted by China and joined the WTO in 2001, the demand of import and export increase while Hong Kong located at the main passage of water and land to and from the mainland with good transport facilities. Thus the value of re-export in Hong Kong is very high. There are various goods for re-exporting and mainly electrical machinery and toys. They mainly imported from neighbor countries and re-export ti mainland and US. Merchandise trade balance = total value of (domestic exports - re-export-import) It it’s positive, we have a merchandise trade surplus, if it’s zero, we have a balance of merchandise trade and if it’s negative, we suffers a merchandise trade deficit. We suffer a merchandise trade deficit since 1990s. Invisible trade refers to the buying and selling of services. The invisible income is the exporting of service locally providing to foreign countries. The invisible expenditure is the importing of service from foreign countries to local people. Note that service provide locally to local people isn’t any kind of invisible trade. Invisible trade balance = Invisible income - Invisible expenditure while we also have the invisible trade balance, surplus and deficit. We have a invisible trade surplus these years. The invisible trade is so important: 1) Invisible trade is the main source of foreign exchange. 2) The invisible trade surplus is huge that it can offset the merchandise trade deficit and have a trade surplus in total. 3) The service sector provides lots of job opportunities (mainly tourism and transport) since the declining of manufacturing industries. The present situation --- The Invisible trade is booming now in Hong Kong. After China joined the WTO in 2001, China further open up it’s Markey and strengthen the role of Hong Kong as a two-way platform between the mainland and the world. The Mainland and Hong Kong Closer Economic Partnership arrangement, CEPA, was signed in June, 2003 which benefits Hong Kong’s service industries: 1) 18 services sector is permitted to access into mainland market earlier, and 2) Residents from some provinces and cities can visit Hong Kong individually, and provides Hong Kong’s tourism and related industry more business opportunities. Financial activities -- They refers to debt and credit, exchange and circulation of capital funds. Hong Kong is an international financial centre with some characteristics. For example, there’re lots of financial institutions→active financial activities. Free capital flow, free and fast information flow and no restrictions on identity of investors. Hong Kong is developed into international financial centre and it has some favourable factors: 1) Stable investment environment -- good legal system and lox tax rate(political stability) 2) No foreign exchange control, free capital flow, and free trade policy. (Trade activities promotes financial activities) 3) The government has set up HKMA to regulate local banking services and SFC to supervise local financial activities. 4) Hong Kong bridges time gap between N America and Europe→24-hr financial activities. 5) Free of information flow and advanced telecommunication tech., facilities and services. 6) Pros on financial industry were provided (e.g. banking personnel, IT talents and lawyers) 7) Hong Kong has a close link to mainland which have a rapid economic growth. This attracts foreign investors to invest and raise fund in Hong Kong The major financial activities in Hong Kong 1) Bank -- Hong Kong has a high concentration of bank institutions providing deposit taking, gold, silver trading and provision of loans. The key functions is that the banks accepts savings and provide interest to depositors, provide loans to borrowers and get interest. 2) Stock exchange -- Companies satisfying some requirements can be listed in Hong Kong, raise funds by issuing shares(open to public), register with Stock Exchange of Hong Kong. 3) Gold trade-- HK is the largest gold market in Asia and people can trade gold at the Chinese Gold and Silver Exchange Society or in the Loco-London Gold Market. There are certain improvements now, including enhance financial infrastructure by utilizing information technology, reform market regulatory framework for sufficient protection, enhance quality of personnel in financial industry and promote cooperation in the financial industry and strengthen the security of electronic services. After China joined WTO, Hong Kong had more business opportunities on services industries. For example, the financial industry enjoys earlier access to mainland than foreign companies, and allowed to provide four aspects of renmenbin services -- deposit taking, currency exchange, remittance and credit-card services.

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