Hong Kong Economic History

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<ul><li>1.SOSC005Hong Kong Economic History CHEN, Y.C.Assistant ProfessorDivision of Social Science[email_address]</li></ul><p>2. Overview </p> <ul><li>I. The Early Colonial Economy (1840-1860) </li></ul><ul><li>II. The Rise of Chinese Capitalist (1861-1941) </li></ul><ul><li>III. Integration with China before the Crisis(1980-1997) </li></ul><ul><li>IV. Integration after the 1997 crisis</li></ul><p>3. </p> <ul><li>Early Colonial Economy</li></ul><ul><li>(1941-1960) </li></ul><p>4. The Occupation </p> <ul><li>British was the 18 thcentury colonial empire that colonized many territories.</li></ul><ul><li>By 1899, British has occupied land that is 61 times larger than it own territory.</li></ul><ul><li>On 26 Jan 1841, British occupied the Hong Kong island, and began a 150 years of colonization </li></ul><p>5. Why British occupied Hong Kong?</p> <ul><li>Mainly commercial interest </li></ul><ul><li><ul><li>A place to fix their commercial boat after a long journey </li></ul></li></ul><ul><li><ul><li>A place where British merchants were under direct protection of British military might.</li></ul></li></ul><ul><li>Materials support for the British army in the Opium War 1940-1942.</li></ul><p>6. Hong Kong as free-trade port </p> <ul><li>4 months after British occupied Hong Kong in 1841, Hong Kong was declared as free-trade port </li></ul><ul><li><ul><li>All vessels from China or Chinese merchants that came to Hong Kong for trade did not have to pay any form of taxes.</li></ul></li></ul><ul><li><ul><li>Until today, Hong Kong only tax on limited goods such as cigarette, alcohol, drinks, cosmetic.. etc.</li></ul></li></ul><ul><li>There were no restriction import goods in term of warehousing, categorization, re-manufacturing, repackaging nor re-export.</li></ul><p>7. Why free-trade port?</p> <ul><li>Hong Kong lack of natural resources and exportable goods </li></ul><ul><li>Food and other consumer goods need to be imported </li></ul><ul><li>Good transportation location </li></ul><ul><li>Good natural harbor</li></ul><ul><li>Strong British colonial army to protect the port and trade security, e.g. fight the pirates.</li></ul><p>8. Build infrastructure</p> <ul><li>Land office was erected in 1841 to measure and divide the land for auction (for sale).</li></ul><ul><li>By 1846, all the lands in the Victoria city was auctioned (or rented) out except military and government land.</li></ul><ul><li>There were residential buildings, offices for the European, warehouse and some factories.</li></ul><p>9. Early economic ordinances ( ) </p> <ul><li>1843 LEGCO was established and many important economic ordinances was released. </li></ul><ul><li>1847 </li></ul><ul><li>1856 </li></ul><ul><li>1866 </li></ul><ul><li>1875 </li></ul><ul><li>1877 </li></ul><ul><li>1883 </li></ul><ul><li>1885 </li></ul><ul><li>1886 </li></ul><ul><li>1888 </li></ul><ul><li>1892 </li></ul><p>10. Three main industries</p> <ul><li>Import and export trading </li></ul><ul><li><ul><li>Hong Kong has a natural harbor. By 1848, the number of British vessels (457), American vessel (118), and Chinese (42) and Spanish (23).</li></ul></li></ul><ul><li><ul><li>Hong Kong was a mid-way trading center between China, Britain and India.</li></ul></li></ul><ul><li><ul><li><ul><li>Indian cotton and opiumChina </li></ul></li></ul></li></ul><ul><li><ul><li><ul><li>Chinese tea and silverBritain and India </li></ul></li></ul></li></ul><ul><li><ul><li><ul><li>British industrial goods (textile, cigarette)China.</li></ul></li></ul></li></ul><ul><li><ul><li>British trading companies in Hong Kong monopolized the trade.