RATE AGREEMENT HAD TO BE PRESEVED AS AN INSTRUMENT OF MONETARY POLICY AND THIS MEANT ENSURING THAT THE AGREEMENT HAD AN APPROPRIATELY WIDE COVERAGE OF SHORT-TERM DEPOSITS.
8.
(F) HONG KONG'S IMAGE AS AN INTERNATIONAL FINANCIAL CENTRE
CONCERN HAS BEEN EXPRESSED AS TO WHETHER RECENT EVENTS HAVE IMPAIRED THE DEVELOPMENT OF HONG KONG INTO AN INTERNATIONAL FINANCIAL CENTRE. HERE THE FACTS SPEAK FOR THEMSELVES. IN 1982, FOREIGN CURRENCY DEPOSITS IN HONG KONG MORE THAN TRIPLED, FROM DOLLARS 29 BILLION TO DOLLARS 99 BILLION, ENCOURAGED BY THE
EXEMPTION OF SUCH DEPOSITS FROM INTEREST TAX FROM 25 FEBRUARY 1932.
MOST OF THE INCREASE REFLECTS MONEY BEING BROUGHT INTO HONG KONG.
PRESENT POSITION
9. THERE IS A GENERAL FEELING THAT THE SITUATION HAS STABILIZED. A RATHER BULLISH STOCK MARKET AND SIGNS OF A REVIVAL OF ACTIVITY IN THE PROPERTY MARKET (SMALL RESIDENTIAL FLATS IN PARTICULAR) CERTAINLY HELPED. EVEN THE VERY TIGHT MONEY SITUATION DURING THE FEW WEEKS BEFORE CHINESE NEW YEAR DID NOT SEEM TO HAVE CREATED ADDITIONAL DIFFICULTIES FOR REGISTERED DEPOSIT-TAKING COMPANIES. WITH INCREASING LIKELIHOOD OF THE US ECONOMY RECOVERING IN 1983, AND WITH THE HONG KONG ECONOMY WELL POISED TO BENEFIT FROM THE RECOVERY, PEOPLE IN FINANCIAL CIRCLES FEEL THAT THE WORST IS
PROBABLY OVER.
FS BUDGET SPEECH PARAS 27-28 (23.2.83)
WHAT HAS BEEN SAID SO FAR
10. QUOTE THE FALL IN PROPERTY AND LAND PRICES CREATED PERSISTENT UNEASE IN THE FINANCIAL SECTOR. TOWARDS THE END OF THE YEAR A FEW REGISTERED DEPOSIT-TAKING COMPANIES EXPERIENCED LIQUIDITY PROBLEMS. THERE HAVE BEEN CLAIMS THAT FURTHER ADJUSTMENTS IN 1982 UNDER THE 3-TIER SYSTEM REQUIRING REGISTERED DTC'S TO RUN DOWN ALL THEIR SHORT-TERM DEPOSITS IN TWO STAGES BY THE END OF JUNE THIS YEAR EXACERBATED THESE PROBLEMS, BUT I DO NOT BELIEVE THAT THIS FACTOR WAS CRITICAL. MOREOVER I AM SURE THAT WHEN THE ADJUSTMENT IS OVER AND THE DUST IS SETTLED WE SHALL END UP WITH A STRUCTURE WHICH PROVIDES BOTH BETTER PROTECTION FOR DEPOSITORS AND A SOUNDER
BANKING SYSTEM. UNQUOTE
11. QUOTE DESPITE OUR KNOWN PROBLEMS, HONG KONG'S POSITION AS AN INTERNATIONAL FINANCIAL CENTRE HAS REMAINED STRONG. IN FACT FOREIGN CURRENCY DEPOSITS INCREASED BY HK DOLLARS 69 BILLION IN 1982, HELPED OF COURSE BY THE EXEMPTION FROM INTEREST TAX ON SUCH DEPOSITS INTRODUCED THIS TIME LAST YEAR. GIVEN THE GENERAL BACKGROUND, THIS OUTCOME IS VERY SATISFACTORY. UNQUOTE
SMA SPEECH TO HARVARD BUSINESS SCHOOL ASSOCIATION
PARAS 17-19 (22.2.83)
12. QUOTE IT IS OF COURSE UNFORTUNATE THAT THIS PHASE OF THE RESTRUCTURING EXERCISE SHOULD COINCIDE WITH A SLOW DOWN IN ECONOMIC ACTIVITY GENERALLY AND SHARP DOWNWARD ADJUSTMENTS IN PROPERTY AND
3
CONFIDENTIAL
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