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also been a running fight to prevent donors manipulating the UNCTAD preference scheme to give an edge to competitors of Hong Kong such as Taiwan and Korea. difficulty of grappling with this set of problems over access to and non-discrimination in export markets has been aggravated by the realignment of parities and the sterling float, and the unfamiliar problems these produced for Hong Kong. But though all this did worry and frustrate it did not by any means overwhelm Hong Kong exporters. The up-turn of trade in North America and Europe was of decisive importance in helping through this difficult time. So at the end of the year it looks as if there will have been rather more than a 10% growth in exports moderate by Hong Kong standards, and considering the need to provide a rising standard of living for the inflated population, but just acceptable. Employment is full, industry is generally prosperous land values and investment have remained high, the stock markets have been active - perhaps too active. In consequence revenue looks as if it will keep ahead of the increase in budgeted expenditure of about 25% over 1971/72.
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In these respects Hong Kong has not changed much during the last 10 years: it constantly appears beset by protectionism and other threats that never cease to worry and exasperate, but never quite stop or reverse the expansion of industry on which the colony depends for its revenue and its very existence though they always so easily might do so. But the sense of having constantly to fight for this existence, and with little bargaining power, continues to foster a wariness and suspicion and tendency to over-react amongst industrialists and officials alike.
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Hong Kong lost heavily by the downward float of sterling owing to the very large sterling balances which the Government and private banks have maintained in London. As I write these still amount to about £832 million. Their value is guaranteed at the rate of US$2.40 to the £l, but the guarantee agreement expires in September of this year.
Arrangements to cover this vast sum of sterling is going to be one of the most important matters of mutual concern to HMG and the Hong Kong Government in the early months of 1973. Ideally these should provide that on the one hand Hong Kong's ability to diversify should no longer be undesirably restricted, and on the other ensure that the gilt-edged market is not unduly disturbed.
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