</li></ul></li></ul><ul><li><ul><li><ul><li>The two main trading items were opium and Chinese bonded labors. </li></ul></li></ul></li></ul><p>11. Shipping industry </p> <ul><li>Many British companies built vessels for</li></ul><ul><li><ul><li>Trade between Hong Kong, China, India and the West. </li></ul></li></ul><ul><li><ul><li>Taking passengers on routine routes, such as , , , , .</li></ul></li></ul><ul><li>Peninsular and Oriental Steam Navigation Company ( )Jardine Matheson &amp; Co ( )were largest shipping companies that engaged in opium trade.</li></ul><p>12. Ship Building Empire </p> <ul><li>To strengthen long-distance navigation and navy power, British colonial government continuously support shipping industry, more than other industries.</li></ul><ul><li>1863 Whampoa Dock Co. ( ) </li></ul><ul><li>1888 with the assistant of British Navy, Whampoa Dock Co. built a new shipping dock atthat can accommodate the largest British Navy fleet.</li></ul><p>13. Banking Industry </p> <ul><li>Many British banks were established to provide trading services.</li></ul><ul><li><ul><li>Import and export financing </li></ul></li></ul><ul><li><ul><li>Credit insurance.</li></ul></li></ul><ul><li>Oriental Banking Corporationfocused on opium trading services.</li></ul><ul><li>Standard Chartered Bankwas the largest remittance service ( ) between China, Britain and India.</li></ul><p>14. Illegal Opium Trade </p> <ul><li>Opium trade continues to be the major trading item in the early Hong Kong colonial history, especially after the Treaty of Nanjing ( ) in 1942 that granted British trading rights and privileges in five Chinese ports. </li></ul><ul><li>Almost every British trading companies (12 largest) in Hong Kong involve opium trade.</li></ul><ul><li>In 1847,86.5%of Hong Kong total export was opium.</li></ul><ul><li>The large opium vessel entered Hong Kong harbor and reloaded on to smaller vessel, and shipped to Shanghai.</li></ul><ul><li><ul><li>There were 40 opium pontoons ( ) along the China coastal region. Most of them belong to the British companies </li></ul></li></ul><p>15. Coolie Trade </p> <ul><li>In 1847, the gold rush in San Francisco and gold mine discovery in Australia 4 years later stimulate the coolie trade in Hong Kong.</li></ul><ul><li>Young male workers were smuggled to Hong Kong by Chinese brokers . They were forced to sign a contract to work continuously to repay their travel and food expenses.</li></ul><ul><li>Theseindentured labor ( ) were then shipped to the U.S., South America, Australia and Southeast Asia.</li></ul><ul><li>25% of coolies dies in the journey between 1850-1856.</li></ul><p>16. Good Business </p> <ul><li>1851 - 1872, around 320, 000 coolies were exported from Hong Kong.</li></ul><ul><li>Shipping company made $90,000 for each trip.</li></ul><ul><li>Coolie trader made $160-283 per coolie sale.</li></ul><ul><li>1851-1875, the annual revenue of coolie sale was 3.4 million. </li></ul><p>17. Early Colonial Economy </p> <ul><li>1841-1843: British military used Hong Kong as a entry port to supply military resources during the Opium War.</li></ul><ul><li>1844-1848: After the Nanjing Treaty, Hong Kong trade decreased because merchants could enter freely into the 5 ports in China.</li></ul><ul><li>1949-1860: capital accumulated from illegal opium and coolie trade were reinvested in Hong Kong. Hong Kong become thetransit trade center( ).</li></ul><ul><li>Hong Kong financed 1/4 import to China 1/3 of the export from China</li></ul><p>18. Urban Land Development </p> <ul><li>In 1858, most trading companies set up their headquarters in Hong Kong.</li></ul><ul><li>The increase in real estate price stimulated colonial government to reclaim new land. Most auctions went to 25-30 Western trading firms. </li></ul><ul><li>They dominated real estate business through construction of offices, shop houses, residential, warehouse and port.