TNAG-1167-FCO40-1447-Future-of-Hong-Kong-1982 — Page 4

increases in loans and advances and in M3 were excessive,

and must have exerted considerable inflationary pressure.

But here too it is encouraging that the rate of increase

in loans and advances dropped from 26% in the first half

of 1981 to 15% in the second, and of M3 from 21% to 7%.

I realise that while bringing us new wealth and new

international status, the very rapid expansion of our

banking and other financial services have also brought

problems relating to prudential control and broad economic

management. I agree with you, Sir, that it is highly

desirable that these be solved within the framework of

arrangements that are broadly consultative and cooperative.

But in so far as solutions in the circumstances of Hong Kong

are possible and that is a big question they must be

found. No doubt the Financial

Secretary will have some thing

to say about this in his budget speech.

11.

You will note that in all aspects of this review

of our economy's performance in 1981 we ended the year

rather better than we started.

12.

relations.

I cannot say the same of our external commercial.

The MFA negotiation is over and we have

authorised signature of the new protocol. Our negotiators

and their colleagues in developing countries succeeded in

beating off a determined attempt by the EEC to use the

protocol to prejudge the contents of bilateral agreements

due for negotiation before the end of 1982. This was a

redoubtable achievement.

You are all familiar with the

/terms of the