currency deposits have increased both in absolute terms and in
•
terms of their proportion of total deposits (5). This trend
has been particularly marked in the first half of 1982, as a
result of the Government's abolition, effective on 25th
February, of the 15% withholding tax on interest paid on
(6) foreign currency deposits with these institutions
It is
difficult to assess how much of the 133% increase in foreign
currency deposits in Hong Kong during the first half of the year represents deposits which were previously placed offshore
to avoid interest tax. Other factors, such as movements in
interest and exchange rates, were also relevant. However, Hong
Kong dollar deposits decreased by 3% because of the new
legislation.
3.4
shift of
During the first half, there was a marked deposits from deposit-taking companies to banks. As a result, M2 grew faster than M3. While total M2 grew by 41% and HK$M2 by 9%, total M3 grew by 20% and HK$M3 decreased by 3%. Among the reasons for this shift was the exemption of deposits with
banks of at least $500,000
original term to maturity
with an
(5)
/ or
As at end of quarter
Deposits with banks and deposit-taking
Of which in
foreign
companies
currency
% of total
(HK$Mn)
(HK$Mn)
1980 Q4
128,854
17,729
13.8
1981 Q1
137,962
18,489
13.4
Q2
156,092
25,874
16.6
Q3
156,368
27,225
17.4
Q4
163,625
29,266
17.9
1982 Q1
175,531
42,225
24.1
Q2
198,257
68,317
34.5
(6)
From the same date, the rate of withholding tax on interest on Hong Kong dollar deposits was reduced to 10% from 15%.
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