“ Hong Kong's separation from its principal markets and lack of indigenous raw materials are among the factors which have produced a concentration of resources on light industry while heavy industry has developed only where a domestic market was available. Two relatively new industrial ventures illustrate this point. The demands of the Hong Kong construction industry have resulted in the establishment of one factory to manufacture spiral welded pipes of all dimensions, and another to produce extruded aluminium fittings and sections. ”

“ Hong Kong is an industrial territory with an economy based on exports rather than on its 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 18 years, although before that industry was not entirely new to Hong Kong. By the turn of the century, shipbuilding and shipbreaking industries had developed as a natural extension of port activities. ”

“ The Federation of Hong Kong Industries, established by ordinance in 1960, promotes the interests of Hong Kong industry as a whole, and its membership represents all industries, many nationalities and all sizes of enterprise. In the promotion of internationally accepted standards for locally manufactured goods, the federation is responsible for a textile testing service, launched in consultation with the Retail Trading Standards Association in Britain. It is also studying ways and means to promote the adoption of standards of other industrially advanced countries. ”

“ International Economic Relations As the United Kingdom has acceded to the General Agreement on Tariffs and Trade on behalf of Hong Kong, the Colony's exports attract most-favoured-nation tariff treatment in the majority of its overseas markets and are protected from discriminatory import restrictions. ”

“ There has been spectacular growth in the electronics industry. The manufacture or assembly of transistor radios began only in 1959, but since then exports of transistor radios have increased to reach a total of 11.7 million sets worth $210 million in 1967. The industry exports its products all over the world with its principal markets in the United Kingdom and the United States. The manufacture of electronic components is also making rapid progress. A number of leading American electronic manufacturers have established subsidiaries in Hong Kong. ”

“ There has been a steadfast policy of preserving free competition, of generally refusing to accept demands for protection of particular industries or demands for retaliation against other countries' restrictive actions. ”

“ Although domestic supplies of agricultural produce and fish are substantial, most of Hong Kong's foodstuffs have to be imported, and food was the principal import, valued at $2,329 million, representing 22 per cent of all imports. The chief items of edible imports were live animals, rice and other cereals, fruits and vegetables, dairy products and eggs, and fish and fish preparations. Raw materials and semi-manufactured goods for industry included textile fibres and yarns, base metals and plastic moulding materials. ”

“ The manufacture of garments remains the largest sector within the industry, employing 61,500 workers. A wide range and variety of clothing, from high fashion dresses to cotton singlets, is produced for export all over the world. Embroidered blouses, beaded or sequinned woollen cardigans, silk and brocade, and evening coats have worldwide popularity while, in conformity with world trends, demand has increased significantly for permanent press garments. Custom and mail order tailoring, principally of men's suits, has developed rapidly in recent years as an important branch of industry. ”

“ Other light industrial products such as electric apparatus and appliances, footwear, and manufactures of metals were also important exports.
The direction of Hong Kong's export trade is influenced by such factors as the advantages of preference in Britain and several smaller Commonwealth markets, and economic conditions and commercial policies in overseas markets. During the year 54 per cent of all domestic exports by value went to two markets—the United States and the United Kingdom, in a ratio roughly of two to one. ”

“ The type of policy most in demand is the Comprehensive Shipments Policy which protects the exporter/manufacturer against political, economic and del credere risks from date of shipment to date of payment. Interest has also been shown in other types of cover such as re-exports, external trade and capital goods. Premium income now more than covers overheads; but the future pattern of claims remains to be seen and will determine how soon the corporation can be truly self-supporting. ”

“ The variety of goods produced in Hong Kong is now considerable. In general, while heavy industry such as shipbuilding and steel rolling continues to be important, Hong Kong is best known for the competitive price and range of its light industrial products and their rapidly improving quality.
Industrial Productivity The problem of improving industrial productivity in Hong Kong is one of concern to the government and to private enterprise. During the year, a statutory Productivity Council and a Productivity Centre were established. ”

“ Nine textile concerns are producing polyester-cotton and polyester-viscose yarn for weaving into shirting and other fabrics for which there is now a more rapid growth in demand than for comparable cotton products. The demand for woollen knitwear has continued to grow. The production of the woollen and worsted spinning industry goes mostly to the domestic knitting industry, although some is woven into cloth. Other woven products include silk and rayon brocade of traditional Chinese design, tapes, military webbing, lace, mosquito netting, carpets and rugs. ”

“ All insurance companies wishing to transact life, fire or marine insurance business in Hong Kong must comply with the provisions of the Life Insurance Companies Ordinance or the Fire and Marine Insurance Companies Deposit Ordinance, respectively. ”

