XN000022-1990-12-07 — Page 3

2

ΤΟ

ASSUME

HE EMPHASISED THAT THERE WAS NO INTENTION FOR THE OFFICE OF THE

FUND,

FURTHER, SIGNIFICANT WHEN EXCHANGE CENTRAL BANKING ROLES.

ESTABLISHED,

OF

BANK "THE ROLES WE ARE NOT PERFORMING INCLUDE THE ISSUING

AND PROVIDING RETAIL BANKING MANAGING THE NOTES,

CLEARING HOUSE SERVICES TO THE GOVERNMENT.

FOR US ΤΟ

HE ADDED.

"AND I DO NOT THINK THERE IS ANY NEED WHATSOEVER ASSUME ANY OF THESE ROLES IN THE FORESEEABLE FUTURE,

(

BE USED TO SIMPLE A

ON THE SUBJECT OF WHETHER INTEREST RATES COULD ASSIST IN THE CURBING OF INFLATION, SIR PIERS SAID HE TOOK THE VIEW THAT HIGH INTEREST RATES WERE HELPFUL IN CURBING INFLATION IN SITUATION WHEN THERE WAS RAPID CREDIT EXPANSION.

ΤΟ "AND

1

THE EXTENT

THAT EXCHANGE

RATE

STABILITY

IS NOT THIS

AFFECTED I AM NOT AVERSE TO USING INTEREST RATES CAUTIOUSLY FOR PURPOSE, HE SAID.

H

HE POINTED OUT THAT EARLIER THIS YEAR HONG KONG EXPERIENCED RAPID RATE OF CREDIT EXPANSION.

AT

"IN

1989, THE GROWTH RATE OF LOANS WAS ABOUT 30 PER CENT, THE SAME TIME, PUBLIC SENTIMENT SEEMED TO BE UNDER THE INFLUENCE OF PERCEPTION THAT THERE HAD BEEN A HUGE OUTFLOW OF MONEY FROM HONG KONG. "THE EXCHANGE RATE WAS ON THE WEAKER SIDE OF 7.80, ALTHOUGH NOT ΤΟ TIGHTEN SIGNIFICANTLY SO. THIS PROVIDED US WITH AN OPPORTUNITY RATES

ΤΟ HIGHER, INTERBANK LIQUIDITY

PUSH INTERBANK INTEREST AND LEVELS SIGNIFICANTLY HIGHER THAN U.S. DOLLAR INTEREST RATES," HE SAID.

INCREASED IN APRIL THIS

"THE HONG KONG ASSOCIATION OF BANKS CORRESPONDINGLY DEPOSIT INTEREST RATES BY ONE FULL PERCENTAGE POINT YEAR, AND THE MAJOR BANKS ALSO INCREASED THEIR BEST LENDING RATES.

GENERAL SLOW "AS A RESULT, AND PARTLY AS A REFLECTION OF THE

TREND DOWN IN ECONOMIC ACTIVITY, WE SAW A QUITE SIGNIFICANT DOWNWARD

LOANS GREW AT AN ANNUALISED RATE OF IN THE RATE OF CREDIT EXPANSION. ABOUT 14 PER CENT IN THE SECOND QUARTER BUT CAME SHARPLY DOWN TO PER CENT IN THE THIRD QUARTER.

"AT THESE GROWTH RATES, I DOUBT VERY MUCH IF CREDIT WAS STILL CONTRIBUTING SIGNIFICANTLY TO INFLATION," HE SAID.

FIVE

EXPANSION

SIR PIERS POINTED OUT THAT WITH HONG KONG DOLLAR INTEREST RATES THE HIGHER THAN THOSE OF THE U.S. DOLLAR, FUNDS WERE ATTRACTED INTO HONG KONG DOLLAR, AND THE EXCHANGE RATE STRENGTHENED TO ABOUT 7.75.

ALTHOUGH AT THAT LEVEL THE EXCHANGE RATE WAS NOT CAUSING US ANY CONCERN, THERE WAS NO NEED TO CREATE A CREDIT CRUNCH EITHER, HE SAID.

WITH CREDIT EXPANSION AT AN HISTORICALLY LOW RATE, THE NEED FOR THOSE MAINTAINING INTEREST RATES AT LEVELS SIGNIFICANTLY HIGHER THAN

CENT CUTS IN FOR THE U.S. DOLLAR FELL AWAY; HENCE THE TWO HALF-PER

OF RETURN

THE INTEREST RATES IN SEPTEMBER AND OCTOBER, AND THE EXCHANGE RATE BACK TO AROUND 7.80.

/"WE ARE