</li></ul><ul><li>By 1855, colonial government had reached balanced budget, and thus did not need any budgetary subsidy from the British government.</li></ul><p>19. </p> <ul><li>Mid Colonial Economy</li></ul><ul><li>(1861-1941) </li></ul><p>20. The Rise of Chinese Capitalist Class </p> <ul><li>Chinese capitalist class formation started by working as broker for their British companies.</li></ul><ul><li>Chinese merchants from China and oversea brought capital to Hong Kong and opened stores and trading firms.</li></ul><ul><li>The began trading in China, and later expanded to international trading.</li></ul><ul><li>The numbers of Chinese business in Hong Kongincreased from 35 in year 1858 to 393 in 1881.</li></ul><p>21. From collaborators to competitors </p> <ul><li>Colonial government encouraged Chinese capitalist to invest in Hong Kong because they were good business collaborators who have good connection with China and oversea Chinese networks, and have good knowledge of the markets.</li></ul><ul><li>At the end of 19 thcentury, many Chinese capitalist gradually became the competitors of the Western Capitalist.</li></ul><p>22. The naturalization of the Chinese capitalist class </p> <ul><li>The 8 thgovernor John Hennessy understood that they could not isolated 95% of the Chinese population, especially the Chinese capitalist class.</li></ul><ul><li><ul><li>The Chinese was crucial to British business interest.</li></ul></li></ul><ul><li><ul><li>90% of colonial government revenue came from the Chinese. </li></ul></li></ul><ul><li>Against segregation, Hennessy allowed Chinese elites to live in the European area ( ), become Legco member, enter the town hall freely </li></ul><ul><li> Chinese Naturalization Ordinance was passed to provide British citizenship to the Chinese elites. </li></ul><p>23. Chinese Business </p> <ul><li>Manufacturing : Small scale light industries have emerged textile, food and drink industries. Grew faster after 1 stWar World. </li></ul><ul><li>Retailing : Oversea Chinese started retailing. , , , .</li></ul><ul><li>Banking : Bank of East Asia ( ) and other Chinese banks were established. Together with traditional , , , Chinese slowly became the third largest financial power. </li></ul><p>24. Banking Industry </p> <ul><li>They were around 30 banks. 10 British banks, 8 Chinese banks and other foreign banks. Their main business was import/export service with China, only little went to investment service.</li></ul><ul><li> was popular among Chinese, provide loan service.</li></ul><ul><li> provided low interest loan for working class community </li></ul><ul><li> work as a cooperation among individuals led bybased on trust. It is a cheaper way of getting personal loan.</li></ul><p>25. Chinese labors </p> <ul><li>Chinese working class was highly discriminated by the British colonial government and their Chinese bosses.</li></ul><ul><li>Their salary was 1/500 of the governor and 1/15 of the lowest rank civil servant.</li></ul><ul><li>If they created trouble, they will be punished as criminals .</li></ul><p>Great Guangzhou-Hong Kong Strike in 1922 26. Worker strikes </p> <ul><li>There were many strikes in which workers demand better wages or protest against war.</li></ul><ul><li>1872 ; 1883 ; 1888 ; 1895 , </li></ul><ul><li>In 1922, 6000 workers from Seamans Union (SU) went on strike for 56 days. It was joined by 30,000 workers.</li></ul><ul><li>The Union had an armed militia that enforced the strike and blockaded all food by rail or sea.</li></ul><ul><li>Tens of thousands of strikers and their families left Hong Kong for Canton where the local government housed, fed and paid them a wage.</li></ul><p>Great Guangzhou-Hong Kong Strike 1922 27. Economic diversification </p> <ul><li>Colonial government continued its free-trade port policy.