Hong Kong, which cannot produce enough food to sustain its population for more than a few months of the year, has imported an average of $200,000,000 worth of goods from Red China in each of the last three years, and food represents more than a third of the total. In the same years, Red China imported about $20,000,000 annually from the colony. Thus the Reds earned a favorable trade balance of $180,000,000 a year, giving them the foreign exchange they need as critically as Hong Kong needs food. It may be wondered why the Chinese Communists, with three successive crop failures, are willing to export any of their food. But they must earn foreign exchange to pay for grain, flour, powdered milk and sugar to save themselves from starvation, and their food purchases in the world market during 1960 and 1961 ran up a bill of $360,000,000. The whole pattern of mainland-colony trade has been reversed since 1950. In that year, their trade came to $406,000,000, or about a third of Hong Kong’s total world trade of $1,314,000,000. By 1960, the total colony-mainland trade had skidded to $228,000,000 and represented only one-seventh of the colony’s world trade volume of $1,716,000,000. In 1950, Hong Kong exported $255,000,000 to Red China, but imported only $151,000,000 from her. The crown colony still serves as a major transshipment port for China’s trade with other countries, but her importance as an exporter and re-exporter from other countries to China was painfully diminished by United Nations and United States embargoes during the Korean war. The pinch of those embargoes was so tight that it looked for a while as if Hong Kong, which had prospered on its Chinese export trade for 110 years, would wither from the loss of it. To the amazement of its economic obituary writers, the colony side-stepped its assigned grave by developing its own industries. Within a few years, Hong Kong became bigger as a manufacturer than it had ever been as a trader. Red China’s benefits from the existing trade with Hong Kong go further than the earning of foreign exchange from a favorable trading balance. She also trades profitably in human misery. The Chinese refugees who fled to Hong Kong are the prime victims of this merciless squeeze. No matter how intensely the refugees dislike the Communist regime on the mainland, they have not severed their ties with friends and relatives in China. They are the first to know of economic reverses and crop failure inside China because the news is brought to them by travelers crossing the colony border. It is a story repeated by almost every new refugee who escapes from the homeland to Macao or Hong Kong.