In this essay I will explore the economic history of Hong Kong during the 20th century. Hong Kong, during this period, I will argue, went from an entrepot trading outpost, which nevertheless attracted large British trading companies, to a major independent regional trading center. I will start by exploring the changes that took place in the Hong Kong economy during the 1950's and 60's, when the economy and culture established some of the patterns that would persist, and that would enable Hong Kong to become a significant economic force in the Asia-Pacific region. I will then explore the changes in the economy during the 1970's, the period when China opened its markets in a limited way to foreigners. The patterns of economic activity in Hong Kong shifted during this period, matching the shifts in the political structure of the entire world economy. This period is marked by a growing interest in the economic possibilities in the Asia-Pacific region by the West. I note that Hong Kong was favorably placed geographically, and also had the type of regulatory environment that enabled foreign financial firms to establish major branches in Hong Kong. During this period, too, Hong Kong became a major trading partner with China, and trade with other countries in the region (Taiwan, Singapore, and Japan) also increased significantly.
[...] At the same time, Hong Kong has been the beneficiary of the growing importance of the Asia-Pacific region in the world economic system. Hong Kong is situated in a central position geographically, and has a stable currency and economy, factors which have attracted major international financial institutions. The international financial industry accounted for of Hong Kong's GDP by 1978 (Yao, 1979). Trade in the same Asia-Pacific region was growing exponentially during the period between 1975 and 1995, and Hong Kong benefited from this growth in trade. [...]
[...] After the initial period of economic change during the 1950's and 60's, Hong Kong has continued to flourish as a manufacturing base. However, Eng provides details of the limited statistics available for the period between 1950 and 1992, showing the gradual decline of the manufacturing sector as a source of employment, from in 1966 to in 1992. Eng argues that there are several reasons why the Hong Kong light manufacturing sector has declined since China opened its doors to foreign manufactures in the 1970's: lower labor costs found in mainland China, more regulation of labor practices in Hong Kong, and a clash between the higher expectations of second or third-generation Hong Kong residents and the pressure on firms, due to global competition, to continue to keep costs as low as possible. [...]
[...] Yao argues that Hong Kong has become a point of convergence, with an excellent reputation for stability and low taxes: “Economically, Hong Kong has during the postwar years built up a solid reputation as a major commercial, manufacturing and shipping center in East Asia . A mere dot on the world map, Hong Kong nevertheless ranked twentieth in the world's leading trading nations in terms of total external trade in 1976” (Yao: 686). In a detailed and complex analysis of the Hong Kong GDP, Ma, Tsang and Tang (1998) describe three categories of economic activity that can be used to classify the type of export activity in the Hong Kong economy; exports to China, exports to China for outward processing, and exports to non-China destinations (rest of the world). [...]
[...] As Eng (1997) describes, however, even at the start of the 20th century, the pattern of business activity based in Hong Kong relied on locally instituted and controlled exploitation. Britain, as a colonial power, turned a blind eye to the local economy, focused as it was on the trade activities in China that were coordinated through Hong Kong. The conditions that support low-cost labor include the ability to operate with very few legal constraints in relation to how labor is treated; the colonial relationship between Britain and Hong Kong facilitated this. [...]
[...] (Fung: 203) This proved to be a crucial decision for Hong Kong; while during the first three quarters of the 20th century, China did not played a major role in Hong Kong's economic development (apart from providing low-cost labor), during the last quarter of the century, the pivotal relationship between China, Hong Kong and the West has been central to Hong Kong's economic development. Had the CCP decided to try to gain control of Hong Kong in 1949, Hong Kong would never have become a trade and manufacturing centre by the end of the 20th century. [...]
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