TNAG-0003-FCO40-39-Commission-of-Enquiry-into-the-Kowloon-disturbances-addition-1968 — Page 152

132

PART VI CONCLUSIONS

(B) Economic

483. Some emphasis was laid in the oral evidence before us-and prominence given in the press comments mentioned in Part II-to the existence of a wide- spread belief that, after a period of stability and rapid economic progress, Hong Kong had entered into a period of business depression and price inflation. Several of the demonstrators/rioters mentioned their fears that an increase in Star Ferry fares would lead to 'chain reactions' and 'price spirals', and other witnesses referred to the insecurity which people had experienced since the bank crisis of early 1965, when two local banks had to close their doors.

484. In these circumstances, we devoted some time to an examination of the economic conditions prior to the outbreak of disturbances and we considered the official statistics relating to the cost of living and to wage rates in selected industries and heard evidence on these figures. We noted, on the one hand, that earnings from exports and tourism continued to expand and that bank deposits in general continued to increase and, on the other, that the increase in the average cost of living had been approximately 2% per annum over the past eight years which had been more than compensated by average increases of 8% per annum in wage rates in those manufacturing industries where records are kept. Un- fortunately, no statistics are available to show wage rates or earnings in other jobs and those relating to manufacturing industry reflect only approximately 55% of all industries. Nevertheless, it appears that many wage earners have been able to improve their position and their standard of living with the continuing growth of the economy and the existence of a large number of vacancies in industry and the service trades.

485. Of course, general trends of this kind do not affect everybody or affect them uniformly. Indeed, individual cases of real hardship may be masked. More- over, it is sometimes not the facts which count so much as what people think to be the facts and, as we have seen, there are a number of people in Hong Kong particularly sensitive to any suggestion of general price inflation.

Banking Crisis

486. The strength of the banking system as a whole was little affected by the bank runs in Jan./Feb. 1965 and total deposits at the end of February were only 2% below their level at 1st January. However, the runs undoubtedly did affect a large number of people; both depositors who incurred a direct loss through the banks being able to meet only a percentage of their deposits-there were 114,000 accounts in one of the banks which failed--and those who queued up outside other banks to withdraw their money owing to a loss of confidence. Furthermore, the encouragement of stricter lending practises than had been the case in certain banks before the crisis led to a tightening of credit in many spheres. Indirectly, the crisis itself and the aftermath of tighter credit and more difficult internal