to high office in the colony. It bolstered the anti-Chinese bias of
old-school colonialists, giving them an opportunity to say, “See! When
you give those Chinese a good job, they sell you out.”
The stream of political abuse which Peking had directed at Hong Kong
for a decade was superseded in 1960 by a stream of fresh water flowing
at the rate of 5 billion gallons a year. On November 15, 1960, the two
governments signed an agreement under which Red China was to tap its
newly built Sham Chun reservoir, two miles north of the colony border,
to provide an auxiliary supply for Hong Kong. The colony put up its
own pumping station and laid ten miles of steel pipeline, four feet in
diameter, to convey the water to its own large reservoir at Tai Lam,
near Castle Peak. The water began flowing in December, 1960, and the
arrangements for receiving and paying for it have proceeded smoothly
since then.
No one has assessed the symbolic or political significance of the deal,
which meets only a small fraction of the colony’s water needs, but it
disconcerts many American tourists.
“Do you mean to tell me I’ve been drinking Communist water?” they ask.
Most of the food they ate in Hong Kong probably came from Red China,
but water is different. Some of them eye it suspiciously, as if they
expected it to have a reddish hue or to contain traces of poison. The
water is purified and filtered in Hong Kong, however, and thus far it has
maintained a crystal-clear neutrality.
The life-or-death issue between Red China and Hong Kong is one that may
not be decided until June 30, 1997, the termination date of the New
Territories lease. If it is not renewed, more than 90 percent of the
colony’s land will revert to China, leaving Great Britain with Hong Kong
Island, most of the Kowloon Peninsula and Stonecutters Island.
If China refuses to renew, as she has a clear legal right to do under the
terms of the 99-year lease, she will get much more than the land itself.
With it will come the colony’s only modern airport, practically all its
productive farmland, its chief industrial centers at Tsuen Wan and Kwun
Tong, by far the greater part of its reservoirs and water-supply system,
from one-third to one-half its population and all its mineral resources
except a few quarries and clay pits.
“It would be folly to try to foresee what will happen in thirty-five
years,” said one of the colony’s principal officials in 1962. “In this
age of fission and fusion, it’s impossible to see even five years ahead.”
On one point, there is little doubt among the colony’s officials: without
the New Territories, Hong Kong would be untenable.
Outside of the colony, the 1997 deadline looms like doom; inside,
it is just another of those far-off worries, like an epidemic or a
catastrophic typhoon. Everyone knows it is coming; meanwhile, they go on
making money, putting up new factories and hotels and planning gigantic
public works.
Some of the colony’s leading businessmen expect the Chinese Communists,
or any other power ruling the mainland in 1997, to drive a tough bargain
for the New Territories and then renew the lease for another 99 years.
Red China, which holds all the cards, hasn’t tipped its hand.
CHAPTER FOUR
Industrial Growth and Growing Pains
“Some are born great, some achieve greatness, and some have
greatness thrust upon them.”—SHAKESPEARE, _Twelfth Night_
In 1951 the economy of Hong Kong set two memorable precedents; it reached
the highest level in the colony’s 110-year history and then fell flat on
its face. When the year ended, it looked as if Hong Kong was finished as
a world trading port.
Twelve months earlier all indicators had pointed toward a continuing
boom. Red China, frantically buying goods to equip itself for the
Korean war, had pushed the colony’s trade volume to an all-time high of
$1,314,000,000 in 1950. Buying continued at the same furious rate until
May 18, 1951, when most of the trade was choked off by the United Nations
embargo on shipments to Red China. Even so, Hong Kong’s total trade
volume reached a new high of $1,628,000,000 in 1951.
The U.N. embargo administered the _coup de grâce_ to the crown colony
trade with Communist China, but it was only the last of a series of trade
restrictions arising from the Korean war. The United States embargoed
all its trade with Red China when the conflict broke out in June, 1950,
and at first included Hong Kong in the ban. The colony voluntarily
stopped its trade with North Korea in the same month and banned a list of
strategic exports to Red China in August, 1950. In December, 1950, and
March, 1951, the colony increased its list of strategic items banned for
export to China.
