SECRET
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been to ensure that the value of her foreign earnings should not be
impaired in terms, say, of medium to strong European currencies and
consequent ly the value of Hong Kong dollars in relation to those
currencies has been the determinant of the Renminbi/H.K.dollar rate.
Prior to the sterling float in June 1972 the U.S. dollar rate
when Hong Kong fixed on the
in Hong Kong was H.K.35.582-U.S.$1:
U.S. dollar she devalued the Hong Kong dollar by 1.2% to
H.K.$5.65-U.S.$1.
When the U.S.dollar was devalued last February the
Hong Kong dollar stayed put and a new rate of H.K.$5.085-U.S.$1 (with
a floor of H.K.$4.9706) was established and is still in force today.
A full record of changes in the Renminbi/H.K.dollar rate is not
available, but prior to the sterling float in June 1972 the rate was
The latest rate (11th July) is H.K.$100-RMB37.95
representing over the period a revaluation of the Renminbi in terms of
the Hong Kong dollar of about 6%. This reflects essentially the
weakness of the U.S. dollar over the period and hence of the Hong Kong
dollar, which is fixed on it, in terms of European currencies.
H.K.00-RMB40.20.
This factor alone must have increased the cost in terms of
Hong Kong dollars of imports by the Colony from China and thus have contributed to the 16% rise in consumer prices, including the 21%
increase in food prices, in the year ended April 1973.
Furthermore
not only has China increased the price of her exports but Japan,
Hong Kong's largest supplier, has revalued the yen to a considerable
degree. Although the currencies of Hong Kong's main suppliers have
appreciated, those of her main export markets - U.S.A. and U.K. who
take about 40% and 14% respectively of her exports - have depreciated.
Thus, Hong Kong is faced with a terms of trade problem.
However,
retained imports are equivalent to nearly 80% of GNP, and it seems
important, therefore, for Hong Kong to seek to contain the cost of
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