9.
WEDNESDAY, MAY 13, 1987
+SUCH CONTRIBUTIONS OBVIOUSLY MEAN A REDUCTION IN THE FUNDS AVAILABLE TO THESE TWO PARTIES FOR THEM TO USE IN OTHER WAYS AS THEY SEE FIT, HE SAID.
FOR AN EMPLOYEE, ONE OF THE IMMEDIATE RESULTS WOULD BE TO REDUCE HIS TAKE-HOME PAY, MR YAXLEY SAID, ADDING THAT A FIVE PER CENT CONTRIBUTION WOULD BE THE SAME AS A FIVE PER CENT INCREASE IN SALARIES TAX.
FOR AN EMPLOYER, THE EFFECT WOULD BE ROUGHLY THE SAME AS AN INCREASE OF MORE THAN 40 PER CENT IN THE RATE OF PROFITS TAX.
MR YAXLEY SAID THAT IN MOST CASES, THE INCREASED COST TO EMPLOYERS WOULD HAVE AN EFFECT ON THE COMPETITIVENESS OF HONG KONG'S PRODUCTS INTERNATIONALLY,
ON THE IMPACT ON PRODUCTION COSTS, HE SAID THAT MANUFACTURERS WERE UNLIKELY TO BE INDIFFERENT TO WHAT WOULD BE EQUIVALENT TO A FIVE PER CENT WAGE CLAIM OR EVEN MORE IF EMPLOYEES TRIED TO RECOVER THEIR CONTRIBUTION FROM THEIR EMPLOYERS.
AND TO REDUCE THE COST IMPACT, EMPLOYERS WOULD REDUCE THE SIZE OF SUBSEQUENT WAGE INCREASES OR REDUCE THE NUMBER OF EMPLOYEES.
+EVENTUALLY, MARKET FORCES WOULD TEND TO REDUCE REAL WAGES SUFFICIENTLY TO RESTORE FULL EMPLOYMENT, BUT WITH MUCH OF THE FINANCIAL BURDEN OF THE CENTRAL PROVIDENT FUND HAVING BEEN TRANSFERRED TO EMPLOYEES,+ HE SAID.
+ IN THE INTERIM, SOME ECONOMIC GROWTH WOULD BE SACRIFICED, BUSINESSES WOULD SUFFER AND JOBS MIGHT BE LOST.
+IT IS POSSIBLE THAT THE LOST ECONOMIC GROWTH MIGHT NEVER BE FULLY RECOVERED, HE WARNED.
ON THE IMPLICATIONS OF THE EMPLOYMENT OF THE VERY CONSIDERABLE ACCUMULATED FUNDS, MR YAXLEY SAID THAT AS THERE WAS ONLY A LIMITED NUMBER OF VIABLE INVESTMENT OPPORTUNITIES AVAILABLE LOCALLY. THERE WAS A DANGER THAT IF THE FUND WAS CONSTRAINED TO INVEST LOCALLY, IT WOULD BE OBLIGED TO INVEST IN LOWER QUALITY OF LOWER-YIELDING ASSETS TO THE POSSIBLE DETRIMENT OF THE PARTICIPANTS.
IF, HOWEVER, A SUBSTANTIAL PROPORTION OF THE AVAILABLE FUNDS WAS INVESTED OVERSEAS IN FOREIGN CURRENCY ASSETS, THIS COULD HAVE AN ADVERSE EFEECT UPON THE FOREIGN EXCHANGE AND MONEY MARKETS, AND, UNDER THE LINKED EXCHANGE RATE SYSTEM, COULD RESULT IN UNSETTLING FLUCTUATIONS IN THE LEVELS OF THE HONG KONG DOLLAR INTEREST RATES.
MR YAXLEY