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CONFIDENTIAL
Colonial Secretariat File No:SCR.1/4841/55 Pt ii
Despatch no.617.
GOVERNMENT HOUSE
HONG KONG
24th May, 1969
Sir,
In my periodic despatch No.239 of 13th February, 1968, I described how the community had faced and over- come the violent Communist confrontation of 1967, and I forecast that a non-violent phase would follow, with the Communists seeking to gain popular support and to exploit weaknesses in the administration, in pursuance of their consistent aim of dominating the Hong Kong Government.
2.
In this despatch I describe how substantial, and at times spectacular, progress has been made during the last year in economic and social fields, despite continuing Communist pressure and, at times, various adverse external influences.
3.
In public finances there have been two successive years of large surpluses: $133 million (£8 million) in 1967/8 and $150 million (£10 million) in 1968/9. The surpluses were partly the result of under-spending on the public works programme, but in 1968/9 revenue increased by 10% (compared with a budgeted 4%) as a result of increased business activity. Although our capital reserves have yet to recover to their level before the devaluation of the pound, our current position is substantially better than we could reasonably have expected.
4.
Despite quota restrictions and negotiated trading restraints, the value of domestic exports have continued to grow. In 1968 the total value of Hong Kong's recorded visible trade was £1,600 million. Before 1967 the value of domestic exports was growing at an average compound rate of 15%. In 1967 it rose by 16.9% and in 1968 by 25.8%. Principal markets are the U.S.A., the European Economic Community and Britain. Ready-made clothing leads the list of exports, and progress is being made in the field of high fashion. Toys, dolls, wigs, transistor radios and electronic appliances are also successful exports.
5.
Part of this growth is the result of the rising value of exports, rather than increased volume, and may be related to inflationary conditions in our major markets. There remains the constant danger of
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