Finance of Industry in Hong Kong 1950-70: A Case of Market Failure?
Author(s)
Schenk, Catherine R.
Abstract
Hong Kong’s industrialization was characterized by the dominance of small-scale enterprise and a strongly laissez-faire approach to finance and banking by the state. This article addresses the question whether banks failed Hong Kong’s industry by not lending to viable manufacturing customers due to structural obstacles that might have been overcome by the state. The analysis includes an investigation of the debate over a state-sponsored development bank, the efforts in the 1970s to overcome market failure through guarantees, and the lending practices of a variety of Hong Kong banks. The evidence does identify a bias in lending towards larger companies, but does not provide a convincing case of market failure. There were a variety of sources of finance in addition to bank facilities available to small business, and the efforts to overcome identified market failure have not been successful.
