Two different data sources can be used to study Hong Kong’s role in intermediating China’s foreign trade. One is the bilateral trade statistics between Hong Kong and the Chinese Mainland reported by National Bureau of Statistics of China, and the other is the bilateral trade statistics published by Census and Statistics Department, Hong Kong. The corresponding statistics are not comparable to each other because of the different statistical criteria adopted by each source. Hong Kong’s intermediation role has been declining since the mid-1990s. A major long-run factor contributing to the decline is the structural change in Hong Kong’s industry led by Hong Kong direct investment in China. The Chinese currency appreciation will have a further negative effect on Hong Kong’s intermediation role. Hong Kong’s offshore trade has increased rapidly in recent years, but its impact is not strong enough to offset the declining share of Hong Kong in Chinese foreign trade.
An Evaluation of the Intermediation Role of Hong Kong in Chinese Foreign Trade
Working Paper No.15/2007