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Thursday, March 15, 1973
Mr. Lee welcomed the proposal to develop Hong Kong as a major
market for foreign currencies.
He agreed with the Financial Secretary that if such a market
could be established in Hong Kong it would broaden the range of facilities
which banking and other financial institutions could offer.
But he listed some of the possible risks to which the Hong
Kong econory might be exposed if the proposed international currencies
market were to include Hong Kong Dollar.
One of the risks, he said, was that the interest payable on Hong
Kong Dollar facilities must, as a consequence, move up towards international
levels, and this would affect all borrowers, both local and foreign.
Justification
Mr. Lee said there was justification for the claim that the
15 per cent interest tax was inhibiting the development of international
currency money market in Hong Kong and should therefore be relaxed.
In his view the easing of interest tax would attract an even
larger inflow of money into Hong Kong.
The possible consequences, he said, would be inflationary as
well as an artificial increase in the exchange value of Hong Kong Dollar and hence making it "more difficult to export our goods.
On the contrary, if for any unforeseen reasons there should be a
sudden repatriation of funds out of Hong Kong, the result would be credit
squeeze, deflation and cheap Hong Kong Dollar.
"Neither of these would be good for Hong Kong,
" he said.
/Referring