TNAG-0004-FCO40-40-Departmental-briefs-about-Hong-Kong-1968 — Page 183

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estimates are up to 1878 m. (£117 m.), a $112 m. (£7 m.) increase above

the figure for 1965-66. The greatly expanded housing programme, the

cost of the recent salaries revision and the rising cost of the

education programme are the main factors which have contributed to this

increased expenditure. In order partly to right this deficit of

$93 m. (85.8 m.) the Government has raised the standard rate of tax on

earnings and profits, which has stood at 121% since 1950, to 15%.

G. TRADE

1. Hong Kong's prosperity prior to 1950 rested on the entrepot trade,

principally with China. With the advent of the Communist Government

in China and the embargo on strategic exports to China during the

Korean War, the entrepot trade dwindled rapidly. In its place industry

has assumed a dominant role and over three-quarters of the Colony's

total exports are now manufactured or processed locally. The arrival

of refugees brought in additional manpower and in some cases valuable

skills and capital. United States regulations prohibiting the import of

Chinese manufactures provided the stimulus to develop new Chinese-type

products in Hong Kong for the American market. In 1949 Hong Kong's

total trade was £173 million; in 1966 it topped, for the first time,

£1,000 million.

2. The Colony is now firmly established as an industrial economy

dependent upon exports rather than a domestic market. Since Hong Kong

has to export to live the only industries worth having are those whose

products can be sold in the domestic market without protection or which

can be exported without subsidies. Hong Kong has therefore remained

true to the traditions established when it was an entrepot, i.e. no

tariffs other than those which are designed solely to produce revenue,

and free ingress for other goods from any quarter of the globe. The

entrepot trade is, however, still considerable.

3. Hong Kong's exports have been expanding in recent years at the

rapid rate of 12-15% per annum. Textiles still account for about 60%

of the total, with woollen knitwear now a rapidly expanding sector

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