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# Chapter VII.
# COMMERCE.
The trade of Hong Kong is that of an entrepôt, a place where goods are imported primarily for exportation. As a business centre the Colony handles the trade between South China and the rest of the world, and consequently the mercantile community is much larger than is necessary for handling local needs. (At present, when the South China market is to a large extent cut off by military operations, many firms have been compelled to reduce their overhead expenses and to draw upon reserves.)
From its position as the centre of an entrepôt trade Hong Kong has grown to be a very important banking centre. Trade conditions demand a highly organized system of exchange banking. The banks established are, therefore, pre-eminently Exchange Banks which also perform the ordinary functions of domestic banking. There are about thirty-four banks in the Colony. Marine insurance companies are also numerous.
Hong Kong is one of the world's large ports, possessing a fine natural harbour seventeen square miles in extent. Cargo is handled both in mid-stream and at wharves which give access to modern warehouses.
Shipbuilding, which is dealt with more fully in Chapter VI, is one of the Colony's most important trades, employing, in commercial establishments and in the Royal Naval Dockyard, many thousands of Chinese under the supervision of European experts. Cement, sugar refining and rope-making are old established industries. Recently there has been considerable development of knitting and weaving, garment-making and rubber-shoe manufacture which has received an impetus by reason of duty-free admission to British countries under Imperial Preference.
For practical purposes the Colony of Hong Kong can be considered to be a "free port." The only import duties imposed are on liquors, tobaccos, perfumed spirits, and light hydrocarbon oils. Preferential rates of duty are extended to Empire brandies and tobaccos. An ad valorem licence fee is charged on first registrations of motor vehicles which are not of British Empire origin.
The Hong Kong trade returns do not distinguish between imports for consumption and imports for re-export or between exports of Hong Kong, Chinese and non-Chinese origin, and it is not possible to differentiate the various items of trade accurately. Trading conditions have changed radically, in various directions since the outbreak of the Sino-Japanese hostilities in 1937. Before that date the visible trade of the Colony fell into four broad categories
(a) Imports for consumption in Hong Kong (including raw materials for certain industries) and exports of Hong Kong origin.
(b) Chinese external trade passing through Hong Kong, i.e., Chinese goods re-exported to non-Chinese countries and non-Chinese goods re-exported to China.
(c) Chinese coastal trade, i.e., goods imported from one part of China and re-exported to another.
(d) Non-Chinese entrepôt trade, i.e., goods imported from a non-Chinese country and re-exported to another non-Chinese country.)
By an examination of the individual items of trade it was possible to make an approximate estimate of the values of the respective items, and these, prior to July, 1937, were roughly as follows:-
One third of the imports into Hong Kong was of goods intended for retention in Hong Kong, coming from Chinese and non-Chinese countries in the proportion of one to three; and a tenth or less of the exports was of goods originating in Hong Kong.