TNAG-2752-FCO40-3967-Organisation-for-Economic-Co-operation-and-Development-(OECD-1994 — Page 279

19-03-1993 17:14

DE OCDE CENDEU DIRECTEUR

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9837

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Development Centre

19.03.93

Activity 1.8 China's Future Outlook and the Hong Kong Dollar

(New. To be completed in 1994.)

19.28 China's high growth performance has contrasted strikingly with the negative growth experience of many other countries in transition. From the time reform was initiated in 1978, China's growth picked up immediately and has been sustained at double-digit rates ever since. Up to now, Hong Kong has been an important catalyst for China's growth, serving as a beachhead for the introduction of complementary resources. Widespread currency substitution is already taking place in China's coastal provinces, complicating monetary management in China but also exerting a healthy discipline on its conduct of macroeconomic policy.

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How will these tendencies be affected by the post-1997 status of Hong Kong, which will be integrated into China but retain full autonomy in economic affairs, including monetary sovereignty? A short-term study will aim to answer this question, which is so important for China. The study will focus on the already visible tendency towards currency substitution in China, the difficulties which may arise for the pursuit of monetary policies, and possible alternatives for the current pegging of the Hong Kong dollar to the US dollar.

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