The British, who are inclined to procrastinate in the solution of small crises, can be indomitable in the face of major emergencies. Within six months after reoccupying the colony they had restored its government and society to working order. Six years after the British return, the colony was more prosperous, more congested, and more progressive than it had ever been before. Nationalist China was driven from the mainland in 1949, and a new Communist state took its place. Britain promptly recognized Red China as the ruling power on the mainland, but relations between the Chinese Reds and Hong Kong were strained by Communist-caused disturbances in the colony and shooting “incidents” at sea and in the air. There was no apparent danger of war, however. In 1951, the colony’s trade amounted to $1,550,000,000, the highest point it had ever reached. If there were signs of complacency in Hong Kong, they were erased by the outbreak of the Korean war. The United Nations clamped immediate restrictions on the colony’s trade with Red China, and Red China slashed its imports from Hong Kong. Trade volume declined still further when Hong Kong voluntarily halted its exports to Korea and the sending of strategic materials to Red China. The United States at first included Hong Kong in its embargo of all trade with Red China, but the colony prevailed upon America to ease the ban. America agreed to accept goods from Hong Kong, provided that they were accompanied by a Certificate of Origin attesting that they were made in Hong Kong and had not simply been transshipped from Communist China through the colony. With the China market gone, as well as Hong Kong’s traditional role as a transshipper to and from China, the colony executed its most spectacular economic somersault since 1841; it switched from trading to manufacturing. In six years, the great entrepôt became an important industrial producer. By 1962, over 70 percent of the goods it exported were made in the colony, and about half its workers were employed in industry. Having performed this overnight flip-flop without suffering an economic set-back, Hong Kong has become more prosperous than ever. Except that it has too many people, hasn’t enough land to stand on, can’t raise enough food or store enough water, is incessantly harried by rising tariffs and shipping costs, and has no idea what its testy, gigantic neighbor to the north will do next, Hong Kong would appear not to have a worry in the world. CHAPTER TWO An Avalanche from the North “When one reads of 1,000,000 homeless exiles all human compassion baulks and the great sum of human tragedy becomes a matter of statistical examination.”—“A PROBLEM OF PEOPLE,” Hong Kong Annual Report, 1956