Effects of Industrial Growth on Hong Kong Trade

Industrial growth with its increasing demand for capitalequipment and raw materials and consequent diversification of productsis bound to affect the trade pattern of an economy. The extent of sucheffects depends on a host of conditions, the more important of whichinclude 1) the size, geogra¬phical location, and resource endowments ofthe economy, 2) the relative importance of external trade, 3) the levelof economic development, 4) the motivation and model of industrialdevelopment, and 5) the insti¬tutional framework. These factors operate,in the case of Hong Kong's industrial growth, to generate greatereffects on external trade. Hong Kong, with a total land area of lessthan 400 square miles, is endowed with negligible natural resources forindustrial purposes, while economic development remains at a stage ofalmost complete reliance on imported capital equipment. On the otherhand, it is favoured by a shel¬tered deepwater harbour and ageographical location at the south gate of Mainland China with easyaccessibility to all parts of the Far East. Conse¬quently, entrepottrade flourished and predominated in the Hong Kong economy prior to therapid industrial growth in the 1950's. The develop¬ment of this tradeand the necessary facilities (such as banking, insurance, shipping,shiprepairing and warehousing services) has been, to a large extent,responsible for the entrepreneurs' global outlook and the exportoriented industrial development. Such a course is faciUtated bygovernment policy under which trade, industry and foreign exchange aresubject to minimal controls, and duties are levied only on a very fewcommodities for revenue purposes.