WEDNESDAY, JULY 18, 1979
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HK'S ECONOMY BEGINNING TO ADJUST IN THE WAY INTENDED
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THE EXCHANGE VALUE OF THE HONG KONG DOLLAR SHOULD STRENGTHEN WHEN IT BECOMES APPARENT THAT THE RATE AT WHICH THE VISIBLE TRADE GAP IS WIDENING HAS SLOWED DOWN, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE SAID TODAY (WEDNESDAY).
REPLYING TO A QUESTION FROM THE HON. HILTON CHEONG-LEEN IN THE LEGISLATIVE COUNCIL ON WHAT MEASURES THE GOVERNMENT WOULD TAKE TO PREVENT THE FURTHER DECLINE IN VALUE OF THE HONG KONG DOLLAR MR. MADDON-CAVE SAID: INDEED, I BELIEVE THERE IS EVIDENCE THAT THE ECONOMY IS NOW BEGINNING TO ADJUST IN THE WAY INTENDED.+
ON THE WEAKENING OF THE HONG KONG DOLLAR AGAINST THE U.S. DOLLAR, THE FINANCIAL SECRETARY SAID HE HAD EXPLAINED IN THE BUDGET SPEECH THAT MEASURES HAD TO BE TAKEN TO BRING THE GROWTH RATE OF TOTAL FINAL DEMAND MORE INTO LINE WITH THE GROWTH RATE OF THE ECONOMY'S OUTPUT, AND HAD STRESSED THAT THIS SHOULD BE DONE IN SUCH A WAY AS TO FACILITATE A RELATIVE SHIFT OF RESOURCES IN FAVOUR OF EXPORTS.
+THE MEASURES ANNOUNCED IN THE BUDGET ARE BEING PROGRESSIVELY IMPLEMENTED AND THEY ARE HAVING THEIR INTENDED EFFECT,+ MR. HADDON-CAVE SAID.
THE FINANCIAL SECRETARY ALSO EXPLAINED THAT PART OF THE RECENT DECLINE IN THE EXCHANGE VALUE OF THE HONG KONG DOLLAR, AS MEASURED BY ITS TRADE WEIGHTED EXCHANGE RATE INDEX, REFLECTED_THE_CURRENT WEAKNESS OF THE U.S. DOLLAR AGAINST OTHER MAJOR CURRENCIES.
+TO THE EXTENT THAT ANY MEASURES TAKEN BY THE U.S. AUTHORITIES SUCCEED IN STABILISING THE EXCHANGE VALUE OF THE U.S. DOLLAR, THE EXCHANGE VALUE OF THE HONG KONG DOLLAR WILL ALSO BE STABILISED TO SOME DEGREE, HE SAID,
HOWEVER
MR. HADDON-CAVE SAID HE DID NOT BELIEVE THAT IT WOULD BE APPROPRIATE FOR THE EXCHANGE FUND TO INTERVENE IN THE FOREIGN EXCHANGE MARKET BY SELLING U.S. DOLLARS OR OTHER CURRENCIES, SO AS TO PROP UP THE EXCHANGE VALUE OF THE HONG KONG DOLLAR.
+ IT IS OUR LONG ESTABLISHED PRACTICE TO INTERVENE ONLY TO SMOOTH OUT OR ATTEMPT TO SMOOTH OUT EXCESSIVE DISTORTIONS IN THE MARKET RATE.
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+EXPERIENCE ELSEWHERE CLEARLY INDICATES THAT TO ATTEMPT TO PRESERVE A GIVEN EXCHANGE RATE, OR EVEN A RANGE OF EXCHANGE RATES, THROUGH INTERVENTION ALONE WILL FAIL AND AT A COST IN RESOURCES WHICH CAN BE ILL SPARED, HE SAID.
IN REPLY TO A SUPPLEMENTARY QUESTION BY MR. CHEONG-LEEN ON WHAT EXACTLY THE EVIDENCE WAS THAT THE ECONOMY WAS BEGINNING TO ADJUST, MR. HADDON-CAVE SAID IT COULD BE BEST ANSWERED WITH REFERENCE TO THE GROWTH RATES OF THE MAIN TRADE AND MONETARY AGGREGATES IN THE FIRST SIX MONTHS OF THIS YEAR COMPARED WITH THE SAME PERIOD OF LAST YEAR,
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