ENG-1964 — Page 56

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5

Industry and Trade

HONG KONG is now firmly established as an industrial economy based upon exports rather than a domestic market, while remaining basically a tariff-free port. The change from entrepôt status has taken place over the past 15 years. Industry is not, of course, new to the Colony. By the turn of the century, as a natural adjunct of port activities, ship-building and ship-breaking industries had developed. Some light industries were established before 1939. Industrial development on a significant scale did not take place until political changes in China, the Korean war and consequent trade restrictions signalled the end of the entrepôt trade as a basis for the economy of the Colony and the simultaneous arrival of refugees from the mainland brought in additional man-power and in some cases technical knowledge and capital. As a result, the slack in the entrepôt trade was taken up by an increase in the manufacture and export of cotton textiles, a development which proved to be the foundation for subsequent light industrial expan- sion.

United States regulations prohibiting expenditure on Chinese manufactures provided another stimulus to develop new Chinese- type products in Hong Kong for the American market under administratively complicated procedures designed by the Commerce and Industry Department in association with the United States authorities to prevent substitution of Chinese goods. The effect was to draw the attention of manufacturers and exporters to the potentialities of the American market in those sectors not covered by the Foreign Assets Regulations, and within the scope of the Regulations to develop the market there for goods, such as cotton clothing, never exported hitherto by China and which Hong Kong manufacturers and exporters might not otherwise have made efforts to develop.

Hong Kong's industrial economy derives therefore from various circumstances, few of which would have appeared favourable to