Industrial growth with its increasing demand for capital
equipment and raw materials and consequent diversification of products
is bound to affect the trade pattern of an economy. The extent of such
effects depends on a host of conditions, the more important of which
include 1) the size, geogra¬phical location, and resource endowments of
the economy, 2) the relative importance of external trade, 3) the level
of economic development, 4) the motivation and model of industrial
development, and 5) the insti¬tutional framework. These factors operate,
in the case of Hong Kong's industrial growth, to generate greater
effects on external trade. Hong Kong, with a total land area of less
than 400 square miles, is endowed with negligible natural resources for
industrial purposes, while economic development remains at a stage of
almost complete reliance on imported capital equipment. On the other
hand, it is favoured by a shel¬tered deepwater harbour and a
geographical location at the south gate of Mainland China with easy
accessibility to all parts of the Far East. Conse¬quently, entrepot
trade flourished and predominated in the Hong Kong economy prior to the
rapid industrial growth in the 1950's. The develop¬ment of this trade
and the necessary facilities (such as banking, insurance, shipping,
shiprepairing and warehousing services) has been, to a large extent,
responsible for the entrepreneurs' global outlook and the export
oriented industrial development. Such a course is faciUtated by
government policy under which trade, industry and foreign exchange are
subject to minimal controls, and duties are levied only on a very few
commodities for revenue purposes.