Economic Liberalization in China and Structural Adjustment of Hong Kong Manufacturing

Economic liberalization and openness in China beginning 1979 helped the establishment of the Special Economic Zones in the early 1980's and the opening of the Pearl River Delta region in mid- 1980's. The policy successfully provided adjacent land and cheap labor for Hong Kong enterprises especially for smaller firms to prolong their labor-intensive productions in the form of cross-border operations. The findings of this survey study showed that the portions of production which moved outward were mainly semi-skill labor-intensive and land-use intensive operations in direct fabrication, processing, and assembly. However, processes with significant service content and of management intensive nature at the upper stream and lower stream were still mainly performed in Hong Kong. Further, a transformation of manufacturing processes to a more service-oriented state was found for local industries. From the view of political economy. the Hong Kong case illustrates a rather unique experience to illustrate regional economic mutual dependence and integration with approximately free factor mobility and free trade, according to the belief of classical theory.