XN000022-1990-07-12 — Page 3

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THURSDAY, JULY 12, 1990

"THIS STARTED WAY BACK IN 1982 WHEN INTEREST WITHHOLDING TAX ON FOREIGN CURRENCY DEPOSITS WAS REMOVED. THE AVERAGE GROWTH RATE OF NON- HONG KONG DOLLAR DEPOSITS FOR THE FIVE YEAR 1985 TO 1989 IS OVER 30 PER CENT PER ANNUM, HE SAID.

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HE NOTED THAT A COMMON FEATURE OF DEVELOPING FINANCIAL CENTRES WAS THAT FOREIGN CURRENCY DEPOSITS TENDED TO GROW FASTER THAN DEPOSITS IN DOMESTIC CURRENCY, SO THAT THE SHARE OF DEPOSITS IN CURRENCY WILL FALL OVER TIME.

THE DOMESTIC

MR YAM SAID THAT DEPOSITS IN DOMESTIC CURRENCIES REPRESENT ONLY THE MINORITY OF THE TOTAL DEPOSIT BASE, ADDING THAT IN LONDON STERLING DEPOSITS REPRESENT ONLY 40 PER CENT OF TOTAL DEPOSITS AND IN SINGAPORE THE CORRESPONDING SHARE WAS ABOUT 50 PER CENT.

MOREOVER, CASH RICH HONG KONG COMPANIES HAD BEEN SEEKING OUT OVERSEAS INVESTMENT OPPORTUNITIES AS THEY EXPANDED, IN THE SAME WAY AS JAPANESE, U.S. OR CANADIAN COMPANIES HAD EXPANDED OVERSEAS.

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"THIS NATURAL DIVERSIFICATION OF BUSINESS HAS ALSO INVOLVED THE MOVEMENT OF MONEY OUT OF HONG KONG OR OUT OF THE HONG KONG DOLLAR, MR YAM NOTED.

ANY

OUTFLOW OF FUNDS, FOR POLITICAL OR ECONOMIC REASONS, MUST HAVE BEEN OFFSET BY AN INFLOW OF FUNDS INTO HONG KONG AND INTO THE HONG KONG DOLLAR; OTHERWISE THE POOL OF MONEY IN HONG KONG WOULD NOT HAVE CONTINUED TO GROW AT THE RATES THAT HONG KONG WAS EXPERIENCING AND THE HONG KONG DOLLAR EXCHANGE RATE WOULD NOT HAVE BEEN SO STABLE, HE SAID.

"THE OVERALL PICTURE IS THEREFORE THAT, WHEREAS THERE HAS INEVITABLY BEEN SOME OUTFLOW OF MONEY FROM RESIDENTS OF HONG KONG, GIVEN HEALTHY MONETARY GROWTH AND A STABLE EXCHANGE RATE, THERE MUST HAVE BEEN OFFSETTING INFLOWS FROM NON-RESIDENTS, MR YAM SAID.

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"SOME HAVE ARGUED THAT THIS IS NOT A HEALTHY STATE OF AFFAIRS. THEY EXPRESSED SOME DOUBT ABOUT THE LEVEL OF COMMITMENT OF NON- RESIDENTS TO THE LONG TERM STABILITY AND PROSPERITY OF HONG KONG.

"WITH RESPECT, THESE PEOPLE ARE HOLDING A VERY NARROW VIEW OF

WHAT HONG KONG REALLY IS," MR YAM SAID.

"HONG KONG HAS ALWAYS BEEN A PLACE FOR MAKING MONEY. WHOEVER YOU ARE OR WHATEVER NATIONALITY YOU HOLD, AS LONG AS YOU FOLLOW THE RULES OF THE GAME, WE WISH YOU THE BEST OF LUCK, HE ADDED.

"NARROW DISTINCTIONS OF WHO IS A RESIDENT AND WHO IS A NON- RESIDENT, AND WHETHER THE MONEY MADE IN HONG KONG ACCRUES TO HONG KONG PEOPLE OR CANADIANS ARE MEANINGLESS, MR YAM SAID.

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"AS LONG AS PEOPLE ARE PREPARED TO PUT THEIR MONEY IN HONG KONG AND TAKE ADVANTAGE OF OPPORTUNITIES TO MAKE MORE OF IT, HONG KONG WILL STAY PROSPEROUS.

/"MONEY STAYS