The Economist Intelligence Unit (EIU), subsidiary of The Economist magazine, has published a report that reinforces the widely known fact that the prospects of the mainland are going to provide more benefits than pains for Hong Kong and Taiwan.

The report, published yesterday, was based on dozens of interview and a survey of senior executives in both Hong Kong and Taiwan.

"The mainland economy will continue to present more economic opportunities than threats to Hong Kong and Taiwan, providing both economies can develop the right policies," Paul Carvey, EIU senior economist, said.

Neither Hong Kong nor Taiwan need to be sidelined by the mainland, says the report. The loss of lower-end sectors can be offset by the expansion of higher-end business that the mainland cannot replicate.

Carvey said the relocation of Hong Kong's manufacturing sector to the mainland will continue in the next few years, which would upgrade Hong Kong's economy to a more service-oriented one.

A services division of labour is also developing. The report said that local companies are moving lower-end tasks such as data-processing and other support services to the mainland, but keeping higher-end work such as logistics management and strategic planning in Hong Kong.

(HK Edition 06/28/2003 page7)