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interest rates remain at a low level (2).
44.
(c) Financial relationships between
Hong Kong and China
Financial relationships between Hong Kong and China have grown rapidly in recent years, as reflected by the rapid increase in financial transactions between Hong Kong's financial institutions (banks and deposit-taking companies) and banks and other enterprises in China. Between end-December 1979 and end-December 1986, external liabilities of Hong Kong's financial institutions to China grew by 80 times from US$42.9 million to US$3.5 billion. During the same period, external claims of Hong Kong's financial institutions on China grew by 4.5 times from US$1.2 billion to US$5.4 billion. However, the shares of these external liabilities and claims in the total claims. and liabilities of Hong Kong's financial sector are still quite small. By the end of December 1986, the external liabilities of Hong Kong's financial institutions to China amounted to only 3% of their total external liabilities, and the external claims of Hong Kong's financial institutions on China also amounted to only 3% of their
total external claims.
(2) However, the transfer of large sums of money by
foreign borrowers within a short period could create pressures on the exchange rate of the Hong Kong dollar under the linked exchange rate system. It is for this reason that the Government is reluctant to see the Hong Kong dollar being excessively internationalised.
G.F. 326
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