ENG-1955 — Page 20

REVIEW OF THE YEAR

5

and manufactures. This is partly a reflexion of China's need for foreign exchange, and partly a switch from her recent practice of selling her produce through Eastern Europe.

The fall in exports to China was compensated by increases in exports to almost all the main markets for Hong Kong manufactures. Malaya remained the principal buyer, her purchases increasing by 17%. The United Kingdom replaced Indonesia in second position, exports rising from $162,000,000, in 1954, to $251,500,000. Although exports to Indonesia fell by about 14% over the whole year, trade improved significantly in the later months, partly as a result of changes in import regulations; exports during November and December were running at 50% over the 1954 level. There was also considerable improvement in exports to Indo- China, Thailand and South Korea; these rose by 147%, 38% and 13% respectively, largely under the impetus of United States Foreign Aid Programmes. Offshore purchases under these programmes have been of great value to Hong Kong in maintaining purchasing power in Far East territories.

Money was abundant during the year, partly as a result of an inflow of capital from politically disturbed parts of the Far East. This was reflected in a continuation of the boom in real estate, and in high prices on the local share market. The Stock Exchange had a good year, turnover being estimated at $445,000,000. In order to check inflationary tendencies the three big note-issuing banks raised their interest rates on advances towards the end of the year, and restricted the advances they would make against the security of shares. The upward movement of share prices was checked, although it is not clear to what extent the credit squeeze was responsible for this.

Government trading, a legacy of the war, finally came to an end. The principal commodity affected by the transfer of trade back to commercial channels was rice. Provision was made, however, for the maintenance of an emergency reserve of rice by limiting the right to import rice to twenty-nine importers, who guaranteed to keep certain minimum stocks. The system was the subject of public criticism as introducing an undesirable element of monopoly, but it has worked well in practice. Reserve stocks have been maintained, and prices have not risen above reasonable levels. After some months of operation the Government announced, in view of the criticisms, that it had not been able to devise any other system