China and the Origins of the Hong Kong Miracle Economy

In the postwar era Hong Kong experienced some of the fastest economic growth in world history, posting double digit GDP increases for nearly two decades and earning a place among the East Asian miracle economies. Whereas scholars of Japan, South Korea, and Taiwan have shown how state intervention in the economy led development, Hong Kong remains an exception to the developmental-state thesis. Existing understandings of Hong Kong development acquiesce to the neoclassical position of free trade, or at best show minimal state support in peripheral areas. Focusing on Hong Kong’s rapid industrialization in the 1960s and 1970s, I shift attention from exports and trade to production processes. Tracing the origins of machine tools in Hong Kong and how they formed the backbone industrialization and production, this study offers a new explanation to the Hong Kong miracle. I argue that China acted like a developmental state in Hong Kong, both providing subsidized machine tools to the Hong Kong market and working with firms to design and customize machinery. The provision of these machine tools enabled Hong Kong firms to development their brand of guerrilla capitalism and emerge as the world’s largest exporter of toys, electronics, and garments.