TNAG-0186-FCO40-222-Special-branch-reports-on-Communist-activities-1969 — Page 16

which are at present the target of their main United Front effort. Such

a move would, of course, also reduce the economic value of the Colony to

the communists, if conducted for any prolonged period.

BANKING AND INSURANCE

27.

The decline in trade and the slow recovery in communist business

circles has been reflected in the communist owned banks and insurance

companies in Hong Kong which were adversely affected by the local

disturbances in 1967 and the upheavals of the Cultural Revolution in

China. Many banks lost a proportion of their deposits, and although there

has been a continuing growth in communist bank deposits since the beginning

of this year they are not apparently keeping pace with the general

improvement in the position of banks in Hong Kong. However, as public

confidence returns and more stable conditions continue in China, there

is every likelihood that the position of communist banks will continue to

improve. Chinese foreign exchange purchases through Hong Kong have also

increased this year; an estimate made in October put the growth at 15%

increase over 1967 although devaluation of the pound will no doubt have

had some influence on this rise.

28.

Efforts to improve their banking position during the last few

months have included taking over complete control of the Chi Yu Bank and

its two branches and the opening of the new branch of another bank. There

are at present five C.P.G. owned banks and eight C.P.G. state/private

banks in Hong Kong which between them control 56 branches throughout the

Colony.

29.

Communist insurance business is not believed to have recovered

fully from the reverses it suffered during confrontation when business

fell to some 34% below anticipated levels. However, like the banks,

insurance depends largely on public confidence and growth in trade, and

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