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The trade of Hongkong is special in that it is predominately an entrepôt trade.
What is Hongkong's advantage? It is being a distributing centre for the China and the Pacific area. It is an advantage to the distributor to be able to keep his goods out of bond, break bulk and wait for a favourable market. It is essential that the port charges, the expenses of handling cargo and the general taxation to be paid should be of the minimum: wages should be low and the cost of living as economical as possible.
Hongkong is, I believe, the cheapest port in the world for handling cargo, much cheaper than Singapore, Manila, Shanghai or Kobe, consequently much cargo comes to Hongkong which would otherwise go to other ports-even for a resting period only.
Protective tariffs on a number of articles call for a large staff of officials, bonded godowns, complicated system of drawbacks, much loss of time in dealing with cargo, endless forms to fill in, difficulty in breaking bulk and general irritation and annoyance from petty and even senior officials.
Turning now to the industrialisation which has in fact taken place in the Colony during the past 20 odd years in lines such as knitting factories, the manufacture of sweet-meats, rubber shoes, torches and a number of other similar articles is it not due
(a) To the disturbed conditions in South China.
(b) The settled conditions in Hongkong.
(c) Until recently the low Chinese tariffs.
(d) The advantages of security of Government, cheap labour, free port status, allowing for the manufacture for export to Malaya, Siam, etc., etc., apart from the China market?
The position has somewhat altered. South China has experienced more settled conditions in the past two or three years than she has for the past 20 years. Conditions (b) and (d) still remain but China has now a high protective tariff with a view to fostering her new Industrial Reorganisation Scheme. This Industrial Reorganisation Scheme consists in building factories within the Chinese tariff wall with a view to supplying her own needs. It cannot be denied that although there are bound to be failures in some cases owing to misman- agement, etc., nevertheless already vast quantities of goods of all kinds are moving up and down the coast which would formerly have been supplied from Europe. The British Economic Mission to the Far East 1930/31 found that the Chinese market was a price market and with development in China and Japan, Lancashire must accept the fact that certainly in the cheaper goods and coarser counts she had lost the China market.
The industrialisation of Hongkong, as just indicated, has, in my opinion, been in a substantial measure artificial, based originally on the inability of China and Japan to supply the demand, and latterly to a largely extent on the unsettled conditions in China.
I welcome the smaller industries but they must exist because they are economically sound and not by reason of a protective tariff. The recent establishment of the Commercial Press in Hongkong would seem an apt example.
Up till 1842, China was for almost all purposes self-contained and economically sound since when foreign interests have commercially invaded China, largely disorganising her whole economic system and rendering her a country largely dependent on imports from abroad, but she is now trying to get back to her old economic equilibrium by industrialisation of her country.
I now propose to deal with Singapore as a "Free Port" with a view to proving the advantage to Hongkong of the "Free Port" status.
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