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Growth, Public Policy and Hong Kong' Economic Relationship with China*

Published online by Cambridge University Press:  17 February 2009

Christopher Howe
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Extract

Variations in economic performance have in recent years been subject to increasingly sophisticated analyses; but the chemistry of growth remains mysterious. Although we can usually measure the physical contributions to increased output, these variations rarely explain everything we wish to understand. This is unfortunate because it makes prediction hazardous, particularly in situations where basic parameters are changing. Nonetheless, the requirements of policy require an effort to be made, and it is the purpose of this article to describe and explain the changing economic scene in Hong Kong and thereby to draw attention to some of the economic dimensions of the changing relationship between Hong Kong and China. The main thesis of the article is that Hong Kong is already passing over an economic watershed, and that present and future relations with China must be seen in that light.

Type
Hong Kong Briefing
Information
The China Quarterly , Volume 95 , September 1983 , pp. 512 - 533
Copyright
Copyright © The China Quarterly 1983

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References

1. Official estimates of GDP are available from 1966 to 1981 and are published annually at the time of the Budget. These are based primarily on the expenditure approach. Mo-huan Hsing has discussed these and other estimates, and with Y. P. Ho has produced an alternative set of accounts for Hong Kong that cover the period 1950–75. Hsing, Mo-huan, A Critical Evaluation of the Existing NI/GDP Estimates in Hong Kong (Hong Kong: The Chinese University of Hong Kong. Economic Research Centre, 1977)Google Scholar; Hsing, Mo-huan and Ho, Yin-ping, The National Income and Social Accounts of Hong Kong, 1950–1975 (Hong Kong: The Chinese University of Hong Kong. Economic Research Centre, 1982)Google Scholar;

2. World Development Report 1981 (Washington: World Bank, 1981), Table 2, pp. 136–37Google Scholar;

3. Estimates of Gross Domestic Product 1966 to 1981 Hong Kong Government, Census and Statistics Department, 1983, p. 9.

4. Data from, Hong Kong Statistics 1947–1967, Hong Kong Government, Census and Statistics Department, 1969, Sect. 4; Hong Kong, annual reports, various years; Hong Kong Monthly Digest of Statistics, Sect. 4; Hong Kong Census and By Census data for 1971,1976,1981; and 1982 Economic Background, 1983.

5. There is some controversy about unemployment estimates, discussion in, ASEAN Young Executive, Vol.4, No. 2 (1983), pp. 26–27Google Scholar;

6. Lin, T. B. and Wong, K. Y., “The economic aspects of the tourism industry in Hong Kong,” in Leung, C. K., Cushman, J. W. and Gungwu, Wang (eds), Hong Kong Dilemmas of Growth (Canberra: Australian National University, 1980), pp. 237–59Google Scholar;

7. Turner, H. A.et al., The Last Colony: But Whose? (Cambridge: Cambridge University Press, 1981), Ch. 6Google Scholar;

8. Estimates of Gross Domestic Product 1966–1981, pp. 12–13.

9. Hong Kong, annual reports.

10. Financial Secretary, The 1983–84 Budget, p. 4.

11. Data cited by the financial secretary in 1981 show how successful Hong Kong was between 1976 and 1980 in expanding exports to OECD countries against the world trend. The 1981–82 Budget, p. 17.

12. 1982 Economic Background, Ch. 2.

13. Financial Times, 7 July 1980 and 21 June 1982.

14. Industry: The Facts, Hong Kong Government, no date.

15. Financial Times, 9 July 1979.

16. Jao, Y. C., “Hong Kong as a regional financial centre: evolution and prospects,” in Leung, C. K.et at., Hong Kong Dilemmas of Growth, pp. 161–93Google Scholar;

17. The Bank's strategy is outlined in its Annual Reports, especially those for 1979 to 1981. The international diversification of the trading conglomerate Jardines can also be followed in their recent Annual Reports, and in The 150th Anniversary, particularly comments by the chairman, pp. 10–16.

18. 1982 Economic Background, p. 30.

19. de Zoete, and Bevan, , Hong Kong: Equity and Property Markets, London, 1980, p. 34Google Scholar; Fallon, Ivor, Sunday Telegraph, 19 11 1978Google Scholar; Seng, Hang data for the early 1970s are in The 1975–76 Budget: Economic Background, pp. 16–17Google Scholar;

20. SirHaddon-Cave, Philip, The Hong Kong Economy in 1980: Being a Paper Read to the Hong Kong Society of Security Analysts, 09 1980, p. 4: Financial Times, 7 July 1980Google Scholar;

21. Hong Kong Standard, 1 November 1980; South China Morning Post, 5 September 1980.

22. Financial Times, 4 November 1980.

23. Financial Times, 25 June 1980.

24. This is confirmed by econometric analysis, Chen, E. K. Y., “The pattern of economic growth in Hong Kong,” in Leung, C. K.et al., Hong Kong Dilemmas of Growth, pp. 219–36Google Scholar; See also, Lin, T. B., Mok, V. and Ho, Yin-ping, Manufactured Exports and Employment in Hong Kong (Hong Kong: The Chinese University Press, 1980)Google Scholar;

25. Immigration numbers rose from 31,000 in 1977 to 178,000 in 1979. Natural increase at that time was 60,000 and fertility was declining. Data from Hong Kong Monthly Digest of Statistics, Special Review, April 1982; ibid. November 1982, p. 2. The actual growth of population in recent years can be compared with anticipated trends in Hong Kong Population: A Twenty Year Projection, Hong Kong Government, Census and Statistics Department, February 1978.