</li></ul><ul><li>Greater special rights are given to British companies, while absorbing Chinese business elites.</li></ul><ul><li>HSBC, , conglomerates that represented British interest have become very dominant </li></ul><ul><li>Economy has diversified from coolie and opium sales to more trade, finance and manufacturing. At the same time, construction, public infrastructures, local business and services began to take off as population increase rapidly. </li></ul><p>28. </p> <ul><li>Late Colonial Economy (1945-1997) </li></ul><p>29. Japanese Occupation (1941-1945) </p> <ul><li>Japan occupied Hong Kong for 3 years and 8 months during the WW II.</li></ul><ul><li>They took over all the British and foreigners banks and their assets.</li></ul><ul><li>Hong Kong currency was banned.</li></ul><ul><li>Hong Kong population decreased from 1600 thousands in 1941 to 600 thousands in 1945.</li></ul><ul><li>All economy activities stagnant.</li></ul><p>30. Positive Non-interventionism </p> <ul><li>After British took back Hong Kong in 1945,the governor continue free trade economic policy in Hong Kong.</li></ul><ul><li>However, the unregulated banking sectors were engaged in fierce competition, which led to Banking crisis in the 1960s. Government begin to regulate import/export of gold (1947); prohibited foreign bank to set up branch in Hong Kong (1966) ..etc.</li></ul><ul><li>Positive non-interventionism only intervene in economy at the time of major economic difficulties or crisis.</li></ul><p>31. </p> <ul><li>Abolish Foreign Exchange Control in 1973</li></ul><ul><li><ul><li>Foreign exchange transaction increase rapidly. By 1978, the daily transaction was 0.5 billion US, increase to 5 billion in 1980 and 10 billion in 1982, and 91 billion in 1995.</li></ul></li></ul><ul><li>Abolish Gold import and export control in 1974 </li></ul><ul><li><ul><li>Hong Kong gold exchange increase from 0.3 million ounces per day to 1 million at the end of 1970s. Hong Kong becomes one of the 4 thlargest gold market in the world.</li></ul></li></ul><ul><li>Relax the prohibition of bank branch in Hong Kong in 1977.</li></ul><ul><li><ul><li>Oversea banks increase from 48 in 1975 to 151 in 1995. Rank 3 rdafter the U.S. and U.K.</li></ul></li></ul><p>32. Regulation of Bank and Stock market </p> <ul><li>At the same time, government engage in close regulation to prevent the banking crisis in the 1980s)and stock market crisis (1973 and 1987).</li></ul><p>33. Industrial Development </p> <ul><li>1945-51 : Recovering from the war </li></ul><ul><li>1952-70:Rapid industrialization </li></ul><ul><li>1971-80: Finance, tourism, real estate and transportation took off.</li></ul><ul><li>1981-1997: Move from manufacturing to service.</li></ul><ul><li><ul><li>Service industry has increased from 68% in 1980 to 84% in 1996. </li></ul></li></ul><ul><li><ul><li>Manufacturing has decreased from 23% in 1980 to 7% in 1996.</li></ul></li></ul><p>34. Industrialization </p> <ul><li>1947-1950, large amount of oversea Chinesecapitalflew into Hong Kong, which was equivalent to 48% of HK national income.</li></ul><ul><li>Populationdoubled from 1945-1947, and continue to increase at 15% per year.</li></ul><ul><li>The influx of abundant capital, cheap labors and skilled labors were the pre-condition to the rapid industrialization of Hong Kong in the 1950s and 1960s. </li></ul><ul><li>With decrease in trade barrier (GATT in 1947), Hong Kong export of manufactured goods increased.</li></ul><p>35. Trade Embargo ( ) </p> <ul><li>The U.S. government announced trade embargo against China during Korean War in 1950. Under U.S. pressure, other countries follows.</li></ul><ul><li>HK Colonial government Trade and Industrial Branch also prohibited important raw-materials from import/export to China.