TNAG-0050-FCO40-86-Disturbances-essential-food-supplies-1968 — Page 14

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G.F. 323

CONFIDENTIAL

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Cost of Food

19.

The most important effect of the reduction of Chinese supplies during 1967 was on the price of essential foodstuffs in Hong Kong. It is the Government policy not to interfere with the ordinary market forces, which will react quickly to shortages except in the case of rice where Government controls and the presence of a large stock does have a stabilising effect on prices. The table at Appendix 2 shows the main foods consumed by an average household (as established by the Household Expenditure Survey of 1963/64), the weights attached in the calculation of the Consumer Price Index and the fluctuations in the prices from May to December 1967. From this it can be seen that the most significant increases were in fresh pork, fresh vegetables, fresh beef, fresh poultry, eggs. Fish and vegetables are both significant local products but were affected by the increased demand resulting from scarcities of fresh meat. It can also be seen that prices quickly stabilised as soon as Chinese supplies were resumed.

20.

ESSENTIAL FOODS

The following paragraphs examine the more important foodstuffs in greater detail. This examination makes no attempt to make special allowance for either the European or the Indian communities (whose diet generally differs from that of the bulk of the population) because their numbers are insignificant in terms of the overall population.

Rice

21.

The present consumption of rice is 30,000 tons a month The stock at 31st December, 1967 was 97,000 tons, which, at the normal rate of consumption, would last slightly more than three months. In addition to this godown stock there is a good deal of rice in the hands of both retailers and the public. Interference with other food supplies would result in an increased consumption of this staple food of the bulk of the population. It would therefore be safer to assume that, without rationing, the rice stocks would last only two months.

22.

Local production of rice is insignificant, being between 3 and 5% of annual consumption and there is no potential for significant expansion. The rice crops are harvested in July and November.

23.

At present the import of rice from China is restricted by import licensing to 30% of the total imports although performance during the past year has been at about 19%. Some 60% of the rice imports come from Thailand which, since November 1966, has been trying to control its own domestic prices by restricting the commercial export of rice. Although Hong Kong is given special treatment as a 'traditional market', internal politics in Thailand could restrict exports and affect prices at any time but particularly towards the end of the year.

24.

The Director of Commerce and Industry who controls imports and exports of rice under the Importation and Exportation (Reserved Commodities) Regulations has been encouraging registered imports to try other sources of supply besides Thailand and China. Local preference and the geographical position of Hong Kong reduces the number of potential sources. In addition there is a world shortage of rice owing to the

CONFIDENTIAL

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