The economic reform of China in 1979 has attracted massive outward investment from Hong Kong to China and has provided Hong Kong manufacturers an unprecedented opportunity to lower production costs. A process of “structural transformation” of Hong Kong economy by absorbing a good portion of labour resources that were released from the manufacturing sector. In the last decade, it has shown that the contribution of manufacturing sector to GDP decreased, and the size of employment also shrank substantially to half in 1994. Our result shows that the manufacturing industries has a greater structural change within the sector in the period 1989-1993 than that of 1979-83 and 1984-88. The total factor productivity of manufacturing industries has grown at 0.22% to 4.40% for the period studied. The favourable impact of FDI on raising productivity of home economy, at least, is not observed in Hong Kong’s case.
Cheung, K. Y. (1997). Hong Kong's outward processing investment in China : its implications on Hong Kong economy (CAPS Working Paper Series No.47). Retrieved from Lingnan University website: http://commons.ln.edu.hk/capswp/41