</li></ul><ul><li>Hong Kong export fell sharply because the embargo has basically stop the trade flow between Hong Kong and China.</li></ul><p>36. Manufacturing</p> <ul><li>Due to the embargo, many HK entrepreneur decided to shift to export-oriented manufacturing ( ).</li></ul><ul><li>Traditional traders also started to trade locally produced products, instead of trade on foreign products.</li></ul><ul><li>Manufacturing firms increased from 1479 (in 1950) to 4783 (in 1960). Employees increase from 82,000 (1950) to 216,000 (1960).</li></ul><p>37. The success of manufacturing </p> <ul><li>Market demand </li></ul><ul><li><ul><li>Advanced countries phrased out labor-intensive manufacturing. HK picked up.</li></ul></li></ul><ul><li>Flexible production </li></ul><ul><li><ul><li>Hong Kong firms could produced faster, cheaper and more varieties.</li></ul></li></ul><ul><li>Entrepreneurship ( ) </li></ul><ul><li><ul><li>(niche market) </li></ul></li></ul><ul><li><ul><li>(risk taking) </li></ul></li></ul><ul><li><ul><li>(innovative) </li></ul></li></ul><p>38. Entrepreneurship in Textile Industry</p> <ul><li>In 1965, the US and UK set import quota for Hong Kong textile product. Hong Kong firms reacted by: </li></ul><ul><li><ul><li>Increase the added value of the product by improving the textile product.</li></ul></li></ul><ul><li>Facing the technical barrier from South Africa. Hong Kong firms reacted by: </li></ul><ul><li><ul><li>Innovation through trial and error, and finally overcome the technical barrier and export to South Africa. </li></ul></li></ul><p>39. Cheap labor </p> <ul><li>Between 1949-1970, more than 1 million migrants came from China, 25% of total HK population.</li></ul><ul><li>They provide the large quantity of cheap labor needed in the labor-intensive industries.</li></ul><p>40. Textile Capital and Skilled labor </p> <ul><li>Many Chinese entrepreneurs from Shanghai and Zhejiang relocated to Hong Kong during to avoid civil war in China.</li></ul><ul><li>They movedmachines and technologiesto Hong Kong. </li></ul><ul><li>They also and invitedskilled workersfrom Shanghai and Zhejiang factory to work in new Hong Kong factories.</li></ul><p>41. Semi-public government agencies </p> <ul><li>Hong Kong colonial government provided semi-public agencies to promote industrialization through provide market assessment, consultancy, technical enquiry, and training. </li></ul><ul><li><ul><li>Hong Kong Industrial Association </li></ul></li></ul><ul><li><ul><li>Hong Kong Export Credit Insurance Council</li></ul></li></ul><ul><li><ul><li>Hong KongTrade and Development Council </li></ul></li></ul><ul><li><ul><li>Hong Kong Productivity Center</li></ul></li></ul><p>42. Hong Kong Public Housing </p> <ul><li>Hong Kong public housing is crucial in providing affordable housing to poor workers.</li></ul><ul><li>It all began in a accident in 1953. Before the accident, Hong Kong government has no interested in providing housing for the poor.</li></ul><ul><li>fire happened on the Christmas Day of 1953. </li></ul><p>43. 44. </p> <ul><li> 41 164,000 </li></ul><p>45. </p> <ul><li>1953 </li></ul><p>46. </p> <p>47. Housing Authority ( ) </p> <ul><li>(1) 1955-1964 the HA need to build rapidly to replace the slum population. </li></ul><ul><li><ul><li>a. With limited resources </li></ul></li></ul><ul><li><ul><li>b. The quality of the public housing was terrible, but it successfully house 600,000 people in 9 years.</li></ul></li></ul><ul><li><ul><li>c. Public housing was a successful social control strategy.</li></ul></li></ul><p>48. </p> <ul><li><ul><li>a. Pressure from the public to improve the quality of the public housing </li></ul></li></ul><ul><li><ul><li>b. HA improved the quality, for example, 2.23.25 squared meter</li></ul></li></ul><ul><li><ul><li>c. But the n...</li></ul></li></ul>