CONFIDENTIAL
3. This reliance on overseas trade cannot be over-emphasised. On the one hand, it draws attention to the importance to the Hong Kong economy of its export sector (domestic exports and/or re-exports). On the other, it provides the rationale for the government's policy of non-intervention in the economy with a view to regulating the level of aggregate demand (as distinct from providing a suitable environment, through the legal framework and by means of the infrastructure, in which free enterprise can flourish). Thus the government would not, through fiscal, monetary or other means, introduce measures designed to bring about full employment, since the additional expenditure which would be pumped into the economy would rapidly leak away through imports, thereby creating relatively few jobs and bringing the balance of payments into deficit (unless external finance were obtained, this, in turn, burdening the budget with debt service charges). At the same time, the government has been anxious to ensure that purely private sector enterprise remains profitable, and has therefore enschewed financial aid and subsidies for industry.
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