TNAG-0735-FCO40-939-Policy-objective-for-the-developing-of-Hong-Kong-in-the-1980-1978 — Page 138

11.

Given that the Hong Kong dollar depreciated substantially between these two eight month periods (2), this relatively modest increase in export prices in Hong Kong dollar terms represents a fall in prices in terms of overseas currencies. Even if we take the export-weighted exchange rate index (3), although it has depreciated less, the conclusion that Hong Kong's export competitiveness has improved remains (4).

(3)

12.

Absence so far of imported inflation

So we are not yet, Sir, suffering from historically high rates of price increases, except in the property market. In particular, on this occasion, imported inflation in the form of rapidly rising prices of imports in foreign currency

(2) Trade-weighted exchange rate index (18th December 1971 = 100):

1976

1977

31st December

114.4

106.6

1977

1978

31st August

112.8

96.7

(3)

(4)

The trade-weighted (or effective) exchange rate index averages together the exchange rates of the Hong Kong dollar against the currencies of fifteen foreign countries with weights derived from the total trade (imports and exports) between Hong Kong and these countries in 1972. The export-weighted exchange rate index is the export-weighted component of the trade-weighted index. It involves a similar calculation to that for the effective exchange rate index, but using Hong Kong's export trade with these countries as the basis for the weights. It is thus a better index to use when assessing changes in Hong Kong's export competitiveness.

Export-weighted exchange rate index (18th December 1971 = 100):

1976

1977

31st December

118.0

112.5

1977

1978

31st August

117.3

105.1

6

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