TNAG-0735-FCO40-939-Policy-objective-for-the-developing-of-Hong-Kong-in-the-1980-1978 — Page 144

this in more technical terms, the net balance between the

imports and exports of tourism). But in the past decade this

net surplus has been narrowing rapidly. In 1967 it was about

$870 million, but by 1977 it had fallen to about $215 million

(both figures at current prices), despite the growth in the number of tourists visiting Hong Kong. This latter figure

was only 5.6% of the visible trade deficit in 1977 which, I

am afraid, is a long way from Mr. Newbigging's average figure

of 90% over the last decade (not that 5.6% is necessarily

insignificant and we would almost certainly have had a high

negative balance on tourism account but for the marketing

efforts of the Hong Kong Tourist Association).

(5)

21.

Growth of the money supply

But to return to my main theme, namely, the present

imbalance in the supply of, and demand for, real resources

For so long as interest rates remained relatively low and the

banks and deposit-taking companies continued to accommodate the demand for loans, the excessive growth rate of domestic

demand was being encouraged. It is in this context that the growth of the money supply has been such a matter of concern

in recent weeks.

22.

(a)

Determinants

Apart from changes in the cash element, changes in the money supply, as presently measured (12), are determined by changes in the level of bank deposits. These changes are generated, first, by the demand for credit which, in turn, is influenced by the rate of interest at which advances are offered by banks; and, secondly, by the net acquisition of foreign currency assets by banks in Hong Kong. These assets are either purchased from the non-bank private sector in the open market or acquired via swap arrangements with head offices or other

banks overseas.

(12) That is, excluding deposits with deposit-taking companies, as

necessary figures will not be available until some time in 1979.

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