The cumulative effect of these restrictions, which were critically
important in checking Chinese Communist aggression, was to push Hong Kong
to the edge of economic disaster. With the loss of the China trade, the
colony lost half its export market and about one quarter of its imports.
This was the trade which had always been the main reason for the colony’s
existence.
Prospects for reviving the China trade when the Korean war was over did
not look encouraging. Long before the embargoes and restrictions had gone
into effect, the Chinese had begun to shift their trade from Hong Kong to
Soviet Russia and Europe.
Hong Kong had grown and prospered on its ability to receive, process
and reship the products of others, but its own productive capacity was
insignificant. With a few minor exceptions, its industries—chiefly the
building, repairing and supplying of ships—existed to serve its trade.
Its banks and insurance companies, too, lived almost entirely on the
colony’s trade. Accordingly, when trade collapsed toward the end of 1951,
the whole economy of the colony came crashing down with it.
In the aftermath of the 1951 debacle, there was at first no thought of
substituting industry for trade. For a variety of reasons, industry in
the colony had never been developed independently of trade. Certainly
Great Britain had not established the colony to produce goods which
would compete with English manufacturers. The Hong Kong market was too
small and its people generally too poor to support its own industries.
There was no tariff wall to protect the colony’s goods from outside
competition, and this factor alone had stifled several early attempts to
launch local industries.
Many natural handicaps combined to make the colony a most unlikely place
for industry. Its mineral resources were few and limited in quantity.
It had no local source of power to run a plant. Its water supply was
chronically short of ordinary needs and suitable land for factories
was scarce and expensive. The colony could not raise enough food nor
provide enough housing to take care of its potential factory workers.
And if anyone were imprudent enough to invest his money in an expensive
industrial establishment, how could he be sure that the Reds would not
move in and take it over, just as they had grabbed the mills and plants
of Shanghai?
The colony had a few assets worth noting, however. Its government was
stable and orderly, and had attracted a heavy influx of capital from
pre-Communist China and the shaky regimes of Southeast Asia. Its banking,
shipping and insurance services were the most efficient on the mainland
of Asia, and its merchant community had well-cultivated connections with
the world market. Its sheltered deep-water harbor was one of the best in
Asia.
The colony’s possibilities as a future industrial power were further
enhanced by an unlimited supply of cheap labor and the immigration of
skilled workers and experienced industrialists from Red China. Its labor
unions numbered in the hundreds, but were so weakened by factional
fights and political objectives that they were unable to drive a hard
bargain in wage negotiations. Under Imperial Preference and the Ottawa
Agreements of 1932, colonial products paid a lower tariff rate within the
British Commonwealth than their foreign competitors.
Finally, any industry in Hong Kong could rely on one intangible asset of
unique value; the character of the average Chinese workman. In most cases
he was a refugee, uneducated and penniless but determined to reestablish
himself with any job he could find. Having landed a job, he worked at it
with a diligence, energy and skill that astounded Western observers.
Although industry had accounted for a very minor part in the colony’s
economy before 1951, its beginnings go back to the earliest years. Its
first recorded product was the eighty-ton vessel, _Celestial_, built and
launched by Captain John Lamont at East Point, on Hong Kong Island, on
February 7, 1843. The California gold rush of 1849 and the Australian
gold strike two years later caused a shipping boom in Hong Kong as
scores of sailing ships carried Chinese labor to work in the goldfields.
Shipbuilding expanded rapidly, a dry dock was constructed on the island
and a whole new industry of refitting and supplying ships came into
being. A foundry for the casting of ship cannon was established in the
same era when cannon were the only valid insurance against South China’s
coastal pirates.
A group of ship-repair yards was consolidated in 1863 as the Hong Kong
& Whampoa Dock Co., which subsequently sold its Chinese facilities and
established its headquarters at Hung Hom, on Kowloon Bay. The Taikoo
Dockyard & Engineering Co. began operations at Quarry Bay, on the north
shore of Hong Kong island, in 1908. Between them, the two yards have
completed nearly 1,400 ships, ranging from large cargo and passenger
vessels to light harbor craft. Each company employs about 4,000 men,
which is still the largest number employed by any Hong Kong industrialist.
