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continue to protest vigorously.
Subsequently runs have
hit several banks: panic withdrawals from Citibank and
Standard Chartered totalled over £200 million. HKG has
launched an enquiry, but confidence in the banking
authorities has been shaken.
The Prime Minister might say:
HKG's decision to keep Bank open was taken having
regard to the facts then available and in knowledge that
closure of a bank is a drastic step not to be taken
lightly.
- Know that underlying strength of Hong Kong's banking industry is beyond doubt. Welcome statement (10 August) by Hong Kong and Shanghai Bank and Bank of China
confirming this.
Rumours about soundness of other banks completely
without foundation.
-
(If raised) No (Brief) discussion while in Peking of
proposal for Bank of China to issue banknotes. HKG will wish to study carefully any proposal of this kind.
Inflation
The Hong Kong economy is currently experiencing high inflation (currently 12.3%, and near 10% for past two years) coupled with relatively slow growth (2.5% in 1989 and 1990 and 3.3% projected for 1991). The underlying cause has been a failure of the labour market fully to
adjust to a slow-down of growth in 1989, which became
CONFIDENTIAL
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