Prepared By Prof Alvin So1 SOSC 188 Lecture 26 The Rise of East Asia (III): The Economic Success of Hong Kong

Prepared By Prof Alvin So2 The Modernization Explanation Strong state for Taiwan, S. Korea, and Singapore, but doesn’t apply to HK Neo-Confucianism and free market, but they always exist Fail to examine the historical factors of Asian development and socialist China

Prepared By Prof Alvin So3 Hong Kong before the Communist era Despite a British colony, HK always oriented to mainland China in terms of population, culture, and economy. No exit visa needed before 1949 Mostly an entrepot, very little industrialization

Prepared By Prof Alvin So4 First Phase (1950s) - The Industrial Revolution of Hong Kong The Chinese Communist Revolution - Create a solid border separated the HK from the mainland Economic blockage, no more China trade, massive unemployment, To survive: Re-orient HK towards the world economy The Windfall profit of the Cold War - refugee capital from all over China refugee labor willing to take any job to support their family Mainland subsidized cheap products (food, water)

Prepared By Prof Alvin So5 Why the Communists did not take back HK? HK was used to break US economic blockage earn foreign currency Harmonious capital/labor (political labor union) & harmonious Chinese/British relations - needed no authoritarian state to suppress labor & to promote export

Prepared By Prof Alvin So6 Second Phase (1960s) - Toward Diversification Triple threats - protectionism, periphery competition, labor shortages Solution – diversification of industries and exports The dynamism of small firms in Hong Kong

Prepared By Prof Alvin So7 Third Phase (1970s): Becoming a World Financial Center The opening up of East Asia (China) for investment Influx of transnational capital and the real estate boom The HK state – walking on two legs intervene more in industry (infrastructure, housing, educ) but adopt a laissez-faire policy in finance