TNAG-1726-FCO40-2439-Minutes-and-Hansards-of-the-Legislative-Council-of-Hong-Kong-1988 — Page 330

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HONG KONG LEGISLATIVE COUNCIL-3 February 1988

againe US currency. The Deposit-taking Companies Association has als indicated that they will be issuing guidelines for their members to follow. It is worth remembering, Sir, that registered deposit-taking companies are, in any event, prohibited from accepting deposits under three months. The only deposit-taking companies that would be affected are the licenced deposit-taking companies.

MR. CHEONG-LEEN: Sir, the Financial Secretary claimed in reply to one of the supplementary questions that since announcement of the introduction of negative interest rates, there already seem to have been some salutory effects on the situation. Can he give an assurance to this Council that as and when it is deemed in the best interest of Hong Kong, he will use his influence, gentle persuasive efforts, whatever you may call it, to have the immediate withdrawal of negative interest?

FINANCIAL SECRETARY: Well, Sir, as I have said, we have not implemented these arrangements. Rules have been put in place. The mechanisms are there. The message has been received by many who are involved in speculative activity. Certainly there would be no move in relation to the imposition of negative interest rates without consultation with me and I would certainly bear Hong Kong's interests most seriously in mind. That is what it is all about.

MR. JACKIE CHAN: Sir, Government apparently wishes to be exempted from paying negative interest and similar requests are being made by the Community Chest and other charitable organisations. Is not the administration of negative interest rates going to become impossibly complicated?

FINANCIAL SECRETARY: I think, Sir, I have answered that question already.

MR. LI: Sir, time and again, the Financial Secretary has assured us that the arbitrage mechanisms within the exchange rate system is working perfectly well. Now that he has introduced, or forced the Hong Kong Association of Banks to introduce the negative interest rate, does it not mean that the Financial Secretary has now shifted the burden of defending the peg entirely on the banking system and should he not examine the arbitrage system in the link rate system?

FINANCIAL SECRETARY: Sir, I think we have said at all times that to maintain the link rate, the adjustment would have to take place through the economy, in other words through interest rates and indeed on the rate of inflation. Mr. David Li has referred to the arbitrage mechanisms. We believe those mechanisms do work but of course they may not work in perfect form as Mr. Li well knows.

Students' medical reports

4. DR. CHIU asked: In view of the fact that students in many developed countries are required upon registration to submit their medical reports to the school

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