5.
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Government's industrial policy was not to assist industry beyond zoning land for industrial use, a by-product of town-planning which had the effect of making cheaper land available to industry; providing subsidised flatted factories for squatter workshops; building up the necessary infra-structure.
and
6.
Sir Arthur Snelling enquired the extent to which Hong Kong banks were prepared to provide long term loans to industry.
He under- stood that there was more money in Hong Kong than there were uses for it. Mr. Cowperthwaite replied that perhaps 50% of the time deposits in Hong Kong banks were from overseas Chinese, were inclined to be "hot", and could not safely be lent on long term. By and large, industrialists in Hong Kong generated their own long term capital, relying on the banks only for short to medium term loans. Only in exceptional circumstances did Hong Kong firms seek public quotations on the Hong Kong stock exchange.
7.
In reply to the Secretary of State, Mr. Cowperthwaite confirmed that Hong Kong's unfavourable trade balance was offset by invisible earnings and by movements of capital. The fact that Hong Kong's sterling reserves were rising was an indication that Hong Kong did not at present have a balance of payments problem.
8.
The Secretary of State asked how the surcharge had affected Hong Kong's trade with the United Kingdom. Mr. Sorby replied that the surcharge had borne particularly hard on Hong Kong because all exports were manufactures and because of the distance factor. But exports had slowly picked up towards the end of the period as United Kingdom prices increased and as a result of a certain amount of profit shaving in Hong Kong.
9.
Sir Arthur Snelling asked whether the restraints on cotton textiles had caused Hong Kong to move into wool textiles. Mr. Cowperthwaite thought that because of the difficulty of transferring capital between the two industries, there was no direct casual relationship. Restrictions on cotton textiles had rather resulted in trading up in the cotton sector and in a move into synthetics.
10.
The Secretary of State noted that the Federation of Hong Kong Industries wished to discuss the question of Hong Kong's trade relations with the United Kingdom. Mr. Sorby believed they would probably raise this issue in the context of reverse preferences in favour of E.F.T.A. members particularly in respect of imports of man-made fibre textiles. Mr. Cowperthwaite repeated the solution he had advocated many times before: that the United Kingdom should recognise the de facto free trade area between Hong Kong and the United Kingdom. Sir Arthur Snelling thought that such an arrangements would have no advantage for the United Kingdom and could hold out little hope of improving the situation as far as any reduction in duty on imports of Hong Kong man-made fibre textiles was concerned. Mr. Cowperthwaite commented that one of Hong Kong's difficulties in international negotiations was that it had already given everything away. Sir Arthur Snelling replied that the United Kingdom had likewise given away everything by providing duty-free entry to Commonwealth countries.
The
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Mr. Miller interposed that the Federation's question was really a political one. As Hong Kong was uniquely dependent on exports, maintenance of the channels of trade must have the first priority. United Kingdom had overall responsibility for Hong Kong's commercial relations although Hong Kong had tried to take its share of the administrat- ive and financial burden. Confidence in the United Kingdom's willingness to exercise this overall responsibility had been somewhat eroded by the carryover dispute and the import surcharge. Sir Arthur Snelling commented that Hong Kong already in effect exercised independent respons- ibility for its external commercial relations.
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