Another Kind of Crisis

Hong Kong's British garrison was put on the alert last week, and police leaves were canceled. Governor Sir David Trench appealed for calm over radio and TV. The stock market dipped. The crown colony was having something of a crisis, but it had nothing to do with the escalating warfare in South Viet Nam. It was caused instead by a run on a handful of Hong Kong's Chinese-owned banks.

The Chinese, who comprise 98% of Hong Kong's population, have traditionally distrusted banks, preferring to keep their savings in the form of jewels in a safe or gold under a mattress or in their teeth. Such suspicion has waned considerably, however, as Hong Kong has become mainland Asia's leading trade and banking center, with a long-stable currency that is fully backed by Britain. Last year the colony's 80 banks hit a record $1 billion in deposits.

This confidence was shaken when the Chinese New Year, always a time of free spending, produced heavier than usual calls for cash. Unable to meet the unexpected demand, two small banks, Ming Tak and Canton Trust & Commercial, closed their doors in the face of clamoring depositors. As news of the closings spread, panicked shop and office workers abandoned their jobs to queue up in lines as long as 500 yards outside a dozen more banks. Thousands slept on sidewalks overnight to keep their places in line.

Curiously, none of the colony's Red Chinese-owned banks was affected, a fact that led to rumors that Peking agents had done their bit to help the panic along. On the air, the Governor pointed out that the problem was not financial weakness but only a shortage of Hong Kong's local paper currency. To stem the run, the government ordered 5,000,000 British -L- 1 notes flown from the Bank of England by chartered jet, imposed a temporary $17.50-a-day limit on cash withdrawals. With another -L- 35 million in bank notes scheduled to be flown from London soon, the run subsided by week's end. To dramatize its solvency and calm its customers, one Chinese bank used psychology: it piled a hoard of gold bars on the counter for all to see.

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