In contrast to other late-industrializers, the colonial state of Hong Kong never pursued, nor even attempted, an interventionist development strategy during Hong Kong's postwar industrial take-off. In particular, it never interfered with the inter-sectoral flow of resources and did not provide special aid for the development of manufacturing industries. This paper argues that part of the cause of the (comparatively) more thorough adoption of a laissez-faire approach to industrialization can be found in the financial capacity of the state. Both the capitalist and the colonial nature of the Hong Kong state led to a low level of financial capacity. The other condition for laissez-faire in Hong Kong was the particular configuration of the governing coalition. When manufacturing industry was about to 'sprout' in the 1950s, the state's dominant coalition partner was the financial and commercial bourgeoisie while manufacturers occupied a marginal position in the power structure. The second part of this paper attempts to substantiate these contentions by taking a fresh look at two policy episodes surrounding the issues of industrial land and finance. It is argued that in both cases a combination of financial constraints over the state and the alliance between the colonial bureaucracy and the leading commercial and financial bourgeoisie worked to defeat both proposals for state allocation of industrial land at preferential terms (instead of by the market at the going rate through public auctions), and for the establishments of an industrial bank to supply long-term credit to manufacturers. These political defeats of the manufacturers laid the foundation of the laissez-faire strategy and steadfastly steered the state away from an interventionist industrial policy.
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