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11 paragraph 29.
Exchange rate changes
28. Paragraph 52 reviews the significant changes of parity for the Hongkong dollar. The traditional link with sterling was severed in July 1972 and replaced by a direct link with the US dollar. The central rate for 6 July 1972 was HK$ 5.65 = USE 1 with 2 bands. Following the 10% US dollar devaluation in February 1973, the central rate became H 5.085 = US$ 1. What are the prospects for a float- ing exchange rate for the Hongkong dollar?//Taking 1973 as a whole, it appears that the effective appreciation of the Hongkong dollar against the American dollar between January and December 1973 was 12. Table 9(a) shows that the unit value of Hongkong domestic exports to the USA rose 12% (first 9 months of 1973) while the quantum fell by 1.5%. The contrast with Japan is striking, where export prices fell by 1 (9 months figures) while the quantity rose 116%. These price changes are to some extent puzzling. Why should export prices to Japan have declined while for all countries they rose 16%? Should hot some part of the relative yen appreciation have benefited Hongkong exporters in higher export prices? Perhaps the full calen- dar year figures would throw more light on this.
Comparative exchange rate_changes
30. The cumulative appreciation of the Hongkong dollar for 1973 was 46 (see paragraph 55), as compared with 12% against the US dollar. It would be of interest to compare the exchange rate movements for Hongkong's main far eastern competitors (eg. Taiwan, Singapore and South Korea) particularly against the US dollar and also for other 1dcs competing in the textile exports.
Consumer prices
31.
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Chapter 5 is of special interest, but here again the value of the statistics and comments is reduced because of the 9-month basis. Developments in the final quarter of 1973 will be of particular interest. Some slight delay in publication could surely have closed this gap, particularly as Tables 25 and 26 show that figures up to December 1973 were in fact available at the time the chapter was compiled.
A. Partion.
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Copies to:
Mr M Goodfellow (IKIOD)
Mr W Franklin
B A Tarlton
•
3 April 1974