The financial turmoil could spark political crises in Hong Kong and Macau, the mainland's central bank chief said in a rare warning. Zhou Xiaochuan, governor of the People's Bank of China, met Hong Kong and Macau deputies to the National People's Congress and the Chinese People's Political Consultative Conference in Shenzhen yesterday ahead of the bodies' annual meetings in March. Briefing delegates on the country's economic situation, Mr Zhou explained the risks the financial crisis could pose to the two special administrative regions. 'The financial crisis has put a big dent in the confidence of the citizens of Hong Kong and Macau and has led to a series of incidents, including the Lehman Brothers minibond saga, the run on the Bank of East Asia, the mass termination of insurance policies at AIA and the mass disposal of Hang Seng Bank shares,' he said. 'In a recession and with citizens' confidence fragile, the political stability of Hong Kong and Macau may be threatened,' he said. 'Sudden incidents will lead to storms if not properly handled.' He also warned of the adverse impact of the crisis on the cities' real economies, citing signs such as falling exports, shrinking domestic demand, rising unemployment and the increasing difficulty of small and medium-sized enterprises obtaining credit. However, he said the two cities' financial fundamentals remained strong. Mr Zhou assured deputies that the central bank would strengthen co-operation with the Hong Kong Monetary Authority to study ways to support the city amid the crisis. The central bank could help Hong Kong-based banks negotiate with their business partners when they sought financing on the mainland, and would expand the issuance of renminbi bonds in Hong Kong when necessary, Mr Zhou said. CPPCC member Tam Yiu-chung quoted another official at the meeting, NPC vice-chairman Li Jianguo, as saying he hoped Hong Kong people could show more confidence and unity and make long-term plans to boost the economy. Mr Tam, who is also chairman of the Democratic Alliance for the Betterment and Progress of Hong Kong, said the mainland officials had conveyed Beijing's concerns for Hong Kong. City University political scientist James Sung Lap-kung noted that Mr Zhou had used strong words and said it was rare for the head of the central bank to give such a political warning. 'It shows the central government is very worried about the impact of the financial instability on Hong Kong society.... 'It is a message to the SAR government,' Dr Sung said.