CONFIDENTIAL
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revalue the HK$. Interest rate swings had been wide, but it was felt that intervention (outside the 7.82-7.78 range) had perhaps been too readily undertaken and that the system should have been left to adjust itself. There was a problem with the administered rate structure, which was probably dampening the required movements in market rates.
6. Shifts in the link to a trade-weighted system would be too difficult for the general public to grasp (the US$ level would be changing every day for example). (A trade denomination basket would
in any case put a very high weight (about 70%) on the US$.) A change would only be contemplated in the event of a collapse of the US$'s value which would lead to severe import cost increases. continuing gradual slide would be welcomed as it would improve HK$-relative competitivenes in the US market against European countries (this was significant for textile and clothing against Italian producers).
7.
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quota
Protectionist pressures were not a significant factor utilisation was low during 1985 and textile and clothing exports to the US, for example, had fallen.
HONG KONG AND CHINA
8. Analysis had increased since the emergence of the PRC as a major market. The forecase for exports to China for 1986 was for a fall of 5-6% in volume as the effects of financial restrictions were felt.
CONFIDENTIAL
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