TNAG-2791-FCO40-4030-Relations-between-Hong-Kong-and-China.-With-maps-1993 — Page 50

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(4)

(5)

of China is still targetting a growth rate of around

20% for bank loans in this year, which is somewhat

higher than the forecast growth rate of China's

nominal GNP, its overall monetary and credit stance

is probably still not very restrictive. This may

suggest that, provided it is not getting out of

control, a higher inflation rate is considered to be

not an unacceptable price to pay for China's on-going

economic growth and reforms. But in the light of the

latest inflation trend, stronger restraint measures

aimed at curtailing the less justifiable investment

projects are now more likely (paragraphs 14 to 23).

In the latter part of 1992 and the early months of

1993, the exchange value of the Renminbi experienced

a sharp depreciation in both the foreign exchange

adjustment centres and the black market. Although

the depreciation could have been partly a consequence

of

the rising inflation, this could in turn add to

the inflationary pressures in China, because of the

resultant higher import prices of both consumer goods and industrial goods (paragraphs 25 and 26).

infl

In the present circumstances, China's inflation will

probably not have too much of an impact on the Hong

Kong economy. This is because the prices of China's imports into Hong Kong, which are mostly denominated

in

the

Hong Kong dollars, will probably change little as higher prices and costs in China are being offset

by

the depreciation of the Renminbi. Moreover, the overall influence of the prices of Chinese goods has

also been progressively reduced, following the

continued decline of China's share in Hong Kong's retained imports over the years (paragraph 27).

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