XN000022-1980-01-07 — Page 6

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MONDAY, JANUARY 7, 1980

MONEY SUPPLY AND FINANCIAL STATISTICS

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THE MONTHLY CALCULATIONS OF THE MONEY SUPPLY ON THE NARROWER DEFINITIONS (M1 AND M2), AND OF BANK LOANS AND ADVANCES IN HONG KONG, HAVE BEEN REVISED FROM DECEMBER 1978, TO ELIMINATE GROWING DISTORTIONS CAUSED BY TRANSACTIONS BETWEEN LICENSED BANKS AND REGISTERED DEPOSIT-TAKING COMPANIES.

THE CALCULATION OF M3 (THE MONEY SUPPLY ON THE WIDEST DEFINITION) AND OF TOTAL CREDIT TO THE ECONOMY IS NOT AFFECTED BY THIS REVISION.

THE MONEY SUPPLY AND FINANCIAL STATISTICS FOR NOVEMBER 1979 WERE PUBLISHED TODAY (MONDAY), ON THIS REVISED CALCULATION.

REVISION OF THE STATISTICS

THE TWO-WAY INTERMEDIATION TRAFFIC BETWEEN BANKS AND DEPOSIT-TAKING COMPANIES GREW VERY SUBSTANTIALLY DURING THE COURSE OF 1979. THAT YEAR FORMED A HALF-WAY STAGE IN THE INTEGRATION OF DEPOSIT-TAKING COMPANIES INTO THE FINANCIAL SECTOR OF HONG KONG. UP UNTIL NOVEMBER 1978 THE GOVERNMENT DID NOT RECEIVE REGULAR STATISTICAL RETURNS FROM DEPOSIT-TAKING COMPANIES.

FROM DECEMBER 1978 THESE COMPANIES HAVE SUPPLIED MONTHLY STATISTICS OF THEIR ASSETS AND LIABILITIES, INCLUDING DETAILS OF THE IR POSITIONS IN RESPECT OF BANKS IN HONG KONG= BUT THE STATISTICS SUPPLIED BY BANKS HAVE NOT IDENTIFIED THEIR POSITIONS IN RELATION TO DEPOSIT-TAKING COMPANIES.

FROM JANUARY 1, 1980 THE SITUATION CHANGES AGAIN, WITH BANKS GIVING DETAILS ON THEIR MONTHLY RETURNS OF THE DEPOSITS RECEIVED FROM, AND THEIR ADVANCES TO, DEPOSIT-TAKING COMPANIES. THIS IS NECESSARY BECAUSE FROM THAT DATE BANKS' DEPOSIT LIABILITIES (WHICH, WITH NOTES AND COIN IN CIRCULATION, MAKE UP THE MONEY SUPPLY ON THE NARROWER DEFINITIONS OF M1 AND M2) ARE DEFINED BY LAW TO EXCLUDE THE IR DEPOSIT LIABILITIES TO DEPOSIT-TAKING COMPANIES AND BANKS' SHORT TERM ADVANCES TO DEPOSIT-TAKING COMPANIES ARE SPECIFIED BY LAW AS LIQUID ASSETS FOR BANKS.

THE BASE FOR CALCULATING M1 AND M2, AND BANKS' ADVANCES IN HONG KONG, WILL, THEREFORE, AUTOMATICALLY CHANGE WITH THE JANUARY 31, 1980 STATISTICS (WHICH WILL BE AVAILABLE AT THE END OF FEBRUARY 1980). THE STATISTICS FOR NOVEMBER 30, 1979, WHICH WERE PUBLISHED TODAY, AND FOR EACH MONTH BACK TO DECEMBER 1978, HAVE BEEN RECALCULATED ONTO THE NEW BASE TO ANTICIPATE THE JANUARY 1980 CHANGE, AND TO ELIMINATE AN ELEMENT OF DISTORTION WHICH HAS BECOME INCREASINGLY IMPORTANT THROUGH 1979. TABLE 1 (AT THE END OF THIS RELEASE) SETS OUT THE FIGURES, UNREVISED AND REVISED, FOR THE WHOLE OF THIS PERIOD.

/FROM DECEMBER