ENG-1965 — Page 64

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Industry and Trade

HONG KONG is now established as an industrial territory with an economy based on exports rather than on the domestic market. At the same time it remains basically a free port. The change from entrepôt status has taken place over the past 16 years, but industry is not, of course, entirely new to Hong Kong. By the turn of the century, as a natural extension of port activities, shipbuilding and shipbreaking industries had developed in Hong Kong. Some light industries were established before 1939. But industrial develop- ment on a significant scale did not take place until political changes in China, followed by the Korean war and consequent trade re- strictions, signalled the end of the entrepôt trade as a basis for the economy. The simultaneous arrival of refugees from the mainland brought in additional manpower and in some cases technical knowl- edge and capital. As a result, while the entrepôt trade declined there was an increase in the manufacture and export of cotton textiles— a development which proved to be the foundation for subsequent light industrial expansion.

United States regulations prohibiting the purchase of Chinese manufactured goods provided another stimulus to the manufacture of Chinese-type products in Hong Kong for the American market. Procedures designed by the Commerce and Industry Department, in association with the United States authorities, were introduced to prevent the substitution of Chinese goods. This drew the attention of manufacturers and exporters to the potentialities of the American market in those sectors not covered by the Foreign Assets Regula- tions, and within the scope of the Regulations to develop the market there for goods-such as cotton clothing-never previously exported 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 originally appeared favourable. But