21
Wednesday, February 28, 1973
WAYS TO CURB RISE IN MONEY SUPPLY EXAMINED
Increase In Deposit Rates Welcomed
The Financial Secretary is currently examining ways to slow down
the rise in the money supply to help ease "the pressure on the property and
stock markets" in Hong Kong.
In his Budget speech in the Legislative Council today, the Hon. C.P.
Raddon-Cave said that a slow-down might be encouraged within the framework
of "Hong Kong's normal monetary arrangements."
In this context, he welcomed the recent announcement by the Exchange
Banks' Association of an increase in deposit rates and in the rate for loans
against shares.
Reviewing events in the monetary sector in the last 12 months, the
Financial Secretary said that the money supply rose by much more than the
Gross Domestic Product.
The factors lying behind this were complex, he said, but the most
important were the floating of sterling last June and the linking of the
Hong Kong dollar to the U.S. dollar.
"One of the consequences of these two related developments was
that large balances which would, hitherto, have been invested overseas were
retained in Hong Kong," Mr. Haddon-Cave said.
The banks increased their lending by 50 per cent to $17,700 million
and the proportion of their loans and advances to deposits increased from
63 per cent at the end of 1971 to as much as 72 per cent at the end of 1972
on a much higher level of deposits.
/Specified