“ The United States, remaining the largest market, took 37 per cent by value and increased her purchases by $468 million or 23 per cent. The value of all goods sent to the United Kingdom was $1,147 million, 16 per cent of all domestic exports. The Federal Republic of Germany, which remained the third largest market, purchased Hong Kong manufactures worth $371 million during the year. Other growing markets of importance included Canada, Japan and Australia, but domestic exports now go to practically every country in the world. ”

“ In similar fashion, the expansion of light industry has stimulated the manufacture of machinery and parts. Hong Kong-made machinery, built originally for domestic industry, is now exported to many overseas markets. Of particular importance are plastic blow moulding and injection moulding machines, power presses, lathes and planing machines.
Aircraft engineering is another important industry; one large establishment provides maintenance and repair facilities for most airlines using Hong Kong Airport. ”

“ Companies incorporated outside Hong Kong are required to register certain documents with the Companies Registry within one month of establishing a place of business in the Colony. Only small filing fees are payable in such cases. During the year 44 such companies were registered and 33 ceased to operate. By the end of the year there were 599 companies registered from 39 countries including 149 from the United States, 98 from the United Kingdom and 59 from Japan. Usually for tax reasons, many non-local companies incorporate a subsidiary in Hong Kong in preference to operating a branch office. ”

“ Recently the industry has had to face severe competition from imported bars and rods selling at lower prices and, as a result, many mills are operating at reducing capacity. The industry is now engaged in a large scale modernization programme involving heavy capital investment in new sites and plant. ”

“ Facilities are available for complete airframe and engine overhaul, and work has been received from countries as far afield as Australia and Canada. Local manufactures can produce most of Hong Kong's requirement for cement, most of the raw materials being imported. ”

“ 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. ”

“ Knitting mills produce towels, tee-shirts, underwear and nightwear, swimsuits, gloves, socks and stockings in cotton, silk, wool and other fabrics. From a total of $862 million in 1961, the value of exports of clothing has risen to $2,317 million in 1967, produced by some 1,170 factories.
Other Light Industries In the ever-widening range of light industry the most prominent, after textiles, is the manufacture of plastic articles. Skill in the cutting of moulds and dies, together with the ability to meet short orders, have resulted in increased exports of a very wide variety of products. ”

“ They keep watch on commercial measures adopted by other countries which may affect Hong Kong, and study the activities of international organizations concerned with trade. They are also responsible for preparing for negotiations with trading partners concerning textiles or other products, and for enforcing the provisions of any agreement. Between them, they deal with the calculation and allocation of quotas for markets restricted under the operation of the Long-Term Agreement regarding international trade in cotton textiles. ”

“ That it has managed to meet all these difficulties and still achieve a 17 per cent increase in the value of domestic exports during 1967 shows the basic strength of the economy and augurs well for the future.
Industry The general facility with which industry may be established and conducted in Hong Kong has attracted investors. Most industrialists are Hong Kong residents of Chinese race, and the greater part of their capital resources are self-generated. ”

“ Such insurance, which is already provided in 24 other trading countries, will assist exporters to expand existing business and to find new markets for their goods. Although its policies must be approved by the government, which has provided the initial capital of $10 million, the corporation, in the person of a commissioner, has wide freedom to grant or refuse individual contracts. It is required to operate on a break-even policy and is expected to earn sufficient premium income to cover the payment of claims and other outgoings. ”

“ In the development areas of Kwun Tong, the Tsuen Wan complex, and Sam Ka Tsuen, purchasers of industrial land leases can pay by instalments over 20 years. Purchasers of industrial land elsewhere in the Colony can pay in four equal interest-free instalments, spread over two years. During 1967, there was little demand for land for industrial development and only seven industrial sites were auctioned. ”

“ They include the manufacture of air-conditioners, aluminiumware, clocks and watches, cordage, electrical appliances and equipment, enamelware, food and beverages, footwear, light metal products—especially stainless steel ware—optical and photographic equipment, paint, vacuum flasks, furniture and furnishings. The manufacture of hair wigs has developed dramatically during the last few years, the principal market being the United States. Exports during 1967 were valued at $197 million. Some 9,620 workers are employed in their manufacture. ”

“ These mills produce mild steel bars, window sections, angles and channels and other metal products used in building construction. Although some rods and bars are shipped abroad, principally to South-East Asian countries, the steel mills rely heavily on domestic sales which have suffered from the recent decline in the building industry. Several rolling mills produce brass and aluminium sheets and circles, most of which are used for the manufacture of consumer goods. ”

“ Internal training courses were conducted to prepare the centre's own staff to implement an integrated programme. Preparations were also underway to recruit international experts to assist the centre in training consultants who would offer services to industry. ”