OREANDA-NEWS. November 03, 2011. The Bank of East Asia (“BEA”) has released the October 2011 issue of its “Economic Analysis”, which studies the changes in the employment landscape as a result of Hong Kong’s economic development from 2004 to 2010. While real GDP growth during the period was comparable to another 7-year span characterised by robust growth, from 1991 to 1997, the current expansion creates relatively less employment, reported the press-centre of Bank of East Asia.

During the 2004-2010 period, import/export trade and finance & insurance were the two major drivers of real GDP growth, which together accounted for 55.3% of the total growth. The largest job generators were public administration and the social & personal services sectors, but economic value added by these sectors accounted for only 6.6% of GDP growth during the period. As a result, their payroll increases lagged behind that of the overall economy. This indicates that it takes time for economic benefits of externally driven growth to filter down to the domestic sector.

Looking ahead, Hong Kong exporters will be squeezed by sluggish demand in Europe and the United States, and by rising costs due to the continuing appreciation of the Renminbi (“RMB”), while the Hong Kong’s emergence as a major offshore RMB centre will underpin development of the SAR’s financial sector. The latter’s significance to the economy may compensate for the weakness in the import/export sector.

To jumpstart employment growth, Hong Kong needs to retain economic activities that create jobs. The surge in spending by visitors from the Mainland is one particular bright spot. Greater effort should be made to encourage Mainland visitors to use other local services, such as education, finance, and medical services. Boosting office supply would also help lower the rising cost of commercial premises and retain business service activities.

Hong Kong’s financial and consumer services will continue to benefit from growing Mainland demand. However, supply side constraints have kept Hong Kong from capturing the full benefit. From office space to healthcare services, capacity has failed to keep up with surging demand. Expanding economic infrastructure becomes the most urgent task for Hong Kong.

Published on a quarterly basis, BEA’s “Economic Analysis” provides investors with an in-depth look into current market and economic issues. Copies of the report can be downloaded via BEA’s homepage: www.hkbea.com/Corporate Information/ Economic Research.