TNAG-1843-FCO40-2618-House-of-Commons-Select-Committee-on-Foreign-Affairs-enquiry-1989 — Page 164

..orld Bank figures, has shown that capital has been invested more efficiently in Hong Kong in terms of the resulting increase in production than anywhere else. None of the other economies studied had been required to adjust so completely, or so rapidly, to changes

in world market forces.

19. Closely connected with the free port and essential for it to operate effectively is the free movement of money. The Hong Kong dollar is freely convertible into all other currencies.

There are

no restrictions on the inward or outward movement of funds and no

exchange controls.

20. A number of other long-standing government policies have also been important for the development of Hong Kong's economy. The government does not interfere unnecessarily with the conduct of private business. Businessmen are free to conduct their affairs as they like within the law. No decisions are taken by the Government as to which industries or activities might best be suited to Hong Kong conditions, or attempts made to attract or subsidise particular industries at the expense of others.

21. The Hong Kong government's fiscal policy has been based on the principle of generally balanced budgets, with revenue covering all expenditure, including capital expenditure. In only 6 years since the Second World War have there been budget deficits, and then usually only of modest proportions.. The other 37 years have all registered surpluses, sometimes very substantial.

The result has

been the accumulation of large fiscal reserves and virtually no public debt.

22. The maintenance of a relatively low, stable and simple system of taxation, with the minimum of loopholes and special deductions, has provided an incentive to create wealth. As a result, the Government has been able to collect large revenues from which the whole community has benefited. The current budget provides for the expenditure of some HK$70,000 million, 350 times more in money terms than in the early post-war years and probably more than 50 times larger in real terms:

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