TNAG-0571-FCO40-704-Planning-paper-on-Hong-Kong-1976 — Page 151

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ANNEX C

INTERNAL POLICIES OF THE HONG KONG GOVERNMENT

Background

1.

Hong Kong's post-war development, despite a seven-fold increase

in the population, political uncertainty and a total absence of natural resources has been remarkable. In the period 1945-71 (and particularly after 1961) the Colony achieved a high rate of growth with steadily increasing real wages per head (about 5% per annum), full employment, a sound balance of payments and relatively little inflation. This success was the result of five principal

factors:

(i)

(ii)

the rapid growth of post-war demand in its major export markets, particularly in North America and Western Europe; a plentiful supply of labour used to very low cash incomes and with sociological attitudes peculiar to an immigrant society;

(iii) an inflow of entrepreneurial and financial expertise

from the mainland (and, in the early years, an inflow of Chinese capital, mainly from Shanghai) married to the

existing efficient financial and commercial infrastructure; (iv) a stable and efficient colonial government;

(v)

a general climate favourable to investment, e.g. the

tax structure, absence of exchange controls and of import duties (save on drink, tobacco and oils).

It should be noted that with the exception of (iv), these

factors also applied to other countries in the region with a good record for economic development, e.g. Singapore, Taiwan.

2. Hong Kong's success, against all the odds, has given rise to a widespread belief in influential circles there that economic growth on this scale could only have been achieved by reliance on market forces, particularly evident in the field of monetary management and wages; and by low taxation policies which have encouraged

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