SECRET 高度機密
26.
The adoption of the linked exchange rate system has in effect accorded priority to a stable exchange rate against the US dollar, with adjustments to pressures on the Hong Kong dollar falling, at least initially, on interest rates and the money supply. These pressures were substantial on occasions during
the year.
There were therefore considerable short-term
fluctuations in interest rates and, to a lesser extent, in the growth rate of the money supply. These changes probably had little, if any, adverse effect on the conduct of business.
27.
In my view the present system provides a better environment for making individual and collective economic decisions than one which is characterised by instability in the value of the currency. Apart from short term fluctuations, the operation of the linked exchange rate system has caused the
trend in local interest rates to follow broadly that of US
dollar rates.
28.
I do not intend to comment further on the arrangement linking the Hong Kong dollar to the US dollar beyond saying that it has served us well and will not lightly be changed. This is a firm statement of the Government's policy.
29.
Thus 1984 was the year in which the Hong Kong economy very largely got back on track. Economic growth increased, inflation fell, unemployment was low, confidence returned and investment began to recover. All in all a welcome contrast to the gloom of 1982, which still persisted into much of 1983.
Monetary Issues
30.
This time last year a team from the Bank of England was here to assist us in a review of our systems of prudential supervision of banks and DTCs. Their confidential report has made a most helpful contribution to our thinking, although we
are not in agreement with all of its conclusions and recommendations.
G.F. 316
UNCLASSIFIED
SECRET 高度機密