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Volume One: Living in Troubled Times Chapter 38: Crisis

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    In mid-1964, Meng Youtian had already sensed that the crisis was coming. He found that the banking industry, which was the vane, was too deeply involved in real estate, resulting in a serious shortage of cash reserves. Once a run wave occurred, the consequences would be serious and would be  Chained.

    In fact, some people have noticed the shortcomings of Hong Kong¡¯s banking industry as early as 1962 after the Liao Chuangxing bankruptcies.  At that time, Tomkins, a senior staff member of the Bank of England, visited Hong Kong to study the issue of amending banking regulations and submitted a "Report on Hong Kong's Banking System and Recommendations for Recasting Banking Regulations" to the Hong Kong government.

    The report believes that the main problems in Hong Kong's banking system are: too many banks and a limited market, making it a very fierce competition to obtain deposits. This is partly reflected in attracting deposits with high interest rates and opening a large number of branches; some banks are interested in real estate and  Excessive lending and investment in stocks, and being too deep in the real estate and stock markets; family banks often combine banking operations with the directors' family businesses, affecting the safety of bank deposits.

    Of course, if you can make successful investments in the real estate and stock markets, the rewards will still be considerable; and there are also many banks that rely on the profits from real estate transactions to establish their current achievements.  However, this is not a sound banking system. Facts have proven that many banks have operational difficulties due to their failure to abide by the principle of "loan and credit balance".

    Unfortunately, when the real estate and stock markets were booming, this kind of calm analysis and judgment was ignored by most people.

    Fortunately, Great Wall Industrial has always adhered to a steady policy in developing the real estate market, and the number of unsold and under-construction properties has been controlled at a fixed number.  Once the market turns bad, there won't be a large backlog of funds.  Although land has risen and fallen in the short term, the overall trend is upward. Meng Youtian would rather hold on to the land to preserve its value than frantically raise funds and loans to build buildings.

    Investment in Singapore seems to be going very smoothly, and enterprises have received a lot of preferential policies there. The Mengshi industry, which mainly focuses on textiles and clothing, has gradually expanded to Singapore.  What followed was the purchase of a house. As a safe haven, Meng Youtian bought a house in Singapore and could move there temporarily at any time.  at the same time.  This departure from Hong Kong will also become a smokescreen for Great Wall Industrial¡¯s secretive expansion.  It will make people more unstable during turbulent times.

    "We sold all the stocks, and now we have made a lot of money. Stop holding on to it." Meng Youtian took the lead in reminding his family and friends that the real estate and stock markets have been booming in recent years.  The gains have been considerable.  But to start mergers and acquisitions or holdings.  It's obviously too early.

    "Withdraw your deposits from small and medium-sized banks, don't be greedy for the interest, and deposit them in HSBC. If the note-issuing banks can't withstand it, then what's the point." Meng Youtian's second reminder came soon.

    At that time, various large and small banks in Hong Kong were engaged in a fierce interest rate war to compete for public deposits. Several British banks, led by HSBC, also joined the war one after another to show other banks that uncontrolled competition is futile.  When the interest rate war reached its peak, it was reported that some small banks even raised interest rates to more than 10%.

    Once a run wave occurs, a number of small and medium-sized banks will inevitably fail or go bankrupt, and even a number of enterprises will be affected.  For small and medium-sized banks that are deeply involved in real estate lending and investment, it may be difficult to change the final outcome.

    At that time, rumors about the financial difficulties of Mingde Bank were already circulating in the market, but they did not attract public attention. Most people believed that the competitors were deliberately spreading slander.  A few months later, on the eve of the Lunar New Year in mid-January of 1965, the market's seasonal demand for currency increased under normal circumstances. Banks' money began to tighten, and the straw that broke the camel's back appeared.

    The trigger was that US dollar checks worth HK$7 million issued by Ming Tak were dishonored. Then, some larger customers took the checks to the Ming Tak Bank Head Office in Central to cash them, but the bank did not have enough cash to pay.  As the news spread, customers of all sizes flocked to the bank. In the afternoon of the same day, the Hong Kong Clearing House announced that it would stop clearing the bank.  Early the next morning, the front door of Mingde Bank's head office was crowded with people withdrawing money.  Subsequently, the Hong Kong Government Banking Supervisory Commissioner announced that it would take over the Mingde Bank in accordance with Article 13 of the Banking Ordinance.

    The run on Mingde Bank set off the first wave of the banking crisis in 1965, and bigger crises followed. Guangdong Trust Commercial Bank, which was too aggressive but not stable enough, became the second target of the run.  Amid the overwhelming flow of bank runs, the head office and 24 branches of Guangdong Trust and Commercial Bank declared closure.

    Rumors about the financial difficulties of local Chinese banks are spreading like wildfire throughout the market.  Frightened depositors began to withdraw their deposits in large quantities, and the run quickly spread to Hang Seng, Guang On, Dao Heng, Wing Lung and other banks.  Traffic jams in the Central District were severe, and the police had to be called in to maintain order.  Even after banking hours, the queues for cash withdrawals refused to disperse.

    Panic is spreading as the squeeze continues.??Far East Bank, and spread to Macau.  Worried that the situation was getting out of control, HSBC issued two statements guaranteeing unlimited support to Wing Lung Bank and Far East Bank.  The Hong Kong government published an emergency decree in the Gazette: declaring the pound as legal tender, and the government would fly a large number of pound notes from London to Hong Kong to meet the currency shortage.  Then, Hong Kong Financial Secretary Guo Bowei, HSBC Bank General Manager Sandus, and Standard Chartered Bank Manager Ji Lixian jointly held a press conference, emphasizing that Hong Kong banks have sufficient funds to reassure people.

    After the Hong Kong government and banking system took a series of measures, the run wave has temporarily subsided.  However, the market calm is only temporary.

    Hang Seng Bank, Hong Kong¡¯s largest Chinese-owned bank, is still plagued by rumors.  There are many baseless rumors maliciously attacking Hang Seng Bank, and some irresponsible newspapers have also published damaging news about unnamed local banks. Hang Seng is widely considered to be one of them.  During this period, some major customers quietly canceled their accounts one after another.  In early April, a wave of bank runs resumed, and this time Hang Seng Bank was the first to bear the brunt.

    Although HSBC has repeatedly publicly stated its support for Hang Seng Bank through the media and appointed staff to station in the lobby of Hang Seng Head Office to prove that there is sufficient cash supply.  Although Hang Seng Bank has repeatedly reassured depositors, the situation continues to go from bad to worse.  On April 5, Hang Seng Bank lost HK$80 million in deposits in one day, and by early April it had lost a total of HK$200 million.  Hang Seng's deposits are being drained bit by bit. If this continues, the bank will be unable to repay its debts and may even be on the verge of bankruptcy.  (To be continued, please search Piaotian Literature. The novels will be better and updated faster!
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