Pakistan Institute of Development Economics



Effects of Industrial Growth on Hong Kong Trade

Author: Ronald Hsia

Industrial growth with its increasing demand for capital equipment and raw materials and consequent diversification of products is bound to affect the trade pattern of an economy. The extent of such effects depends on a host of conditions, the more important of which include 1) the size, geogra¬phical location, and resource endowments of the economy, 2) the relative importance of external trade, 3) the level of economic development, 4) the motivation and model of industrial development, and 5) the insti¬tutional framework. These factors operate, in the case of Hong Kong’s industrial growth, to generate greater effects on external trade. Hong Kong, with a total land area of less than 400 square miles, is endowed with negligible natural resources for industrial purposes, while economic development remains at a stage of almost complete reliance on imported capital equipment. On the other hand, it is favoured by a shel¬tered deepwater harbour and a geographical location at the south gate of Mainland China with easy accessibility to all parts of the Far East. Conse¬quently, entrepot trade flourished and predominated in the Hong Kong economy prior to the rapid industrial growth in the 1950’s. The develop¬ment of this trade and 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 export oriented industrial development. Such a course is faciUtated by government policy under which trade, industry and foreign exchange are subject to minimal controls, and duties are levied only on a very few commodities for revenue purposes.

Ronald Hsia

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