Innovation, technology and relocation of lower value-added operations to the Mainland have accelerated the development of more knowledge-based and higher value-added manufacturing activities, as well as manufacturing-related services or producer services. Expansion of manufacturing activities offshore since the 1980s has turned Hong Kong into a strategic control centre of an increasingly globalised production network. In spite of Hong Kong's economic restructuring, the manufacturing sector remained an important sector of the economy, providing employment to 165 300 persons (7.2 per cent of all private sector employees) in December 2004.

The printing and publishing industry was the largest employer in the manufacturing sector as at September 2004, followed by the clothing industry. Chart 1 shows the breakdown of employment within the manufacturing sector as at September 2004.

Chart 1

Number of Persons Employed by the Manufacturing Sector as

at September 2004

The manufacturing sector remains export-oriented and its excellent performance contributed to Hong Kong's ranking as one of the world's leading exporters of textiles, clothing, watches and clocks, toys and jewellery. Domestic exports amounted to $126 billion in 2004 with clothing, electronics, chemical products, jewellery and textiles being the major export items. Chart 2 shows the value breakdown of domestic exports in 2004.

Chart 2:

Value of Domestic Exports of the Manufacturing Sector in 2004

The manufacturing sector is dominated by SMEs. Of the 15 750 manufacturing establishments in 2004, 15 530 (98.6 per cent) employed fewer than 100 persons, accounting for 62 per cent of Hong Kong's total manufacturing employment. Many SMEs are linked with larger factories through an efficient and flexible sub-contracting network. This arrangement has enabled the manufacturing sector to respond swiftly to market changes.