HONG KONG: As the China miracle of continued rapid growth continues, catalyzing the global economy recovery, Hong Kong will continue to be a principal beneficiary of the mainland's performance, a senior economist says.

China is the first major economy to recover from the global recession and is leading Hong Kong out of it, said Qu Hongbin, China chief economist at HSBC.

The arena of cross-border trade provides clear evidence of how the Hong Kong hitch-hiker is moving forward in tandem with the mainland dynamo.Trade between Hong Kong and the mainland serves as the most immediate and substantial stimulus to the city's economy. The close partnership has put Hong Kong in a very favorable position internationally.

"Hong Kong is the biggest beneficiary from the growing amount of trade between the mainland and Hong Kong. A lot of the mainland's trade is shipped through Hong Kong - especially in Guangdong and the Pearl River Delta region," Qu said.

The mainland absorbs nearly 50 percent of Hong Kong's total export value, followed by the US, which accounts for over 12 percent. The city's main supplier of imports is also the mainland, which delivered 47 percent of the total imports last year.

According to statistics from the Ministry of Commerce, the value of mainland exports to Hong Kong in the first half was $69.75 billion, while the value of imports from Hong Kong was $3.72 billion. Although the figures dropped over 20 and 40 percent respectively as the economic recession has curbed trade, the mainland remains Hong Kong's preeminent trade partner .

Investment is another indicator of the healthy Hong Kong-mainland symbiosis. As Hong Kong attracts record-high foreign direct investment (FDI), foreign investors may be targeting mainland companies, but the fees and commissions are paid in the city, generating local income.

"Trade activities require financial services; so do the companies launching IPOs in Hong Kong. They have demand for financial and other profession services," Qu said.

In Hong Kong, over 60 percent of companies newly listed in the past decade were from the mainland.

Stephen Lam, Hong Kong's Secretary for Constitutional and Mainland Affairs, said CEPA (Closer Economic Partnership Arrangement), which was concluded between the two regions in 2003, made Hong Kong more appealing to foreign investors as the city was the first-ever economy to sign such an arrangement with Beijing.

In the aftermath of the financial crisis, the mainland authorities have taken many steps to sustain economic growth for 2009 at eight percent. Their efforts bode well for Hong Kong, because this means that Hong Kong's extensive investments on the mainland will continue to have prospects for a healthy return, Lam said in a statement.

"Looking farther ahead for the next 20 or 30 years, we need to map out a broader strategy. The mainland has provided Hong Kong with precisely that opportunity," he said.

As for stocks, the city's financial markets over the last decade received an influx of mainland companies launching record-making initial public offerings (IPOs), which invigorated the Hong Kong stock exchange.

The Chinese mainland has 37 multinational corporations ranked among Fortune's top 500 global companies, up from just six a decade ago, while 450 of the Fortune 500 American companies have production lines and a business presence on the mainland. Attesting the increasingly intertwined relationship between Hong Kong and the mainland is the fact that nearly all top mainland public companies have a stock code that ends with "HK".

More than a mere matter of names, the prosperity of the city's bourse depends on how many more mainland share sellers are willing to come and how big their IPOs are going to be, which, in turn, depends on the mainland's economic development.

HSBC's Qu said as long as China maintains its current economic reform and development momentum, steady and sustained growth is certain.

"The country is undergoing two kinds of reform, one is industrialization; another is urbanization." he said. "China's economic achievement is a miracle in human history," he noted.

However, there is still a long way to go to urbanize the nation, he added.

Some 45 percent of the mainland population lives in urban areas compared to 70 percent in developed countries, according to HSBC. By contrast, more than 90 percent of the mainland population lived in rural areas in 1949.

Apart from exports and corporate investment, there remains cross-border spending as a component of Hong Kong-mainland prosperity. From an economic viewpoint, mainland spending in Hong Kong represents a portion of Hong Kong exports. It is well known that greatly improved spending power of mainland visitors in Hong Kong is fueling the city's retail sales and property market.

The central government's gradually easing policies to allow more mainland tourists to visit Hong Kong has brought nearly 100 million visitors to the special administrative region, giving a big boost to the local economy - especially the retail sector.

Every month, tens of thousands of mainland tourists flood the city's shopping malls and department stores with each one of them buying at least several thousand yuan worth of goods. In the past six years, mainland tourists helped the tourism industry in Hong Kong create 20,000 new jobs and HK$60 billion in income.

There are also growing numbers of mainlanders investing in the city's property market. "In the first half, we saw a growing number of our luxury properties purchased by mainland investors," said Shih Wing-ching, chairman of Centaline Holdings, the owner of one of the city's largest real estate firms, Centaline Property Agency.

"The sales volume was not big but the transaction value was large enough to give a big boost to the city's housing sales total ," Shih said.

(HK Edition 09/30/2009 page3)