These two companies, equipped to build 10,000-ton ships and capable of
repairing practically any ocean liner that enters the harbor, remain the
giants of local industry. But where they and about two dozen smaller
shipyards employed 28 percent of the colony’s industrial workers in 1938,
they now hire around 3 percent. Theirs is not a declining industry, but
it has become a hopelessly outnumbered one.
The colony’s oldest export industry has a rather spicy history,
antedating the establishment of Hong Kong by at least twenty years. A
Cantonese hawker with an eye for trade discovered that the roots of
the ginger plant when boiled in syrup had a strong appeal for British
traders. Following the line of the most susceptible palates, the
merchant, Li Chy, moved his ginger-preserving plant to Hong Kong in
1846. Some helpful soul introduced the product to Queen Victoria, who
was so taken with its flavor that she made it a regular dessert at royal
banquets, and suggested that it be named the “Cock Brand.” Whether or
not the Queen’s intervention actually occurred is open to question, but
there is no doubt that preserved ginger became a favorite English and
European delicacy. Li Chy’s Chy Loong Co. and a dozen eager imitators
kept Caucasian tongues tingling until 1937, when U Tat Chee, the Ginger
King, formed a syndicate to standardize quality and prices. During the
Korean war, the United States detected a perceptible Marxist taint in
the ginger that grew in Red China and banned its importation. A more
democratic strain was then planted in the New Territories, and with
suitable documentary evidence, permitted to enter the United States.
Preserved ginger exports currently bubble along at 225 tons a year,
pleasing overseas tastes and being credited by the Chinese with curing
the lesser debilities of old age.
Sailing ships were insatiable rope-consumers, and from this demand grew
the Hong Kong Rope Manufacturing Co., formed in 1883, and still doing
business in Kennedy Town at the west end of Hong Kong Island.
The Green Island Cement Co., founded in Macao and transferred to Hong
Kong in 1899, drew most of its raw materials from outside the colony
to supply the local building industry. After replacing a kiln and four
grinding mills hauled away by the Japanese in World War II, it got back
into production in time to ride upward with the postwar building boom.
The Taikoo Sugar Refinery Co., established in 1884, was one of the first
local companies to provide houses for its workers. Extensively modernized
in 1925, it prospered until the Japanese looted and wrecked its plant so
thoroughly that it was unable to resume production until the fall of 1950.
A 55,000-spindle cotton mill made a pioneer beginning in 1898, but the
unrelieved humidity of the climate damaged its machinery and impaired its
efficiency. Stiff competition did the rest and it was out of business
before World War II. Flour mills and shell-button factories prospered for
a time, then wilted in the heat of competition.
As cattle country, Hong Kong is slightly superior to the Sahara Desert.
Nevertheless, Sir Patrick Manson, a doctor who specialized in tropical
medicine, decided to establish a dairy company in 1886. He leased 330
acres of semi-vertical pasture from the crown and his first herd of 80
cows clambered and skidded around its dizzying slopes for a decade until
an epizootic of rinderpest exterminated them. A new herd which soon
outgrew its pasturage was stall-fed thereafter, living on fodder grass
hand-gathered by patient Chinese women. Today’s herd includes about half
the colony’s 3,000 dairy cows and is the chief domestic source of milk
and butter. The dairy company has proliferated into a nutritional combine
called The Dairy Farm, Ice & Cold Storage Co., which runs a chain of food
stores, restaurants, soda fountains and ice and cold storage plants.
The match-making industry, dating from 1938, offers a gloomy illustration
of Gresham’s Law. Factories were built on Peng Chau, To Kwa Wan in
eastern Kowloon and at Yuen Long in the New Territories, turning out
tiny, cheap wooden matches. Factory equipment was primitive, wages low
and the matches, more often than not, splintery and unpredictable. At
its peak in 1947, the industry employed almost 1,000 workers, chiefly
women. Then Macao entered the market with still lower wages and skimpier
matches. Every box of Macao matches ought to bear the warning: “Take
Cover Before Striking Match,” but they far outsell the colony product.
