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THURSDAY, MARCH 31, 1977
NONETHELESS, SHE HOPED THE FINANCIAL SECRETARY WOULD CONSIDER MORE CAREFULLY WHETHER THE STRENGTHENING OF THE HONG KONG DOLLAR BY SOME NINE PER CENT AGAINST THE U.S. DOLLAR OVER THE PAST 14-15 MONTHS REFLECTED THE REALITIES OF HONG KONG'S TRADING SITUATION.
+AND EVEN IF IT DOES, FOR THERE WAS A SUBSTANTIAL REDUCTION IN OUR TRADE DEFICIT LAST YEAR, IS SUCH A STRONG CURRENCY CONDUCIVE TO OUR MAINTAINING THE GROWTH OF OUR EXPORTS IN 19777+ SHE ASKED.
MISS DUNN OBSERVED THAT AS THE TRADING ENVIRONMENT OVER THE NEXT 12 MONTHS DID NOT SEEM TOO FAVOURABLE IN HER VIEW, SHE WAS WORRIED AT THE PROSPECT OF THE HONG KONG DOLLAR CONTINUING TO BE THE THIRD STRONGEST CURRENCY IN THE WORLD IN TERMS OF THE EFFECTIVE EXCHANGE RATE INDEX.
THE COMPETITIVENESS OF HONG KONG'S EXPORTS AND ITS PROFIT MARGINS WOULD BE DAMAGED, FOR THE BENEFICIAL EFFECTS ON COSTS OF CHEAPER IMPORTS TOOK TIME TO WORK THROUGH THE SYSTEM, SHE ELABORATED.
IN THIS CONTEXT, MISS DUNN SUGGESTED THAT THE FINANCIAL SECRETARY SHOULD PAY MORE ATTENTION TO THE UNDERLYING TREND+ OR, RATHER, THE TREND'S IMPLICATIONS FOR THE ENTIRE ECONOMY.
+HE SHOULD NOT RELY TOO HEAVILY ON THE THEORY THAT THE FLEXIBILITY OF COSTS AND PRICES SHOULD ENABLE US TO ADJUST TO GIVEN EXCHANGE RATE.
+THIS MAY BE TRUE IN THE LONG RUN BUT, MEANWHILE, THE PEOPLE OF HONG KONG HAVE TO EARN THEIR LIVING, SHE SAID,
IN MISS DUNN'S VIEW, THE SUBSTANTIAL RESERVES OF THE EXCHANGE FUND SHOULD BE DEPLOYED MORE AGGRESSIVELY TO MODIFY THE UNDERLYING TREND+ PARTICULARLY IF THE TREND WAS OVER-INFLUENCED BY TECHNICAL AND MONETARY FACTORS,
SHE ALSO THOUGHT THAT LOCAL INTEREST RATES SHOULD BE KEPT MORE CLOSELY IN LINE WITH INTEREST RATES ABROAD THAN THEY HAD BEEN, AT TIMES, IN THE PAST.
+THIS IS LARGELY A MATTER FOR THE BANKS BUT, TO THE EXTENT THAT THE EXCHANGE VALUE OF THE HONG KONG DOLLAR IS AT STAKE, THE GOVERNMENT SHOULD ENCOURAGE THE BANKS TO ADJUST INTEREST RATES WHENEVER MONEY FLOWS EXERT EXCESSIVE INFLUENCE ON THE FOREIGN EXCHANGE MARKET.+
TURNING TO THE UNDERSPENDING IN THE PUBLIC WORKS PROGRAMME MISS DUNN SAID SHE FELT OBLIGED TO TAKE THE FINANCIAL SECRETARY TO TASK FOR HIS FAILURE, YET AGAIN, TO MEET THE EXPENDITURE HE BUDGETTED FOR ON CAPITAL ACCOUNT IN 1976/77.
SHE ASKED THE FINANCIAL SECRETARY TO STATE THE REASONS FOR THE UNDERSPENDING AND INDICATE THE RELATIVE IMPORTANCE OF EACH.
/+IN PARTICULAR