Bulletin Number One 1983

Address by Professor Hsing Mo-huan Mr. Chancellor, Mr. Vice-Chancellor, distinguished guests, and friends, Today I feel greatly privileged by being able to share the honour conferred on my distinguished fellows by The Chinese University of Hong Kong. I am particularly appreciative to the University for being given this excellent opportunity to express my views about the current policy issues concerning the Hong Kong economy. I may be ridiculed for talking about this topic as if I had ignored altogether the crisis of confidence arising from the uncertainty of the future status of Hong Kong especially during the past three months. In fact, however, I have watched this unfortunate development with great concern. But I myself remain quite optimistic about the long-term prosperity and stability of Hong Kong, and firmly believe that the continuing progress of the Hong Kong economy remains the strongest pillar supporting the long-term prosperity and stability of Hong Kong. Therefore, I think the policy issues concerning the Hong Kong economy deserve all the more attention. There may be different views about the current economic policy of Hong Kong. Perhaps many people know that the Nobel Prize-winning economist Professor Milton Friedman has a very high praise for the success of economic development in Hong Kong, and he attributes this success to the nonintervention policy adopted by Hong Kong Government towards private enterprise. However, his view does not seem to be generally accepted by those who are concerned about Hong Kong's social and economic problems. Friedman was once reminded of the glaring inequality of income distribution in Hong Kong caused by the government's non-intervention policy. But he replied that it would be impossible for the continuing huge inflow of refugees in Hong Kong to be absorbed in the absence of a free market, and that would end up with an even worse income distribution. I fully agree with him on this point. In both the last and the current year, industrial exports of Hong Kong have shown signs of slowing down, both because of the world-wide economic recession and the competition from the other new industrial countries. This has led many people to suspect that something is fundamentally wrong with the Hong Hong economy. Local industrialists and their sympathizers, therefore, strongly urged Hong Kong Government to change its non-intervention policy .They particularly pointed out that Hong Kong's rivals, Taiwan and South Korea, both adopted a policy of intervention. To meet their competition, Hong Kong Government should not sit idle in the face of the difficulties now experienced by the local export industries. Since those who argued for a change in the non-intervention policy specifically referred to the interventionist industrialization policies adopted by Taiwan and South Korea, I would like to say a few more words on the latter. Owing to different backgroun of economic development of these two countries, it is true that their governments have resorted to strong intervention. However, it is worth noting that at the height of these intervention policies adopted by Taiwan in the 1950s and by South Korea in the 1960s, Hong Kong's industries developed in the climate of free competition were prospering, and nobody bothered to request the Government to change its non-intervention policy towards private enterprise. This is of course because the non-intervention policy then proved correct. The fact that Taiwan's and South Korea's industries began to be able to compete with Hong Kong's afterwards is not because Taiwan and South Korea had stepped up intervention. On the contrary, it is because they had gradually reduced intervention, thereby increasingly enhancing the efficiency of 6 NEWS