SUNDAY, APALL 3, 1903
UPDATED HK DOLLAR EXCHANGE RATE INDEX EXPLAINED
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THE CENSUS AND STATISTICS DEPARTMENT HAS REVISED THE WEIGHTS USED IN THE CALCULATION OF THE TRADE-WEIGHTED EXCHANGE RATE INDEX FOR THE HONG KONG DOLLAR,
THE NEW WEIGHTS NOW REFLECT THE PATTERN OF HONG KONG'S VISIBLE TRADE IN 1981, WHEREAS THE OLD WEIGHTING SYSTEM WAS DERIVED FROM HONG KONG'S EXTERNAL TRADE IN 1972.
THE INDEX CONTINUES TO USE EXCHANGE RATES PREVAILING ON DECEMBER 18, 1971 AS 100 WHEN THE SMITHSONIAN AGREEMENT WAS REACHED.
A SPECIAL REVIEW ARTICLE ENTITLED +UPDATING THE TRADE WEIGHTS FOR THE EFFECTIVE EXCHANGE RATE INDEX FOR THE HONG KONG DOLLAR+ APPEARS IN THE JANUARY 1983 ISSUE OF THE HONG KONG MONTHLY DIGEST OF STATISTICS, WHICH WILL BE ON SALE SOON.
THE ARTICLE EXPLAINS THE PURPOSE OF COMPILING THE INDEX, AND GIVES DETAILS OF THE WEIGHTING SYSTEM, THE METHOD OF COMPILATION, THE EFFECT OF UPDATING THE TRADE WEIGHTS, AND THE LIMITATIONS OF THE INDEX.
THE UPDATING OF THE TRADE WEIGHTS SEEMS TO HAVE A MODERATE EFFECT ON THE OVERALL TRADE-WEIGHTED AND THE IMPORT-WEIGHTED INDEXES, AND A GREATER EFFECT ON THE EXPORT-WEIGHTED INDEX. FOR INSTANCE ON JANUARY 3, 1983, THE OVERALL INDEX, CALCULATED WITH THE 1981 TRADE WEIGHTS, STOOD AT 79.3, WITH THE IMPORT- WEIGHTED INDEX AT 77.1 AND THE EXPORT-WEIGHTED INDEX AT 82.6. WITH THE OLD 1972 WEIGHTS, THE CORRESPONDING INDEXES WERE 79.8, 79.5 AND 84.2 RESPECTIVELY.
THE NEW OVERALL TRADE-WEIGHTED AND EXPORT-WEIGHTED INDEXES WERE LOWER BECAUSE SOME CURRENCIES WITH INCREASED WEIGHTS (E.G. THE RENMINBI) HAD APPRECIATED MORE AGAINST THE HONG KONG DOLLAR THAN OTHER CURRENCIES WITH DECREASED WEIGHTS (E.G. THE POUND STERLING) WHEN COMPARED WITH THE BASE DATE.
THERE IS NO IMPLICATION, HOWEVER, THAT THE HONG KONG DOLLAR HAS SUDDENLY DEPRECIATED BY THE AMOUNT OF THE DIFFERENCE.
IN THE NEW SET OF TRADE WEIGHTS, THE SHARE OF THE RENMINBI AMONG THE 15 CURRENCIES HAS INCREASED TO 18 PER CENT FROM 11 PER CENT. HOWEVER, IT IS NOTED THAT PART OF THE INCREASE IN THE VALUE OF TRADE BETWEEN CHINA AND HONG KONG IN RECENT YEARS IS ATTRIBUTED TO THE EXPORTS OF RAW MATERIALS AND/OR SEMI-MANUFACTURES TO CHINA FOR FURTHER PROCESSING WORK AFTER WHICH THEY ARE IMPORTED BACK INTO HONG KONG.
THE WEIGHT ATTACHED TO RENMINBI MAY BE OVERSTATED TO THE EXTENT THAT SUCH PROCESSING TRADE MAY LEAD TO DOUBLE COUNTING AT LEAST IN PART, OF SOME OF HONG KONG'S TRADE WITH CHINA.
FURTHER DETAILS ON UPDATING THE EFFECTIVE (TRADE-WEIGHTED) EXCHANGE RATE INDEX FOR THE HONG KONG DOLLAR ARE CONTAINED IN THE REVIEW ARTICLE.
THE DIGEST OF STATISTICS MAY BE PURCHASED SHORTLY FROM THE GOVERNMENT PUBLICATION CENTRE, GENERAL POST OFFICE BUILDING, CONNAUGHT PLACE, HONG KONG AT $25 A COPY.
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