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However, the circulation of a significant amount of Hong
Kong dollar notes outside Hong Kong may also give rise to
an element of uncertainty in the conduct of monetary policy in Hong Kong. In any case, it is likely that the
influence of the Hong Kong dollar in China generally and
in the Pearl River Delta region in particular will
strengthen further, and that Hong Kong dollar notes will
continue to feature prominently in foreign exchange
transactions in the black market.
35.
In the light of China's need to raise foreign
loans to finance its visible trade deficit and
modernisation programmes, many multinational financial
institutions have set up branches or representative
offices in Hong Kong, partly with a view to obtaining a
share of this potentially enormous loan business.
Meanwhile, following the settlement of its pre-1949
financial liabilities to the United States and the United
Kingdom earlier this year, China has extended its
fund-raising activities to these two countries.
Nevertheless, given Hong Kong's long-standing economic ties with China and its position as a major regional
financial centre, Hong Kong will continue to have an
important role to play in serving China's financial needs.
36.
China may find it attractive to float bonds or
secure loans denominated in Hong Kong dollars, as the Hong
Kong dollar remains stable against the US dollar under the
linked exchange rate system and if the Hong Kong dollar
interest rates remain at a relatively low level. But in
so doing, there is a possible concern that the Hong Kong
dollar might become excessively used outside Hong Kong.
Moreover, the transfer of large sums of money by outside
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