They have also done a lot to stimulate the manufacture of low-cost
cigarette lighters.
Because of the colony’s habitual preoccupation with trade, many of its
industries existed for decades without attracting much attention outside
their own circle of customers. With the collapse of trade in 1951,
they assumed such unexpected importance that they seemed to have been
invented for the occasion. Some of them, like the printing and beverage
industries, were a century old. Cosmetics, furniture manufacturing and
the fabrication of nails and screws dated from the early 1900s. Three
industries of considerable importance in the export market—electric
batteries and flashlights, rubber footwear, and canned goods—had been
around since the 1920s. Enamelware, electro-plating, machinery, tobacco,
and motion picture industries appeared during the depression decade, and
the leather industry emerged in 1947.
Cottage industries, or small enterprises operating out of the home or
a back-room workshop, are as old as Chinese civilization, embracing
everything from wood and ivory carvings to musical instruments, jade,
coffins, toys, beadwork, lanterns and silk-covered New Year’s dragons.
They average perhaps a dozen employees each, and number in the thousands.
The colony government has kept a careful record of total employment in
registered factories (with 20 or more employees and subject to government
inspection) and recorded workshops (15-19 workers and subject to
inspection), but it has never had a statistical record of the number of
industrial workers outside these two categories.
There are government estimates, but no precise figures, for the number of
persons working in cottage industries, or such major industrial groups
as building construction, engineering construction, agriculture, fishing
and public transport. Estimates of the number of people working in shops,
offices, and other commercial establishments are even hazier.
A purely statistical assessment of changes in Hong Kong industry that
followed the 1951 trade collapse must necessarily be limited to the
registered and recorded industries. Luckily, it has been the registered
and recorded factories which most clearly reflected the colony’s recent
economic revolution.
Between 1947, when the postwar boom began moving, and 1951, when the U.
N. embargo was imposed, the number of registered and recorded industries
rose from 1,050 to 1,961 and their employed force nearly doubled. The
colony’s trade had been shooting upward at almost the same rate, and the
Net Domestic Product (the total value of all its goods and services) had
increased by 75 percent.
The embargo halted the trade boom and reduced its volume by almost
one-third in 1952. Not until 1960 did the total climb back to the record
level of 1951. Colony traders, abruptly cut off from the China mainland
market, had to find new markets or liquidate their accumulated stocks.
Some found new markets in Southeast Asia; others liquidated their
stock for whatever it would bring. Colony imports rose uncomfortably
above exports, investment capital began searching around for better
opportunities outside Hong Kong and unemployment became an additional
cause for anxiety.
One obvious need was to step up the colony’s export volume at once. It
was in this situation that the “poor relation” in Hong Kong’s economy—its
industry—came into its own.
Despite its rapid postwar growth, the colony’s industry had supplied only
about ten percent of the products it exported. In simple desperation, the
traders invested their Korean war profits in local industry. So also did
the transplanted Shanghai industrialists who had lost their factories
to the Chinese Communists but had retained their capital and managerial
skills. The effect on Hong Kong was basic and far-reaching.
After a two-year period of readjustment, the number of industrial
undertakings, or individual registered and recorded manufacturers,
increased at the rate of 500 a year. Employment in the industries more
than doubled; by the end of 1961, the colony had 6,359 companies with
271,729 workers. The climb continued into 1962.
Local industry, which had once contributed only ten percent of the value
of colony exports, contributed more than seventy percent by 1962. Trade
had made its comeback by then, but it showed no sign of regaining the
dominant position it had occupied until 1952.
Entirely without warning and almost against its will, Hong Kong had
become a manufacturing center instead of an entrepôt. New industries
had cropped up from nowhere, taken a firm hold and climbed to the most
important positions in the colony’s productive economy. A few of the
old industries had slumped, but most were expanding with the general
prosperity.
During the uneasy two-year period of transition from trade to
manufacturing, the colony had to lay down two sets of regulations to
stabilize its trade relations with Japan and the United States.
