760 G.F. 316
SECRET
6.
20.
It is noticeable that the Communists have not so far made any sustained attempt to disrupt the Colony's food supplies from China. Nevertheless, the present situation has led to some price rises in basic commodities, particularly in rice (of which less than 30% comes from China) as
of rumours and hoarding. A request for additional water - in July-made in accordance with our water agreements, has not been answered and it remains to be seen whether it will be met.
21.
Stock Exchange prices have been depressed by up to 20% and the price of gold has soared from $262 per tael to about $290 depending on the day to day situation. Government expenditure has increased though not too significantly at present; a more serious effect may be a fall in Government revenue later should there be, as could happen, a slump in the economy generally, and in particular the loss of foreign investment capital.
Conclusion.
22.
This crisis is by no means over. We have weathered the initial storm pretty well; and, at the time of writing, appear to have forced the Communists to think again.
This, however, the local hard core are doing with a malevolence probably enhanced by their initial failures. The keys to the future lie in maintaining Hong Kong's confidence in itself; in maintaining the confidence of the world outside in us for if our economy fails, all fails with it and in our ability to continue to do business; and, finally, in the attitudes towards us of a China in convulsions.
LL.
I have, the honour to beg
sir,
Your most obedient, humble servant,
GOVERNOR
مدلو
SECRET
6858
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