FINANCE AND ECONOMY
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Kong under the Commodities Trading Ordinance. During 1979, trading in both the cotton and sugar markets was sluggish, affected by the absence of major international market movements in these two commodities. The Commodity Exchange applied for permission to trade in two additional commodities - soybean and gold. The soybean market began trading on November 1.
At the end of 1979, 710 people were registered under the Commodities Trading (Dealers, Commodity Trading Advisers and Representatives) Regulations 1976. They included 130 commodity dealers (46 corporate dealers and 84 individual dealers), of which 43 corporate dealers and 10 individual dealers were shareholders of the Hong Kong Commodity Exchange; 556 commodity dealers' representatives; six corporate commodity trading advisers; nine individual commodity trading advisers; and nine commodity trading advisers' representatives.
The Commodity Exchange Compensation Fund, established to compensate those who suffer pecuniary loss as a result of default by shareholders of the exchange, amounted to $3.2 million at the end of the year. Deposits lodged by dealers, other than those members of the Hong Kong Commodity Exchange, stood at $500,000. The purpose of the deposits is to give some protection to investors against any default by dealers who are not members of the Hong Kong Commodity Exchange.
Gold Markets
Trading was extremely active on both the international and Chinese Gold and Silver Exchange Society gold markets in Hong Kong in 1979. Price movements paralleled developments in the other major markets of London, Zurich and New York.
Membership of the Chinese Gold and Silver Exchange Society remained closed at 195 member firms. The price of gold on the exchange rose from $1,304 per tael of 99 per cent fine gold at the end of 1978 to $3,088 at the end of 1979. One tael is equal to 37.429 grams of 99 per cent fine gold.
The international gold market in Hong Kong expanded during the year, with the participation of some of the newly-licensed banks. Dealings in this market take place in United States dollars per troy ounce of 99.95 per cent fine gold, with delivery in London. One troy ounce is equal to 31.103 grams.
Hong Kong's Economy
Various measures announced in the government's 1979-80 Budget were implemented during the year to help slow down the growth rate of demand in Hong Kong. The objective was to achieve a level more consistent with the growth rate of the economy's output in such a way as to facilitate a relative shift in the distribution of resources back to the manufacturing sector. This included a slow down in the growth rate of government spend- ing, particularly with a view to easing pressures on the building and construction industry. The government also took steps to influence Hong Kong's monetary aggregates so that they grew in a manner consistent with the economic circumstances. Measures included legislation to reduce the amount of government balances that could be on-lent by banks; powers to alter minimum liquidity ratios; and the raising of bank interest rates.
The government's attitude is that to reduce overall demand in Hong Kong, where the public sector is relatively small, it is the action of the private sector that is important. However, a contribution by the public sector was essential in 1979 for general economic reasons, and because the public sector's programmes were significantly affecting demand in the building and construction industry. The growth rate of the government's expenditure was accordingly reduced from 25 per cent in real terms in 1977-8 and 1978-9 to 74 per