XN000022-1983-11-09 — Page 2

WEDNESDAY, NOVEMBER 9, 1983

GOVERNMENT FIRM ON EXCHANGE RATE: SIR JOHN

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THE FINANCIAL SECRETARY, THE HON SIR JOHN BREMRIDGE, REAFFIRMED TODAY THAT THE GOVERNMENT +DOES NOT INTEND THAT THE LOCAL CURRENCY WILL FALL BELOW AN EXCHANGE RATE ON THE OPEN MARKET OF ABOUT HK$7.80 TO THE U.S. DOLLAR.+

+WE MUST HAVE STABILITY. THE WHOLE PURPOSE OF OUR NEW POLICY IS TO IGNORE THE PAST AND TO PROVIDE NOW AND FOR THE FUTURE ABSOLUTE CONFIDENCE IN THE NEW LINK AT $7.80, + SIR JOHN TOLD THE LEGISLATIVE COUNCIL.

THE FINANCIAL SECRETARY WAS MOVING THE SECOND READING OF THE INLAND REVENUE (AMENDMENT) (NO. 4) BILL 1983, DEALING WITH THE REMOVAL OF THE INTEREST TAX ON HONG KONG DOLLAR DEPOSITS WITH FINANCIAL INSTITUTIONS.

THE OCCASION, HE SAID, ALSO PROVIDED HIM WITH A SUITABLE OPPORTUNITY TO COMMENT BRIEFLY ON THE NEW CURRENCY STABILISATION SCHEME.

+ SAY BRIEFLY, FOR IT SEEMS TO ME SENSIBLE TO ALLOW UNFOLDING FACTS TO SPEAK FOR THEMSELVES IN A TOTALLY NEW SITUATION, WHICH IS MORE SUBTLE THAN MANY COMMENTATORS EVEN NOW APPRECIATE,+`SIR JOHN SAID.

THE FINANCIAL SECRETARY EXPLAINED THAT THE SCHEME +PROVIDES NOT A PEGGED RATE, BUT A BANKNOTE SYSTEM WHICH ENSURES EQUILIBRIUM AT THE CHOSEN EXCHANGE RATE VIA AN AUTOMATIC ADJUSTMENT MECHAN I SM. +

NOTING THAT THINGS HAD GONE WELL, AS PLANNED, SIR JOHN ADDED, HOWEVER, THAT HE WAS BY NATURE +ALWAYS CAUTIOUS ABOUT ECONOMIC FORECASTS, WHICH MAY NOT ALLOW FOR UNPREDICTABLE PSYCHOLOGICAL OR OTHER FACTORS.+

+THIS IS, HE SAID,

THEREFORE NO TIME FOR CONCEIT, THE

PENALTIES FOR WHICH CAN BE CONSIDERABLE.+

SIR JOHN SAID THAT HONG KONG HAD NEVERTHELESS ENJOYED FOR THREE WEEKS A STABLE EXCHANGE RATE COUPLED WITH A SIGNIFICANT DOWNWARD MOVEMENT IN LENDING RATES.

THIS HAD BEEN HIGHLY BENEFICIAL TO THE COMMUNITY, HE SAID,

+THESE BENEFITS WILL CONTINUE, THOUGH I AM SURE THAT THE HKAB WILL SHARE MY VIEWS ON THE VIRTUES OF A CONSERVATIVE COURSE WITH REGARD TO INTEREST RATES,+ HE SAID,

THE FINANCIAL SECRETARY TOLD THE COUNCIL THAT HE WISHED TO SAY +AGAIN QUITE SIMPLY AND CLEARLY THAT GOVERNMENT DOES NOT INTEND THAT THE HONG KONG DOLLAR WILL FALL BELOW AN EXCHANGE RATE ON THE OPEN MARKET OF ABOUT $7.80 TO THE U.S. DOLLAR,→

/SIR JOHN