26. Of the budget speeches those for 1977–78 and the summing up in the 1981–82 speech are the most useful. A relatively extended, general statement is also to be found in a paper for the Mt. Pelerin Society in 1978, rewritten as the introduction to, Lethbridge, David (ed.), The Business Environment in Hong Kong (Oxford: Oxford University Press, 1980)Google Scholar; Some commentators have emphasized the continuity of thinking among financial secretaries, but this can be overdone. Apart from differences in the problems that had to be handled, Sir John Cowperthwaite had to work in a statistical vacuum compared to the situation in the later 1970s.

27. Early accounts of this are, Owen, Nick C., “Economic policy,” in Hopkins, Keith (ed.), Hong Kong: Industrial Colony (Oxford: Oxford University Press, 1971)Google Scholar and Rabushka, Alvin, Hong Kong: A Study in Economic Freedom (Chicago: University of Chicago Press, 1979)Google Scholar; Owen is fairly critical while Rabushka is admiring.

28. Financial Secretary, The 1978–79 Budget: Concluding Speech, pp. 22–23.

29. This measure of public expenditure includes public funds not spent directly by the government, but excludes activities in which government has only an equity interest.

30. Two academic studies of Hong Kong's public finance are: Rabushka, Alvin, Value for Money (Palo Alto, Calif.: Hoover Institution, 1976)Google Scholar and, Ho, H. C. Y., The Financial System of Hong Kong (London: Croom Helm, 1979)Google Scholar; The bureaucratic politics are discussed in Rabushka and the key role of the Finance Branch remains controversial, see, e.g. the exchange with the Dunn, Hon. Lydia reported in, The 1978–79 Budget: Concluding Speech, p. 9Google Scholar;

31. Financial Secretary, The 1981–82 Budget, p. 18.

32. Ibid. p. 57, and The 1983–84 Budget, pp. 15–16, in which the objective of reducing public sector growth to GDP growth is emphasized.

33. The guidelines and statistical out-turns are reported in Budget speeches.

34. The 1974–75 Budget puts the problem in the context of new 10-year projections, pp. 22, 31–34, 42. There are further comments in The 1975–76 Budget, p. 22. The development of thinking as capital revenues grew is shown by The 1981–82 Budget, p. 147 and comments by The Governor, H. E., Annual Address to Legislative Council, 10 1980, p. 4Google Scholar;

35. SirCowperthwaite, John in, Hong Kong Standard, 20 06 1976Google Scholar;

36. Compare the long-run data quoted in, Beck, Morris, “Towards a theory of public sector growth,” Public Finance, No. 2 (1982), pp. 163–71Google Scholar;

37. The Hon.SirGordon, S. S., Hong Kong Hansard, 1966, pp. 114–15Google Scholar;

38. Financial Times, 7 July 1980; ibid. 21 June 1982; South China Morning Post, 10 December 1981; Hong Kong Standard, 2 March 1983.

39. Quoted in Press Release, Hong Kong Government London Office information file, Economic Planning and Development, 338, 1976–1978Google Scholar; SirChung, S. Y. is quoted in The 1978–79 Budget: Concluding Speech, pp. 26–33Google Scholar; MrWong, T. W., deputy director of Hong Kong Industries, is quoted in, South China Morning Post, 17 11 1981Google Scholar;

40. Interesting comparative material on these economies is in, Lee, Eddy(ed.), Export led Industrialisation and Development, International Labour Organization, Geneva, 1981Google Scholar;

41. Report of the Advisory Committee on Diversification, 1979. Recent comment on progress is included in, H.E. The Governor, Annual Address to the Legislative Council, 10 1982, paras 22–24Google Scholar;

42. Hong Kong Hansard, 1975–76, pp. 226–27.

43. Discussed in a perceptive monograph, L. Meier, Richard, The Performance of Cities. An Assessment of Hong Kong and its Future (Berkeley: University of California. Institute of Urban and Regional Development, 1970)Google Scholar;

44. Quoted in a comprehensive survey, Jao, Y. C., “Dependence is a two way street,” Far Eastern Economic Review, 20 01 1983Google Scholar;

45. See note 44, supra, and data quoted in, Hong Kong and Shanghai Banking Corporation, Hong Kong Economic Report, 01 1983Google Scholar;

46. See papers in, Howe, Christopher, Shanghai: Revolution and Development in an Asian Metropolis (Cambridge: Cambridge University Press, 1981)CrossRefGoogle Scholar;

47. Accessible materials on the Special Economic Zones and China's policy towards foreign investment are in the Hong Kong Economic Reporter, particularly issues published in the first half of 1982.

48. H.E. The Governor, Annual Address to the Legislative Council, 10 1979, especially paras 15–18Google Scholar; See also materials cited in note 25, supra.