TUESDAY, NOVEMBER 24, 1981
RESERVES USED FOR HONG KONG'S BENEFIT
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CONTRARY TO POPULAR MISCONCEPTIONS, HONG KONG'S RESERVES ARE NOT BEING SENT TO BRITAIN FOR THE BENEFIT OF THE UNITED KINGDOM.
THE RESERVES BELONG TO HONG KONG AND ARE EMPLOYED FOR THE BENEFIT OF HONG KONG, THE SECRETARY FOR MONETARY AFFAIRS, MR DOUGLAS BLYE SAID TODAY.
SPEAKING AT A ROTARY CLUB OF HONG KONG LUNCHEON MEETING, MR ELYE SAID THE AMOUNT OF HONG KONG'S FISCAL RESERVES WAS SHOWN IN THE GOVERNMENT'S MONTHLY ACCOUNTS AS THE GENERAL REVENUE BALANCE+.
IN THE ACCOUNTS PUBLISHED IN THE LATEST GOVERNMENT GAZETTE, THE AMOUNT OF FISCAL RESERVES AT SEPTEMBER 30, 1981 WAS $18 204 MILLION, AND OF THIS $16 861 MILLION HAD BEEN USED TO BUY EXCHANGE FUND DEBT CERTIFICATES.
THE EXCHANGE FUND DEBT CERTIFICATES SHOWN IN THE GOVERNMENT'S BALANCE SHEET ARE LIQUID ASSETS ENCASHABLE AT ANY TIME, HE SAID, ALTHOUGH THEY ARE NORMALLY ONLY REDEEMED TO MEET CASH SHORTFALLS.
→THE RESIDUE, AFTER ALLOWING FOR DEPOSITS WITH THE GOVERNMENT FROM VARIOUS SOURCES AND ADVANCES MADE BY THE GOVERNMENT, IS, AS CAN BE SEEN FROM THOSE ACCOUNTS, HELD IN CASH AND BANK BALANCES, HE SAID.
MR BLYE EXPLAINED THAT THE EXCHANGE FUND WAS ESTABLISHED IN 1935 FOR THE PURPOSE OF REGULATING THE EXCHANGE VALUE OF THE CURRENCY OF HONG KONG AND THAT IT WAS STILL ITS MAIN PURPOSE.
+THIS MEANS THAT IT MUST HAVE FOREIGN CURRENCY ASSETS WHICH IT CAN SELL WHEN THE HONG KONG DOLLAR IS UNDER PRESSURE,+ HE SAID.
+HONG KONG DOLLARS ARE ALSO REQUIRED TO PURCHASE FOREIGN CURRENCY WHEN THE EXCHANGE VALUE OF THE DOMESTIC UNIT IS APPRECIATING TOO QUICKLY, BUT EXPERIENCE INDICATES THAT EXCHANGE RATE DISTORTIONS MORE OFTEN FOLLOW FROM A PERCEIVED WEAKNESS IN THE VALUE OF THE LOCAL CURRENCY RATHER THAN THE OTHER WAY ROUND.
+AND SO THE FUND NEEDS TO HOLD A GREATER PROPORTION OF ITS ASSETS IN FOREIGN CURRENCY THAN IN LOCAL UNIT.+
MR BLYE SAID THE FUND WAS HELD IN U.S. DOLLARS, CANADIAN DOLLARS, DEUTSCHMARKS, SWISS FRANCS, GUILDERS, YEN, STERLING AND HONG KONG DOLLARS.
THE STERLING ELEMENT MOUNTS TC ABOUT 10 PER CENT OF THE TOTAL ASSETS OF THE FUND.
/MR BLYE ...........