Export competitiveness of Hong Kong and Singapore in the US market : market share approach

  • Wilson Wai Sang LEE

Student thesis: MPhil Thesis (Lingnan)

Abstract

This paper aims to examine Hong Kong’s and Singapore’s export competitiveness in the US market, using market share models. Factors affecting their export competitiveness will be examined using two closely related economic models. The first model aims to examine the significance of real exchange rate and product quality composition in market share changes. The second model is used to detect the sources of competitiveness and the degree of export rivalry of Hong Kong and Singapore in the US market.

The first model employs linear ordinary least square regression analysis with two independent variables. The first independent variable is a price coefficient constructed by taking the ratio of export price index to real exchange rate. The second is quality composition coefficient proxied by the ratio of less labor-intensive to more labor-intensive products. The less labor-intensive product (LLIP) is assumed to be higher in quality than the more labor-intensive product (MLIP).

The second model applies the shift-share technique to compare the sources of export competitiveness and the degree of rivalry of two economies in the US market. The differences in industry mix effect, competitive effect and interactive effect between the two economies in four different product categories are examined. These three effects may be used to explain the competitiveness behavior between Hong Kong and Singapore in the US import market.

The market share models suggest a strong relationship between real exchange rate of Singapore and its market share via-a-vis Hong Kong in the US. Besides, changes in product composition as proxied by the LLIP/MLIP ratio indicates a positive change in relative market share in the US. The effect of relative real exchange rate in Hong Kong on its export share in the US was not significant. This may be attributed to the linked exchange rate system. However, Hong Kong5s market share vis-a-vis Singapore in the US market is significantly affected by the relative product quality proxy ratio under the study.

The market share models indicate that the export share elasticity with respect to relative price adjusted by the real exchange rate and the changes of product quality composition suggest a reasonably strong competition for exports share in the US market between Hong Kong and Singapore, especially in the more labor-intensive products.

Besides, the shift-share models show that Singapore consistently performed better than Hong Kong in LLIP but not in MLIP. It poses a threat to Hong Kong's exports of LLIP in the US market. Singapore government has succeeded in developing its economy as a high technological export economy. It is able to export more balanced product mix as well as to diversify its export markets. Hong Kong, however, seems to excel in re-export trade especially in the MLIP, with its advantage lying in its proximity to and integration with China. The research results also demonstrate that the emergence of the Chinese economy since 1978 could have provided a strong competitive impetus for Hong Kong to compete with Singapore in the US market.

In this thesis, changes in market share among exporters on a common import market were assumed to be the result of substitution between exporters only. The analysis may be extended to account for substitution in LLIP between the two exporting economies and the US. This could improve the empirical modeling.
Date of Award7 Oct 1997
Original languageEnglish
Awarding Institution
  • Lingnan College
SupervisorJan Piaw Thomas VOON (Supervisor), Yak Yeow KUEH (Co-supervisor) & Lok Sang HO (Co-supervisor)

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