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be carefully weighed perhaps even against resistance from the Finance Branch. nong Kong is still trying to hold on the principles of laissez-faire although the realities are fust pulling it in a different direction. Now that hong dung is having to compete in the more sophisticated industrial fields in an increasingly complicated world economic situation which injects into Hong Kong itu complex economic problema and fino balunces of outsido influences the steer- ing of the economy cannot be left only to the Tree wheeling of Inevitably the Government is becoming increasingly involved in the economy - extent to which it is being called upon to control the netivity of banks and Sintnee houses is an illustration of this (and Philip luddon-Cave's reluctunco to "regulate" is sympomatic of the rear guard action which some elements of the establishment are fighting). Similarly as a corollary the Government is bound to become more involved in the care of the people; us a larger proportion of the population begins to enjoy or expect higher standards, the more they are likely to look to the Government to safeguard and guarantee them, including providing increasing welfare services and the facilities for education, housing, etc. Unless the forward movement is maintained in these directions many experienced local observers to whom I have spoken believe that there is a real risk of public disturbances, if not violent protest. Indeed there are already murmurings around town of considerable dissatifaction that the Budget as a whole has done little or nothing to control the cost of living, has directly and in- directly affected the pockets of the middle and lower levels of society and, if anything, appears to favour the higher income groups and managerial class. Indeed it has been suggested in editorials that an increase in the general taxes would be more acceptable even now than increases in fees, fares, etc which have been introduced in this Budget and are envisaged in Philip Haddon-Caves warning that it is not possible to continue sibsidising common services purely for "political reasons" (sec paragraph 114).
13.
So it is possible that partly because of the economic situation developing as a result of outside factors not entirely within the Hong Kong Government's con- trol and partly because of a feeling that the Government is still (even through this Budget) letting things find their own level in the critical and sensitive field of the day to day cost of living, there may be some choppy water ahead. 1974 could be a turbulent year here as it may well be in many other countries.
14.
Points Directly Affecting UK trade Prospects
Sterling:
Philip Haddon-Caves references to the Sterling reserves problem were unusually... restrained and carried the inference that although Hong Kong had suffered some book losses as a result of the devaluation of Sterling there was probably no better place on balance to lay the reserves anyway. And it has been noticable that so fur none of the commentators have picked up the reserves issue, which on past experience I would have expected them to do in the course of thrashing around to find reasons for the deterioration in Hong Kong's overall economic condition. Perhaps one might hope that this reflects some growing realisation that in the last analysis we are all of us in the same boat and it is as well not to rock it - this is the case then it will certainly be more helpful towards the general atosphere within which we have to try to trade than have been the somewhat acrimonious criticisms of the British Treasury and Sterling over the past year. Jut perhas this just a lull before another storm.
15. Banks:
Me hint in the Budget that consideration night now be given to allowing a 1.N more comercial banks to open for ordinary retail branch business offers an
opportunity
every fort is made to ensure that the information given herein is accurate, but no legal responsibility is accepted for any errors or omissions a that information and no responsibility is accepted in regard to the standing of any firms, companies or individuals mentioned.
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