XN000022-1973-02-28 — Page 23

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Wednesday, February 28, 1973

WAYS TO CURB RISE IN MONEY SUPPLY EXAMINED

Increase In Deposit Rates Welcomed

The Financial Secretary is currently examining ways to slow down

the rise in the money supply to help ease "the pressure on the property and

stock markets" in Hong Kong.

In his Budget speech in the Legislative Council today, the Hon. C.P.

Raddon-Cave said that a slow-down might be encouraged within the framework

of "Hong Kong's normal monetary arrangements."

In this context, he welcomed the recent announcement by the Exchange

Banks' Association of an increase in deposit rates and in the rate for loans

against shares.

Reviewing events in the monetary sector in the last 12 months, the

Financial Secretary said that the money supply rose by much more than the

Gross Domestic Product.

The factors lying behind this were complex, he said, but the most

important were the floating of sterling last June and the linking of the

Hong Kong dollar to the U.S. dollar.

"One of the consequences of these two related developments was

that large balances which would, hitherto, have been invested overseas were

retained in Hong Kong," Mr. Haddon-Cave said.

The banks increased their lending by 50 per cent to $17,700 million

and the proportion of their loans and advances to deposits increased from

63 per cent at the end of 1971 to as much as 72 per cent at the end of 1972

on a much higher level of deposits.

/Specified