TNAG-2791-FCO40-4030-Relations-between-Hong-Kong-and-China.-With-maps-1993 — Page 66

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www

15

year.

Downward pressures

have persisted since then (15).

26.

that

on

the Renminbi exchange rate

The depreciation of the Renminbi could in turn add to the inflationary pressures in China, because of the resultant higher import prices of both consumer goods and industrial goods. Nevertheless, from past experience it

appears

the Renminbi depreciation is more a

consequence than a cause of domestic inflation. A case in point was the relative insensitivity of China's inflation in 1990 and 1991 to the substantial depreciation of the

Renminbi in 1989 and 1990. However, as China becomes more

externally oriented,

absorption of imports has inflationary

its

increased over the

years (16)

effect arising from

relatively larger.

Thus the

Renminbi depreciation may have become

This is especially so in the major

cities and the coastal areas where the demand for imports

is generally greater.

(15) The

(16)

depreciation of the Renminbi in the foreign exchange adjustment centres and in the black market was also prompted by rumours that the government intended to make the Renminbi convertible in the coming year or so. The exchange rate of the Renminbi

+

in

Shanghai's foreign exchange adjustment centre fell from Rmb 7.9/US$ at the end of 1992 to around Rmb 8.2-8.5/US$ in mid-February 1993. The black market rate of the Renminbi against the Hong Kong dollar in Shenzhen reportedly fell from around Rmb 100/HK$ to Rmb 115/HK$ during the same period.

Ratio of imports to China's GNP

1980

1985

1990

1991

1992

(%)

6.7

14.5

14.7

17.3

19.0

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