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Greater China

Jul 23, 2005

Hong Kong to keep peg with US dollar

HONG KONG - Hong Kong's acting financial secretary, Stephen Ip, said July 21 that Hong Kong will keep its currency peg with the US dollar. "The government has no intention at all to change the Linked Exchange Rate system, which has served Hong Kong well for more than 21 years and has been the anchor of our economic stability," Stephen Ip, Secretary for Economic Development and Labor in Hong Kong, said in a statement.

He also welcomed the latest reform of the yuan (Chinese currency) exchange rate regime, in response to the announcement made by the People's Bank of China Thursday evening. "Hong Kong's financial and monetary systems are well established and well prepared for changes of this kind," said Stephen Ip. According to him, the reform of the yuan exchange rate regime is also likely to benefit the economy of Hong Kong.

These benefits include greater competitiveness in Hong Kong's exports to the Chinese mainland and the stability brought by more sustainable economic development of the mainland, he said. A stronger renminbi will also raise the purchasing power of mainland consumers and this is likely to benefit Hong Kong's exports to the mainland. Hong Kong's inbound tourism will also benefit as more mainland visitors come and spend in Hong Kong, he added.

According to Joseph Yam, chief executive of the Hong Kong Monetary Authority, the recent refinements introduced to the Linked Exchange Rate system have strengthened its ability to deliver monetary stability in Hong Kong and to handle the impact of capital flows arising from changes to the renminbi exchange rate regime. "The financial market in Hong Kong is not volatile," he added.

(Asia Pulse/XIC)

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