ABSTRACT
The descriptive analysis made in the previous chapter indicates a tight economic connection between China and Hong Kong in terms of trade and capital transactions. China has become the largest supplier of imports to the territory, and HongKong has been the largest foreign investor inChina since the beginning of the economic reforms. Furthermore, re-export activities, in particular, the re-exporting of China’s products to a third country and the re-exporting of a third country’s products to China, have replaced domestic exports to dominate the trade flows of Hong Kong. In addition, the trade intensity index indicates that China and Hong Kong have a stronger tendency to trade with each other than with other countries. The trade intensity index between China and Hong Kong is highest among all the major bilateral trade intensity indices.On the other hand, the trade complementarity index shows that trade between China and Hong Kong is complementary, which means that the two economies have been able to exchange their comparative advantages in the process of trading.While the linkages between China andMacau are not comparable to thosebetweenChina andHongKong, a strong connectionhas also been formed between China and Macau since the beginning of the economic reforms.
