TNAG-1012-FCO40-1262-Address-by-Sir-Murray-MacLehose--Governor-of-Hong-Kong--at-t-1981 — Page 27

11

I will be explaining one new departure in the Government's own housing

programme to counteract the abrasive effect of inflated land and

30.

1..

:

From

property prices, and also our extensive plans for land production.

Thirdly, while a depreciating Hong Kong dollar helps export

competitiveness, it adds inflationary pressures to the economy. But

another factor which is adding pressure to inflation, or at least is

accommodating it, and is weakening the Hong Kong dollar, is the rapid

growth rate of the money supply which in turn is largely the result

of excessive credit growth. So obviously we have been giving serious

thought to whether or not the growth of the money supply should be

contained, and if so, how it might be done, particularly without putting

further pressure on our industry which remains the backbone of our

economy

j

This limits the use that can be made of interest rates.

The recent rise is unavoidable and was made in the belief that banks

will find means of helping industry and exports here.

SIN

But we

sincerely hope external circumstances will permit its reduction as

}

ནཾ་

:

soon as possible. The Financial Secretary recently spoke in detail

sedu about the various possibilities of government intervention in the

special circumstances of Hong Kong, and of his strong preference for

restraint of credit by the self-discipline and responsibility of banks

and deposit-taking companies. I heartily agree. We are committed in

principle to as free an economy as possible.

Nevertheless this assumes

t

that we as a community have the good sense to act freely without

videntoima undermining our economy.

this

DORS

or ylämansE Obviously recent events cast some doubt on

and the Financial Secretary is watching the situation closely.

/DEVELOPMENT