XN000022-1973-05-09 — Page 4

- 3

Wednesday, May 9, 1973

In general, Mr. Jones said, Hong Kong people still had greater

access to a greater variety of food at cheaper prices than elsewhere.

Inflation

Mr. Jones also rejected arguments that alleged inflation generated

in Hong Kong itself was a major factor pushing up prices and the cost of

living.

"I do not deny that there is inflation in Hong Kong but would submit that it is caused largely by external influences operating on our

economy, " he said.

"If there were no inflation in the countries from which we obtain

our imports and those in which we sell our exports there would be no inflation

in Hong Kong."

Mr. Jones conceded that there were two areas in which some degree

of inflationary pressure had been generated from within Hong Kong in recent years.

These were the bottleneck in the construction industry and the very large inccoase in the supply of credit over the past year or so over and above that generated by inflows of funds from abroad.

"Both these factors are, however, being ironed out by natural economic processes and the inflationary forces they have exerted are beginning to die

away: If he said.

The construction industry which had been hard hit by the banking crisis of 1965 and the events of 1967, he said, was also now employing more labour and was beginning to use labour more productively with more capital intensive operations.

There were also signs that bank loans and deposits, and with then

the money supply, were beginning to level off following the considerable increase in bank lending last year and in the first few months of this year.

/"So, the