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Background Paper No 1
1.6
Rising production costs, reflecting shortages of labour and land,
that will tend to weaken the international competitiveness of Hong Kong's
industries which are facing increasing pressure from low cost suppliers such
as Korea and Taiwan. As a result, Hong Kong is seeking to trade up in
quality and to invest in more capital- and skill-intensive industries with
higher added-value.
Vulnerability to external factors, such as changes in trading policies
and market conditions of major trading partners, because the economy
relies on only a few manufacturing industries, chiefly clothing and
textiles. Fear of protectionism has intensified the need to diversify and
broaden the industrial base.
The Government's Advisory Committee on Diversification recently submitted a wide-ranging report, with recommendations, to the Governor.)
The recent influx of immigrants from China while it may help to alleviate the current labour shortage is likely to impose a considerable
strain on the territory's resources.
On the other hand, Hong Kong stands to gain from the growth of closer
economic links with China, in particular with the development of the border Province of Guangdong both in its re-emerging role of entrepôt and as a
source of finance, services and expertise for collaborative enterprises. In this respect Hong Kong serves China's interests in providing a "laboratory"! within which China's trading, banking and other organisations can gain experience of conducting business in a market economy and where the transfer
of technology from advanced economies to China can be facilitated.