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Haddon-Cave himself saw existing quota restrictions and the possible spread of protectionism as potential threats to the growth of export volume in the near future, but showed no sign of concern in his paper that the present boom in the internal economy had reached a dangerous level, or that the effects of the adjustment process working through the exchange rate, higher interest rates and a slowdown in net foreign exchange earnings would not, in time, result in a curb to the strong growth of consumer demand.
The flexibility and adaptability demonstrated by the Hong Kong economy in the past give a reasonable basis for Haddon-Cave's optimism and the purpose of this letter is not to suggest that any reassessment is needed of our basic attitude towards this market. However, given the possibility of a significant increase in ECGD's commitments in respect of Hong Kong, you should be aware of the recent unfavourable trends in the economy. We will continue to keep a close watch on developments.
I am copying this letter to the recipients of Birch's letter to Miss Kelley of 22nd September.
Imo amary
J.E.W.Kirby
Kring
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