CO129-557-5 Estimates 1937 19-8-1936 - 7-8-1937 — Page 18

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I agree with Mr. Gent that there is no

cause for alarm in these estimates.

There is no

point in having reserve funds unless we are prepared

to use them in hard times, and it is unreasonable

to hope that things will not improve in Hong Kong

in the next few years. Even if the surplus for

1937 is reduced to the figure shown in the estimates,

Hong Kong would still be in a fairly sound position

compared with many other Colonies. Actually, if

peace is preserved in China we can legitimately

hope that China herself, and therefore Hong Kong,

will benefit both by the increased currency stability

and by the general improvement in world trade, so

that the revenue may prove to exceed the estimate. happy On the other hand, the currency is in the má bake

position that no decline in its value can be

forced upon us (although we could engineer a

decline if the policy of deliberate inflation were

thought in Hong Kong's interests), and Government

need not therefore fear a forced increase

burden of its sterling commitments.

in the

The currency

is also in such a position that looking to the

more distant future the Government ought to secure

some revenue from the investments of the Exchange

Fund. A rise in the value of the Hong Kong dollar,

although it might render it inexpedient for the

Government to take revenue from the Exchange Fund,

would reduce the burden of sterling commitments;

while a fall in the value of the dollar, while it

would increase that burden, would also create a

surplus in the Exchange Fund which should in due

course become available for purposes of general

revenue.

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5. Caine

9. 12. 36.