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Friday, Nov. 13, 2009
Hong Kong to keep currency pegged to 'predictable' greenback
Despite the recent weakening of the dollar against other currencies, Hong Kong will keep its currency pegged to the greenback and will not consider linking it to the Chinese yuan, the Hong Kong financial and treasury secretary said Wednesday.
"I think that is really a source of security to the Hong Kong financial market," K.C. Chan said.
"As far as Hong Kong is concerned, having a predictable currency is very important for the financial market. The peg to the U.S. dollar actually is serving Hong Kong very well," he said in an interview with The Japan Times.
Speculation has been rife that Hong Kong may eventually drop the Hong Kong dollar's peg to the U.S. dollar and instead link it to the Chinese yuan, given growing uncertainty over the U.S. dollar's value and Hong Kong's increasing dependency on the Chinese economy.
A major obstacle for renminbi-linkage would be China maintaining its restrictions on making the yuan unconvertible on the international market. Asked whether Hong Kong would consider currency linkage to the renminbi if those restrictions were removed, Chan said it is too early to seriously think about.
"It would take a long time for the Chinese currency to be convertible, and convertible in a way that would be used as an international reserve currency. So the question is really long and far in the future," he said.
While visiting in Tokyo this week, Chan attended a symposium on Islamic finance and paid a courtesy visit to Financial Services Agency commissioner Katsunori Mikuniya.
Chan, a former dean of business and management at the Hong Kong University of Science and Technology, stressed that Hong Kong, despite intensifying competition with Shanghai as a financial center, has retained competitive edges as a gateway to China, given its advanced and Westernized financial infrastructure.
"As China is opening up the market, it is very natural for companies to enter China in very many different ways. And that's very good. That's good for economic development," he said.
Big Japanese corporations may try to advance directly into the mainland, but small and midsize firms would get greater benefits from using professional Westernized services in Hong Kong, he said.
"Hong Kong would be a very good place for (them), because Hong Kong has all that expertise."
He also predicted that Hong Kong and Shanghai will be complementary to each other, with Hong Kong emphasizing international financial services and Shanghai centering on domestic finance.
"Chinese investors who try to look for investment opportunities overseas can go through Hong Kong because Hong Kong has a very well-regulated financial industry. Our regulations, our infrastructure, are very similar to London, New York and other financial capitals."