Japanese industry, swiftly reviving during the American Occupation, began
pouring cotton yarn and piecegoods, household utensils and metalware into
the Hong Kong market. In 1952, Hong Kong imported four times more from
Japan than it exported to her. But the colony was less concerned about
export-import balances than it was over reducing the Sterling Area’s
adverse balance of payments with Japan. Japanese imports were tightly
restricted or suspended from early in 1952 until the second half of 1953.
Meanwhile, local industries enjoyed a welcome breather from Japanese
competition, especially in their home market.
Restoration of trade with the United States was essential. The volume of
this trade had taken a steep dive after the U.S. and U.N. embargoes
on trade with China, and the United States wanted no Communist products
funneled through Hong Kong, nor any Red Chinese raw materials fabricated
in the colony. The Hong Kong Commerce and Industry Department and the
U.S. Treasury Department finally worked out a solution: the Comprehensive
Certificate of Origin, covering every kind of goods that might be
suspected of Red Chinese origin. Among these were silk, linen, cotton,
jade, furniture, Chinese antiques and handicrafts. Goods of North Korean
origin were similarly classified.
In enforcing the Comprehensive Certificate of Origin regulations, the
Commerce and Industry Department directly supervises the raw material
supply and the finished products of the factories; in some cases, it
seals the goods after examination and keeps them under surveillance until
they are exported. Severe legal and administrative penalties are slapped
on manufacturers or dealers who are caught falsifying a Comprehensive
Certificate of Origin. The colony government protects the validity of
the certificates to insure trade relations with its biggest customer,
and because it gives the colony a monopoly on certain goods for which
Red China would otherwise have the market sewed up. The most vociferous
critics of the Comprehensive Certificate of Origin are American tourists
who recoil from it as if they had been handed two sets of income-tax
demands for the same year.
With the road clear for industrial expansion, the response was
overwhelming, and more than half the growth came in six light industries.
Between 1948 and 1958, the six light-industry groups showed these
increases in employment: garment-making, 20,000; metal products, 13,000;
cotton spinning, 11,000; cotton weaving, 9,000; plastic wares, 8,000; and
rubber footwear, 3,000.
At the end of 1961, registered and recorded industries employed a round
total of 272,000 persons, with 42 percent of these workers concentrated
in two categories; textile-making with 69,000, and garment-making with
45,000. Metal products were third in line with 28,000. Shipbuilding and
ship-breaking employed 13,000. Plastics, non-existent until 1947, had
separated into two major industries, plastic wares and plastic flowers,
with each employing around 13,000 workers. Food manufacturing, printing
and publishing, rubber products, machinery, electrical apparatus and
chemicals were the other leaders. In the metal-products line, just one
of its many specialized products, the manufacture of flashlight cases,
employed more than 6,000 persons.
The success of Hong Kong’s light industries is typified by three of its
leaders in plastics, textiles and metal wares. The Three Ts—H.C. Ting, P.
Y. Tang and John Tung—were prosperous Shanghai industrialists when the
Chinese Communists closed in on them. Each one managed to reestablish
himself in Hong Kong as the head of a major industry. Together, they
represent one of Red China’s unintentionally generous gifts to the
colony—the exodus of capital and management skill. A whole new complex
of tall, modern buildings in the North Point section of Hong Kong Island
called Little Shanghai is a monument to this newly arrived capital.
H. C. Ting, managing director and principal owner of Kader Industrial
Co., Ltd. at North Point, began as a battery salesman for a Shanghai
factory, set up his own company, the Wei Ming Battery Works, in 1925, and
began tinkering around in a laboratory to develop a long-lived battery.
He picked up his chemistry as he went along and painstakingly dissected
hundreds of messy cells until he evolved a really durable battery that
sold well. He branched into flashlights, bulbs and carbon rods, survived
the Japanese invasion of China and planned to try his luck in the
plastics industry after the war. Foreign exchange limitations made it
impossible to equip a plastics factory in Shanghai, so he sent a group of
his employees to Hong Kong in 1947 with instructions to set up a plant.