ENG-1979 — Page 65

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Finance and Economy

HONG KONG Continued to develop as an international financial centre in 1979. A large num- ber of major international banks opened for business, either through branches or subsidiary companies: after granting licences to 41 banks between March, 1978, and August, 1979, bringing the number of licensed banks in Hong Kong to 115, the government temporarily suspended the grant of new licences pending a review of the licensing criteria.

The number of deposit-taking companies also rose during the year. More steps were taken to apply prudential controls to these companies, including a system of minimum liquid asset ratios.

Work continued during the year on legislation to merge Hong Kong's four stock ex- changes into one exchange, and on other measures to enhance the protection of investors in securities and commodities.

The gold markets continued to expand making Hong Kong one of the world's largest gold centres. The territory's time zone position enables it to trade while Europe and North America are closed down, thus completing the 24-hour trading link.

The domestic economy expanded rapidly in 1979, for the fourth year in succession, with an impressive export performance contributing to a growth rate of the gross domestic product which was much higher than originally forecast. Various measures were announced in the government's 1979-80 Budget to help slow down the growth rate of domestic demand. Bank lending rates were raised several times during the year, reaching record levels in August, to restrain the excessively fast rate of growth of bank lending and of the money supply. The government also took steps to ensure that its Hong Kong dollar balances, which were building up partly from its continued fiscal surplus, could no longer automati- cally contribute to the expansion of bank lending.

Hong Kong's Financial Structure

Government Finance

Hong Kong has almost complete autonomy in its domestic financial affairs, with the ultimate authority for the government's revenue and expenditure proposals resting with the Legislative Council. The revenue and expenditure estimates for each financial year, which starts on April 1, are submitted to the Finance Branch of the Government Secre- tariat by each government department in October of the previous year. The estimates are scrutinised and are adjusted according to the priorities set for the government as a whole. They are then submitted to the Legislative Council with the Appropriation Bill at the time of the Financial Secretary's Budget Speech in February.

Hong Kong is financially self-supporting and the government's accounts showed a surplus of $1,467 million for the 1978–9 financial year.