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Appendix 3

(Chapter 3: The Economy)

Exchange Value of the Hong Kong Dollar

(A) Historical changes in the exchange rate system

Par value of the HK$ in

grams of fine gold

£1

-

US$I=

SDRI

=

HKS

HK$

HK$

December 18, 1946

IMF parities established; Hong Kong dollar is pegged to sterling

0.223834

16.00

3.970

September 18, 1949

Hong Kong dollar devalued pari passu with sterling by 30.5%

0.155517

16.00

5.714

November 20, 1967

Hong Kong dollar devalued pari passu with sterling by 14.3%

0.133300

16.00

6.667

-

November 23, 1967

Hong Kong dollar revalued by 10%, including against sterling, but continues pegged to sterling, at new rate

December 18, 1971

As part of the general currency realignment, Hong Kong dollar and sterling appreciate by 8.57% against US dollar. As a result of USA terminating, in August 1971, the convertibility of US dollar into gold, gold par value no longer has a practical meaning. IMF begins to adopt the SDR as its accounting unit

July 6, 1972

Hong Kong dollar pegged to US dollar following the floating of sterling

0.146631

14.55

6.061

February 14, 1973

US dollar devalued; Hong Kong dollar remains pegged.

at new rate

November 26, 1974

Hong Kong dollar allowed to float, ie the government no longer undertakes to maintain a particular rate against

any other currency

October 17, 1983

Hong Kong dollar was linked to US dollar, through a new arrangement

in the note-issue mechanism, at a fixed exchange rate of HK$7.80=US$I

1

14.55

5.582

6.061

5.650

6.134

5.085

6.134

£

US$

DM

End of period

HK dollars to one unit of foreign currency i

(B) Exchange rates of the Hong Kong dollar against several major currencies

Trade-weighted Index* Calculated with 1981 trade weights (18.12.71 = 100)

#

SDR

1974

11.53

4.910

2.03

0.0164

6.012

105.1

1980

12.27

5.130

2.61

0.0253

6.543

87.6

1981

10.88

5.675

2.52

0.0260

6.605

85.2

1982

10.58

6.495

2.73

0.0278

7.165

79.5

1983

11.32

7.780

2.86

0.0337

8.145

68.3

1984

9.11

7.823

2.49

0.0312

7.668

75.9

1985

11.27

7.811

3.18

0.0390

8.580

70.6

Note:

* The trade-weighted exchange rate index is derived from a weighted average of nominal exchange rates of the Hong Kong dollar against the

currencies of 15 principal trading partners.

Figures in table (B) are based on closing middle-market T/T rates.