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CONFIDENTIAL
Aftermath of May Disorders
Commercial and Industrial Attitudes
Trade and Industry Advisory Board members plus Executive Directors of General Chamber and F.H.X,I. are continuing to meet twice a week, Cotton Advisory Board members once a week, under my Chairman- ship, to help me keep in touch with informed opinion and to keep Board members abreast of developments and Government thinking and policy. It is from discussion with these sources that the opinions recorded below derive.
General
Chinese businessmen now realise both how skilfully Government avoided a Macau-type build-up in Hong Kong, and how narrow was the margin between victory and defeat. They understand that the Police, and police restraint, were the shield of law and order. They appreciate the risks taken by the Government, its firmness, and the support from Britain. They also appreciate that we are engaged in a war of nerves, and find it difficult to accept the concept of "sweating it out". They are desperately conscious of the need for a lead from Government, and beginning to understand that Government in turn needs maximum, support from them. The immense response to the Police Education Fund, etc. has encouraged them to be more overt in their support of Government. But all Chinese businessmen are, not unreasonably, nervous and jittery, and find it difficult to conceal their nervousness under a bold front. They are ready to do almost anything that the Government suggests, provided instructions are clear and simple. All this is not particu- larly articulate, but I think it is there.
In my judgment, European business (other than the well-informed) is much more grudging in its support for Government, is more extreme in both its nervousness, its steadfastness, or its unawareness of the issues at stake. They are in general much more preoccupied than Chinese businessmen with the damage to Hong Kong's external image and less conscious of the difficulty of winning the battle for the minds and hearts of the generality of the population.
Internal Trade and Industrial Production
I don't have much contact with the retail trade, but it is almost certainly, and not unexpectedly, sluggish. Credit is bound to be short or non-existent. Foodstuffs have been stocked up without significant increase in prices.
Bankers are reticent, and business awaits with breathless concern the May banking statistics, which are likely to be of interest only to the historian by the time they are issued. Investment inflows are accepted as having dried up. People are mum about capital outflows or fear the worst. The substantial rise in the price of gold yesterday is a reflection of the prevailing jittery state.
I have no knowledge of the property market, but it can scarcely be in good shape.
Industrial production continues unabated and without serious interruption. But overriding concern of industrialists and merchants alike is whether buying contracts will be renewed. There is not much real evidence that they will not. American buyers on the standard
CONFIDENTIAL
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