Macro-Finance Salon (No. 111): The Misunderstanding of ‘Positive Non-Intervention’--The Causes and Consequences of the Hong Kong Banking Crisis in 1965

On the morning of January 3, Macro-Finance Salon (No. 111) was held in RUC. Li Peide, honorary professor of the University of Hong Kong, delivered a keynote speech entitled with “The Misunderstanding of ‘Positive Non-Intervention’: The Causes and Consequences of the Hong Kong Banking Crisis in 1965”. The salon was chaired by He Ping, professor at the School of Finance. Professor Wang Jue, the leader of the Economic History Department of the School of Economics at RUC and Cai Ruhai, Dean of the Training College of the Central University of Finance and Economics, attended the seminar and made comments. Professor Li Peide mainly discussed the issue from the banking crisis that broke out in Hong Kong in 1965. He first pointed out that proposed by the Financial Secretary of Guo Bowei, the policy meant that the market will naturally develop without the intervention and limits from the government. He then analyzed the background of the bank crisis. The first was the high growth of Hong Kong's economy from 1964 to 1965. The success of Hong Kong's economy was attributed to laissez-faire policy. The second was HSBC's monopoly privilege. Li Peide pointed out that after the bank crisis broke out, the Bank of England consultants believed that the main reason was bank cash flow, bank runs and excessive inter-bank competition. The government’s inaction and “positive non-intervention” policies were also criticized by some financial advisers at that time. The government's response is to cancel the licenses of those offending banks. Finally, he said that the consequence was that by acquiring Hang Seng Bank, HSBC took the leading position in the Hong Kong banking industry. During discussion, Professor Wang Jue and Professor Cai Ruhai put forward some questions and opinions, such as the quasi-central bank status of HSBC, the political convenience of the positive non-intervention policy, and the analysis of the bank's financial strategies. Li Peide also answered in terms of these questions. In addition, experts also discussed the impact of rumors on the 1965 Hong Kong banking crisis.

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