ENG-1966 — Page 74

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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 dependence upon entrepôt trade has taken place over the past 17 years, although industry is not 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 the Colony. Some light industries were established before 1939. But industrial development on a significant scale did not take place until political changes in China, followed by the Korean war and consequent trade restrictions, 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 knowledge 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.

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United States regulations prohibiting the purchase of Chinese manufactured goods provided another stimulus to the manufacture of certain categories of products in Hong Kong for the American market. Certification 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 stimulated the interest of local manufacturers and exporters in the potential of the American market. Restrictions in the trade in cotton textiles between Japan and the United States in the late 1950's caused American buyers to turn to Hong Kong as an alternative source of supply. Since then the United States has become the largest market for Hong Kong's products, including textiles and garments.

Hong Kong's industrial economy thus derives from various circumstances, few of which originally appeared favourable. But