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OF ECONOMIC GROWTH. LIVING STANDARDS HAVE RISEN ACCORDINGLY.
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3. TOWARDS THE END OF LAST YEAR THE EXCHANGE RATE STARTED MARKEDLY
TO WEAKEN, REFLECTING AMONGST OTHER FACTORS UNCERTAINTIES ABOUT
HONG KONG'S FUTURE.
4. BEFORE THE GOVERNMENT ANNOUNCED THREE WEEKS AGO THAT IT WAS
CONSIDERING PROPOSALS TO STABILISE THE EXCHANGE RATE CURRENCY
DEPRECIATION WAS TENDING INCREASINGLY TO FEED ON ITSELF IN AN
UNSTABLE AND IRRATIONAL MANNER. THIS DEPRECIATION WAS NOT JUSTIFIED
BY EITHER CURRENT ECONOMIC DEVELOPMENTS OR FUTURE PROSPECTS.
THE ECONOMY HAS REBOUNDED AND IS DOING VERY WELL. THERE IS LITTLE
UNEMPLOYMENT AND EXPORTS ARE BOOMING. HONG KONG HAS SUBSTANTIAL
FOREIGN CURRENCY RESERVES, A GENERALLY LIQUID BANKING SYSTEM
AND VIRTUALLY NO GOVERNMENT DEBT.
5. THE GOVERNMENT HAS BEEN CONCERNED BY THE FALLING EXCHANGE RATE
AND HAS DONE EVERYTHING IN REASON, WITHIN THE ESTABLISHED FRAMEWORK,
TO ATTEMPT TO STABILISE IT. THESE EFFORTS HAVE ACHIEVED ONLY
LIMITED SUCCESS.
6. THE CIRCUMSTANCES OF HONG KONG PRECLUDE EXCHANGE CONTROL. AFTER
A THOROUGH EXAMINATION OF REALISTIC OPTIONS, WE HAVE NOW DECIDED
TO ALTER THE FRAMEWORK WITHIN WHICH THE EXCHANGE RATE IS DETERMINED.
WITH EFFECT FROM MONDAY 17 OCTOBER, THE TWO NOTE-ISSUING BANKS WILL PAY THE GOVERNMENT'S EXCHANGE FUND FOR ADDITIONAL CERTIFICATES
OF INDEBTEDNESS, WHICH THEY ARE REQUIRED TO HOLD AS BACKING FOR ANY INCREASE IN THEIR NOTE ISSUES, IN FOREIGN EXCHANGE AT A
FIXED RATE OF HK DOLLARS X.XX EQUALS US DOLLARS 1.
7. FROM THE SAME DATE, WHEN NOTES ARE WITHDRAWN FROM CIRCULATION
AND THE NOTE-ISSUING BANKS SURRENDER CERTIFICATES OF INDEBTEDNESS
THE EXCHANGE FUND WILL PAY THEM THE EQUIVALENT FOREIGN EXCHANGE
AT THE SAME FIXED RATE. IT IS OUR INTENTION TO HOLD THIS RATE
UNCHANGED.
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