Chapter 3
The Money and Foreign Exchange
Markets
The Money Supply
39. For the purposes of this chapter, the money supply will be defined as: total deposits (this is, demand, savings and time deposits) with the licensed banks, together with legal tender notes and coins held outside the licensed banks. On this definition, the money supply has increased by about 140% since the begin- ning of 1969, although the rate of growth declined sharply in 1973.
Money Supply, 1968-1973
Gross Domestic Product and Average Money Supply, 1969–1973
Table 12
Gross domestic
product
Money supply
(at current market (average for year)*
prices)
% change
on
% change
on
HK$
HK$ million previous million previous
year 15,352 17.8 18.6
average of monthly figures.
† preliminary estimate.
1969
Table 11
1970
18,212
year 13,218 19.1 15,751
19.2
1971
20,320
11.6
19,380 23.0
% change on
1972
HK$
23,657†
16.4
24,367 25.7
previous
1973
million
28,335+ 19.8
28,277 16.0
year
*
As at end of year:
1968
12,188
1969
14,225
16.7
1970
17,177
20.8
1971
21,359
24.3
1972
27,525
28.9
1973
29,329
6.6
The Money Supply and the Gross Domestic Product
40. Bearing in mind the very open nature of the Hong Kong economy, the rates of growth of the money supply and of the gross domestic product, at current market prices, ought generally to be of the same order of magnitude. Table 12 shows the average money supply for each of the years 1969 to 1973. It will be seen that the money supply grew more slowly in 1973 than in each of the four preceding years. Only in 1970, and to a lesser extent in 1969, did the money supply and the gross domestic product grow at much the same rate.
forecast.
The Money Supply and the Banking System
41. The proportion of the money supply represented by notes and coins held by the public has decreased in recent years and this reflects not only increasing confidence in the banking system, but also the greater sophisti- cation with which the commercial affairs of the community are conducted.
Proportion of Money Supply represented by Non-bank holdings of Notes and Coins, 1968-1973
Table 13
As at end of
1968
year:
1969
1970 1971
1972
1973
%
14.9
13.6
12.9
12.1
10.6
10.7
13
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