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Wednesday, March 28, 1973
The Financial Secretary agreed that recent Government decisions
might have made things more difficult, in the short term, for Hong Kong
exporters in the United States and British markets and elsewhere in relation
to one or two of our competitors.
He also accepted that if internal costs, including wages and rents,
were to rise unduly at the present exchange rate then Hong Kong's exports
could become less competitive abroad.
However, he did not believe that devaluation was an appropriate
corrective instrument for any weakness which might appear in our balance
of payments because it would be an inefficient and inflationary corrective.
Flexible
The Financial Secretary said Hong Kong's economy was etill
expanding rapidly and he believed that it was flexible enough to maintain
this growth.
One encouraging feature was that investment in buildings, plant
and equipment was now running at 25 per cent of the Gross Domestic Product
and he felt that this should produce a stimulating effect on productivity in
industry as well as assist in keeping down costs.
He described as unusual the rate of expansion in Hong Kong's money
supply over the last year but said this was not a bad development because
it pointed to a high and growing degree of confidence in the Hong Kong economy.
This expansion, he said, was due not so much to external factors but
rather to a significant increase in bank loans and advances, particularly
to increased internal demands.
"However, it clearly cannot go beyond certain limits dictated by prudent banking practices and liquidity considerations," he said.
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