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FRIDAY, SEPTEMBER 11, 1981
HE SAID THAT THE GROWTH RATE OF THE ECONOMY WAS BEING LED MORE BY DOMESTIC DEMAND THAN BY EXPORTS, WHICH IS A SITUATION THAT COULD NOT BE SUSTAINED INDEFINITELY. THE WIDENING TRADE DEFICIT AND THE DIFFERENTIAL IN REAL INTEREST RATES IN FAVOUR OF THE US DOLLAR HAD CONTRIBUTED TO A FALL IN THE EFFECTIVE EXCHANGE RATE OF THE HONG KONG DOLLAR, AND MORE MARKEDLY IN A FALL IN ITS EXCHANGE VALUE AGAINST THE US DOLLAR.
*THIS INDICATES THAT AN ADUSTMENT IN HONG KONG'S INTERNATIONAL COMPETITIVENESS IS UNDERWAY,+ MR BREMRIDGE SAID,
THE FINANCIAL SECRETARY POINTED OUT THAT THOUGH HONG KONG EXPORTS WERE MORE COMPETITIVE IN FOREIGN CURRENCY TERMS, THE PRICES OF IMPORTS BECAME MORE EXPENSIVE IN HONG KONG DOLLAR TERMS.
FOR MANUFACTURERS, THIS ALSO MEANT THAT HIGHER IMPORT PRICES
IN TERMS OF HONG KONG DOLLARS TENDED TO OFFSET SOME OF THE GAINS IN TERMS OF FOREIGN CURRENCY PRICES OF THE IR EXPORTS.
+BUT AS LONG AS THE IR EXPORTS HAVE A REASONABLE HONG KONG VALUE ADDED CONTENT, THE DEPRECIATION OF THE HONG KONG DOLLAR SHOULD IMPROVE THE COMPETITIVENESS OF THE IR EXPORTS, AT LEAST VIS-A-VIS THE EQUIVALENT TERMS PRODUCED BY OTHER MANUFACTURERS IN THE IR EXPORT MARKETS.
*THE MAIN EXCEPTION THAT COULD OCCUR WOULD BE IF THE DEPRECIATION IN TERMS OF THE CURRENCIES OF THE COUNTRIES FROM WHICH HONG KONG MANUFACTURERS IMPORT WAS GREATER THAN THAT IN TERMS OF THE CURRENCIES OF THE COUNTRIES TO WHICH THEY EXPORT.
+FORTUNATELY THIS HAS NOT BEEN THE RECENT PATTERN, MR BREMRIDGE SAID.
THE FINANCIAL SECRETARY ALSO SAID ■ +THE INCREASE IN THE HONG KONG DOLLAR PRICE OF IMPORTS IS AN INEVITABLE CONSEQUENCE OF THE DEPRECIATION OF THE EXCHANGE VALUE OF THE HONG KONG DOLLAR. IT IS IMPORTANT TO MINIMISE THE EXTENT TO WHICH THIS IMPORT INFLATION INDUCES INCREASES IN THE PRICES OF DOMESTIC INPUTS. IF THE INCREASE IN IMPORT PRICES IS MATCHED WITHIN A SHORT PERIOD OF TIME BY INCREASES IN DOMESTIC PRICES, MOST OF THE BENEFITS OF THE DEPRECIATION WILL BE LOST.
*THE EXTENT TO WHICH THIS OCCURS DEPENDS ON THE EXTENT TO WHICH EITHER THE SUPPLY OF AND DEMAND FOR DOMESTIC RESOURCES ARE OUT OF BALANCE OR THE GROWTH IN THE MONEY SUPPLY ACCOMMODATES THE EXTRA SPENDING IN MONEY TERMS NEEDED TO MAINTAIN THE LEVEL OF SPENDING IN REAL TERMS, AS A RESULT OF THE INCREASE IN
IMPORT PRICES.
+BOTH OF THESE FACTORS IMPLY THAT THE GOVERNMENT SHOULD DO WHAT IT CAN TO PREVENT THE BENEFITS OF A DEPRECIATION OF THE HONG KONG DOLLAR BEING DISSIPATED. ALTHOUGH | ACCEPT THAT THE GOVERNMENT HAS A ROLE TO PLAY IN THE PROCESS OF ACHIEVING ECONOMIC STABILITY THE SCOPE FOR BENEFICIAL GOVERNMENT INTERVENTION IS NEVERTHELESS LIMITED.+
MR BREVKIIGE