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be the Hong Kong Government which would act as lender
of last resort to the system, using the assets of the
Exchange Fund.
Effects of a Crisis
་
9. In practice, a simple liquidity crisis in Hong Kong
would be a matter affecting individual banks and containable
within the established machinery. It is also possible to
envisage more serious domestic ecnonomic problems involving
the solvency of the banking system, such as a property
collapse or other major economic upset. In practice this
could be containable provided the situation arose from
commercial factors and not from an actual or even anticipated
change in the political situation, but it could affect
external confidence too. A more serious threat to the
system as a whole could result from a major shift out of
Hong Kong dollars altogether such as might be stimulated by
worries about relations with China. This would quickly
affect, and very seriously, the exchange rate of the Hong
Kong dollar. In other words, the crisis would be a foreign
exchange crisis and the Exchange Fund's commitment as
lender of last resort would be to act as foreign exchange
dealer of last resort standing ready to use its foreign
exchange assets to purchase Hong Kong dollars. However the
Exchange Fund assets are not unlimited, although they have
risen substantially in recent years. At present levels of
import prices the Fund's assets represent about 19 weeks
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/of