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quite apart from threatening the stability of the banking and financial system, would threaten all lenders and bring about a series of company failures. This in turn would lead to redundancies,
reduced incomes, reduced job opportunities and a
serious strain on the Government's social services.
Reduced incomes would curtail consumer spending, ser- iously affecting retail trades and restaurant businesses. The fact that people have already lost a degree of confidence is likely to make the impact more heavily felt. External confidence, once
eroded, would be difficult to restore.
11.
As the underlying factors of Hong Kong's success vanish and the economy goes through a convoluted series of downward adjustments, depending on the extent of the loss of confidence, Hong Kong might
revert to a shape and size similar to that
in
the
1960s.
The quality of
manufactures would move down-market and become increasingly uncompetitive without substantial wage cuts, and the financial services sector would
have suffered a serious contraction. But unlike the 1960s, Hong Kong would still have to maintain a population substantially larger than that 20 years ago. Needless to say standards of living would drop and would be worse than they were 20 years ago, with all that entails for social stability(12).
12.
Thus a loss of confidence in Hong Kong must have serious implications for the economy. Those who are likely to suffer most in such a situation would be:
(a)
the average inhabitants in Hong Kong, as their standards of living would drop; and
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