Young (A Tale of Two Cities, 1992 and the Tyranny of Numbers, 1995) demonstrated, based on the data from the 1960s to the 1980s, that the total factor productivity (TFP) growth since the mid-1980s owed much to the establishment of the cross-border division of labor in which Hong Kong relocated manufacturing to the Mainland and provided support and entrepot trade services in the form of service exports. Nevertheless, growth since the 1980s came largely from the declining manufacturing sector. The expanding services sector’s TFP growth, whether tradable or not, has been low. Hong Kong’s annual TFP growth rate dropped below one percent during the 1991-97 period. As a result of the decelerating demand growth for Hong Kong’s service exports since the mid-1990s as well as the greatly reduced manufacturing sector’s size, a fall of Hong Kong’s long-term output growth rate appears to be unavoidable.
Imai, H. (2000). Structural transformation and economic growth in Hong Kong : another look at young's "a tale of two cities" (CAPS Working Paper Series No.98). Retrieved from Lingnan University website: http://commons.ln.edu.hk/capswp/25