2
Sir,
CONFIDENTIAL
Hong Kong, 24 May, 1969.
In my periodic despatch No. 239 of 13 February, 1968,† I described how the community had faced and overcome the violent Communist confrontation of 1967, and I forecast that a non-violent phase would follow, with the Communists seeking to gain popular support and to exploit weaknesses in the Administration, in pursuance of their consistent aim of dominating the Hong Kong Government.
2. In this despatch I describe how substantial, and at times spectacular, progress has been made during the last year in economic and social fields, despite continuing Communist pressure and, at times, various adverse external influences.
3. In public finances there have been two successive years of large surpluses: $133 million (£8 million) in 1967-68 and $150 million (£10 million) in 1968-69. The surpluses were partly the result of under-spending on the public works programme, but in 1968-69 revenue increased by 10 per cent (compared with a budgeted 4 per cent) as a result of increased business activity. Although our capital reserves have yet to recover to their level before the devaluation of the pound, our current position is substantially better than we could reasonably have expected.
4. Despite quota restrictions and negotiated trading restraints, the value of domestic exports have continued to grow. In 1968 the total value of Hong Kong's recorded visible trade was £1,600 million. Before 1967 the value of domestic exports was growing at an average compound rate of 15 per cent. In 1967 it rose by 16·9 per cent and in 1968 by 25.8 per cent. Principal markets are the United States, the European Economic Community and Britain. Ready-made clothing leads the list of exports, and progress is being made in the field of high fashion. Toys, dolls, wigs, transistor radios and electronic appliances are also successful exports.
5. Part of this growth is the result of the rising value of exports, rather than increased volume, and may be related to inflationary conditions in our major markets. There remains the constant danger of additional restrictions and impediments to trade, but there is no sign yet of a slackening of the growth rate of exports.
6. Industrial development, which reduced its rate of growth in 1967, is now progressing again. There is a shortage of industrial accommodation and a severe shortage of labour in some industries which are paying less than average wages. Tourism continues to expand, with the number of visitors in 1968 rising by 17 per cent, and there are already signs of a shortage of hotel rooms, which may persist over the next few years if the number of visitors continues to expand.
7. We are engaged in a large programme of public works. A new 2,600-ft. bridge has been built at Lai Chi Kok; roads are being widened and flyovers and underpasses are being constructed; the 37,000 million gallon Plover Cove Reservoir is now in use; a large sports area has been built at Tsuen Wan; a $30 million abattoir has been opened, and a second costing $25 million will be opened next month; a tunnel linking the island and Kowloon is to be built; and we are considering the financial and engineering feasibility of an underground railway.
8. Immigration is now at a low level and the birth rate is falling, but all our social services are still under pressure from the accumulated effects of massive immigration and a high birth rate over a period of years.
9. Over one-third of the population is now accommodated in subsidised housing: 1.1 million in resettlement estates and 300,000 in other forms of subsidised housing. About 85,000 people were housed in 1968, but there are still nearly 500,000 squatters on steep hillsides or other land not required for development.
† CO Print HWB 13/7 of 28 May, 1968.
CONFIDENTIAL