XN000022-1995-11-15 — Page 41

- 28 -

Circulation of Hong Kong currency in China

Following is a question by the Hon Allen Lee and a written reply by the Secretary for Financial Services, Mr Rafael Hui, in the Legislative Council today (Wednesday):

Question:

In view of growing economic activities between China and the territory, the total amount of Hong Kong currency circulating in China over the years has accumulated to a substantial level, which can impose a significant effect on the economy of the territory. In this connection, will the Government inform this Council of:

(a) the total value of Hong Kong currency in circulation in China in each of the past three years, together with its percentage to the total currency circulation in the territory;

(b) the anticipated circulation of Hong Kong currency in China in the next three years; and

(c) the anticipated effect the circulation of Hong Kong currency in China on the inflation rate and the economic conditions in the territory?

Reply:

(a) There are no official statistics on the actual size of the amount of Hong Kong dollar banknotes circulating outside the territory. One estimate puts the figure in the range from about 30% to 35% of the total amount of currency in circulation, i.e. between HK$20 - 25 billion out of a total of HK$70 billion. The bulk of this is likely to be circulating in China.

(b) While we do not have any clear and official basis to estimate the future demand for the Hong Kong currency in China, we believe that this would depend on China's policy towards allowing currencies other than the Renminbi to circulate in China and the enforcement of that policy.