XN000022-1992-10-08 — Page 17

THURSDAY, OCTOBER 8, 1992

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IN

WE CAN'T USE MONETARY POLICY A CONVENTIONAL WAY TO DEAL WITH IT BECAUSE OF OUR ABSOLUTELY NECESSARY LINK WITH THE US DOLLAR. BUT LET US BE CLEAR, IF WE WERE USING MONETARY METHODS IN A TRADITIONAL WAY TO TRY TO DEAL WITH

IT, THAT WOULD MEAN THAT WE WOULDN'T HAVE AS MANY PEOPLE IN JOBS AND WE PROBABLY WOULDN'T HAVE AS FAST ECONOMIC GROWTH. SO NOBODY SHOULD RECKON THAT USING MONETARY POLICY IN A TOUGHER WAY WOULD BE A COST- FREE OPTION.

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WE MIGHT REMEMBER THAT THERE WERE - AND I THINK I'M REMEMBERING IT ACCURATELY - THERE WERE A COUPLE OF DECADES WHEN THE JAPANESE YEN WAS LINKED TO THE US DOLLAR, A PERIOD DURING WHICH, AGAIN AS I SUSPECT A CONSEQUENCE, JAPANESE INFLATION WAS INVARIABLY ABOVE UNITED STATES INFLATION. AT THE END OF THAT PERIOD

I DON'T THINK MANY REGARDED THE JAPANESE ECONOMY AS BEING A WEAKER ECONOMY THAN THE UNITED STATES ECONOMY. WHAT IS IMPERATIVE IS THAT EVEN THOUGH OUR DOMESTIC INFLATION, TO WHICH I WANT TO RETURN, HAS BEEN INCREASING AT A LEVEL WHICH THE COMMUNITY RIGHTLY REGARDS WITH CONCERN, WE HAVEN'T BEEN SUFFERING TO THE SAME EXTENT WHEN IT COMES TO THE GOODS THAT WE EXPORT. THE GOODS THAT WE EXPORT, THE GOODS THAT WE MARKET, HAVE ONLY BEEN RISING AT ABOUT 1% A YEAR IN PRICE WHICH HAS MEANT THAT WE'VE REMAINED COMPETITIVE, LARGELY BECAUSE WE'VE BEEN ABLE TO USE GUANGDONG AND OTHER AREAS AS A MANUFACTURING BASE FOR OUR PRODUCTS. IT'S BEEN A VERY IMPORTANT PART OF OUR COMPETITIVE EDGE BUT WE'VE ALSO REMAINED COMPETITIVE BY RUTHLESSLY AND RELENTLESSLY TRYING ΤΟ MAKE OUR PROCESSES MORE EFFICIENT AND THAT IS SOMETHING FOR WHICH THE MANAGEMENT IN HONG KONG DESERVES A VERY SUBSTANTIAL PAT ON THE BACK.

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THE COMMUNITY

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AND I'M SURE THOSE WHO RECENTLY ELECTED THE HONOURABLE MEMBER MADE THIS POINT TO HIM AGAIN AND AGAIN THE COMMUNITY IS UNDERSTANDABLY CONCERNED ABOUT THE THREAT OF DOUBLE-DIGIT INFLATION, AND SO AM I. WE HAVE TO TACKLE THAT IN A NUMBER OF SOPHISTICATED WAYS, FOR EXAMPLE, BY WHAT I WAS SAYING EARLIER, ON RE-TRAINING AND THE LABOUR SUPPLY. BY HELPING, AS I WAS SAYING EARLIER, TO DEAL WITH SOME OF THE PROBLEMS AFFECTING SOME GROUPS, PARTICULARLY THE SANDWICH CLASS IN HOUSING, BUT OTHERS AS WELL.

THOSE ARE THE WAYS IN WHICH WE HAVE TO TRY TO BRING DOWN INFLATION, WE HAVE TO RECOGNISE THAT UNLESS THE WAGE INCREASES WE PAY OURSELVES CAN BE MET OUT OF INCREASED PRODUCTIVITY AND EFFICIENCY THAT тоо WILL LEAD TO GREATER INFLATION, SO WE NEED TO BE MORE EFFICIENT IN ORDER TO HOLD DOWN AND REDUCE INFLATAION.

AND OF COURSE, FINALLY, WE NEED TO HELP THOSE WHO LIVE ON FIXED INCOMES, PARTICULARLY PUBLIC ASSISTANCE PAYMENTS, COPE WITH INFLATION BY ENSURING THAT THEIR PUBLIC ASSISTANCE PAYMENTS ARE PROTECTED YEAR AFTER YEAR AGAINST THE RAVAGES OF INFLATION.

MRS PEGGY LAM:

MR GOVERNOR, IN YOUR POLICY ADDRESS YOU GO INTO DETAIL ABOUT EDUCATION AND YOU TALK ABOUT PARENTS AND QUALITY EDUCATION. ALL ALONG THE EDUCATION SYSTEM IN HONG KONG IS SUCH THAT IT IS CRITICISED BY THE COMMUNITY AND THE PARENTS. THE EDUCATION POLICIES IN HONG KONG ALL ALONG HAVE BEEN FORMULATED BY PROFESSIONALS. I WOULD LIKE TO ASK YOU THIS: HAVE YOU CONSIDERED THAT IN FUTURE, WHEN FORMULATING EDUCATIONAL POLICIES, YOU WILL INVITE PARENTS TO TAKE PART IN FORMULATING POLICIES?

/GOVERNOR: I