alone equivalent, in value terms, to as much as twice the gross domestic product.
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 ro-imports). 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 pre-
viding 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, mone-
tary 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
eschewed, therefore, financial aid and subsidies for industry.
The Boom Years
(a) Population Growth
4.
Since the war, the Hong Kong economy has been radically
transformed, from an entrepot for the China trade to a modern
manufacturing metropolis. This means that its export sector now
largely handles domestic exports rather than re-exports as in
the past. This was partly brought about by the rapid growth of
the population, swelled in the early 1950's by a massive influx
of refugees. In 1947, the population stood at 1.75 million; by
1957, it had risen to 2.74 million; and by 1967, it had reached
3.83 million. Today it stands at 4.35 million. But the main
impetus to the transformation process came from the United
Nations' embargo on much of the trade with China. Between 1951
and 1954, the value of Hong Kong's exports actually declined, by
as much as 45%.
(b) Specialisation
Largely as a result of the government's free-trade policy 5. and its determination not to become directly involved in the
management of the economy, Hong Kong has, since the war, tended to specialise in the production, for export, of those commodities
CONFIDENTIAL
/in which
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