XN000022-1980-01-07 — Page 7

MONDAY, JANUARY 7, 1980

6

FROM DECEMBER 1978 (1.E. THE FIRST MONTH WHEN THE DEPOSIT-TAKING COMPANIES STATISTICS WERE AVAILABLE) TO NOVEMBER 1979, THE DEPOSITS OF THESE COMPANIES WITH LICENSED BANKS IN HONG KONG ROSE FROM $6.9 BILLIONS TO $17.6 BILLIONS (MUCH OF THIS INCREASE REPRESENTS BALANCES GATHERED BY LICENSED BANKS' DEPOSIT-TAKING COMPANY SUBSIDIARIES, WHICH ARE NOT SUBJECT TO THE EXCHANGE BANKS' ASSOCIATION INTEREST RATE AGREEMENT, AND ARE PASSED ON TO THE PARENT BANKS).

THESE DEPOSITS HAVE HITHERTO BEEN INCLUDED IN M2 WHICH, OVER THE SAME PERIOD, ROSE FROM $73.4 BILLIONS TO $90.5 BILLIONS, OR BY 23.3 PER CENT. IF M2 IS REDEFINED TO REMOVE THESE DEPOSITS ITS LEVEL HAS RISEN OVER THE SAME PERIOD BY ONLY 9.8 PER CENT FROM $66.5 BILLIONS TO $73.0 BILLIONS.

OVER THE PERIOD FROM DECEMBER 1978 TO NOVEMBER 1979, BANKS' ADVANCES TO DEPOSIT-TAKING COMPANIES HAVE RISEN FROM $6.4 BILLIONS TO $11.5 BILLIONS. (MUCH OF THIS INCREASE IS ACCOUNTED FOR BY FOREIGN CURRENCY ADVANCES BY BANKS, TO FUND THE OFFSHORE LENDING ACTIVITIES OF THEIR DEPOSIT-TAKING COMPANY SUBSIDIARIES). BANK LOANS AND ADVANCES IN HONG KONG (ON THE EXISTING CALCULATION) ROSE OVER THE PERIOD FROM $52.8 BILLIONS TO $70.1 BILLIONS, OR BY 32.8 PER CENT, IF BANKS' ADVANCES TO DEPOSIT-TAKING COMPANIES ARE SUBTRACTED, BANK LENDING IN HONG KONG HAS RISEN OVER THE SAME PERIOD BY ONLY 26.3 PER CENT, FROM $46.4 BILLIONS TO $58.7 BILLIONS.

WHEN THE FIGURES FOR M1 AND M2, AND BANK LOANS IN HONG KONG, ARE RECALCULATED IN THIS WAY, THEY PROVIDE A BETTER INDICATION OF THE ACTIVITIES OF LICENSED BANKS IN HONG KONG.

CLEARLY THE ACTIVITIES OF REGISTERED DEPOSIT-TAKING COMPANIES ARE ALSO IMPORTANT, IN RELATION TO THE ECONOMY AS A WHOLE IT IS FOR THIS REASON THAT M3 (THE MONEY SUPPLY ON THE WIDEST DEFINITION) IS CALCULATED TO INCLUDE PUBLIC DEPOSITS WITH DEPOSIT-TAKING COMPANIES, AND THAT THE TOTAL CREDIT TO THE ECONOMY IS CALCULATED TO INCLUDE LOANS AND ADVANCES IN HONG KONG BY DEPOSIT-TAKING COMPANIES. THESE TWO INDICATORS HAVE BEEN PUBLISHED EACH MONTH SINCE MID-19791 THE IR TOTALS ARE NOT AFFECTED IN ANY WAY BY THE REVISED CALCULATIONS OF THE FIGURES FOR THE BANKING SECTOR.

THE FOLLOWING DEFINITIONS WILL, THEREFORE, BE USED FORTHWITH, BACKDATED TO DECEMBER 1978:-

M1-- LEGAL TENDER COINS AND NOTES IN THE HANDS OF THE

NON-BANK AND NON-DEPOSIT-TAKING COMPANY PUBLIC, PLUS DEMAND DEPOSITS (OTHER THAN FROM BANKS AND DEPOSIT-TAKING COMPANIES) WITH LICENSED BANKS.

M2

M3

M1 PLUS SAVINGS AND TIME DEPOSITS (OTHER THAN FROM BANKS AND DEPOSIT-TAKING COMPANIES) WITH LICENSED BANKS.

M2 PLUS DEPOSITS FROM THE NON-BANK AND NON-DEPOSIT- TAKING COMPANY PUBLIC WITH REGISTERED DEPOSIT-TAKING COMPANIES.

/BANK LOANS