ABSTRACT
It was argued in Chapter 1 that the wider international political and economic environment in which Hong Kong emerged in the post-war period was instrumental in determining the financial relations of the colony. This chapter seeks to position Hong Kong in the Asian economy of the immediate post-war period by examining in detail the turbulent relationship with China, culminating in the withdrawal of China from the international economy in the 1950s. The Civil War and the subsequent Communist government in China had profound effects on international trade and payments in Hong Kong. Through the 1960s and 1970s, China was separated from most international economic contact partly by excluding itself and partly by being shunned by the West, but it maintained banking and trade links with Hong Kong. The pragmatic and low-profile relationship of these later decades was forged out of the chaos and conflict of the immediate post-war period. The events of these years exposed the opportunities as well as the difficulties presented by the close operation of two distinct economic regimes, and the impossibility of completely separating Hong Kong from the Chinese economy.
