HONG KONG LEGISLATIVE COUNCIL — 11 January 1989
香港立法局 一九八九年一月十一日
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MR. TAI: Sir, could the Financial Secretary inform this Council whether the inflation in Hong Kong is largely due to the weakness of the United States currency which is being linked to the Hong Kong dollar; and if the answer is in the affirmative could the Financial Secretary consider linking the Hong Kong currency to a basket of currencies?
FINANCIAL SECRETARY: Sir, I do not consider that altering the link in any way or adjusting the link rate is a sensible option for Hong Kong. We would be paying much too high a price for it in terms of destabilizing our monetary system and the exchange rate. I also think a basket is out of the question. As far as the effect on inflation is concerned, as the value of our currency has come down with the US dollar, it has certainly made our goods more competitive in the world market. So there has been a very strong demand and that has of course, to a certain extent, fed through into the inflationary process domestically. I would remind Members, Sir, that we lived with the present exchange rate of 7.80 to the US dollar when the US dollar was much higher, but of course then the demand for our goods was nothing like as strong.
MR. CHEONG: Sir, based on paragraph 4 of the Financial Secretary's reply, it seems that we have no option but to wait until the economy adjusts itself to tackle the inflation problem. Could the Financial Secretary confirm that actually we have no options but to wait?
FINANCIAL SECRETARY: I think Mr. CHEONG missed the words that do not appear in the printed version of my answer — I said there was nothing we could do "beyond containing public expenditure". It does seem to me that there is something that the Government can do in terms of containing public expenditure, and that is my intention.
MR. MCGREGOR: Sir, would the Financial Secretary please confirm that although foodstuffs from China represent only 20% of consumption or imports into Hong Kong, in some foodstuffs China is in fact the principal supplier? `I am thinking of such things as pork, beef, vegetables and so on. Would the Financial Secretary therefore give careful consideration to the possibility of the reduction of supplies from China and the inflationary effect that would have?
FINANCIAL SECRETARY: Sir, what Mr. McGREGOR says is of course absolutely correct. China is our principal supplier of certain item. There are alternative sources, but we need to watch the situation carefully to ensure that those alternative sources can be tapped if necessary.