Hong Kong’s peg to the US dollar should be reviewed regularly, although a change may not be necessary, veteran banker Joseph Yam told the Hong Kong Economic Journal in an exclusive interview.
The former chief executive of the Hong Kong Monetary Authority, the city’s de facto central bank, made the remarks after the People’s Bank of China said the city has the autonomy to decide the future of the dollar peg regime, which has been in place since 1983.
Yam said all currency systems should be reviewed in accordance with the public interest, and the Hong Kong dollar is no exception. The status of the Hong Kong dollar will not necessarily be reduced or become peripheral even if the city expands the use of the Chinese currency, he said.
It is crucial to allow the renminbi to perform certain currency function in the city, Yam said, noting that Hong Kong, as an international financial center and a small economy that is highly reliant on the mainland market, should provide market participants with a multi-currency platform for them to better manage foreign exchange risks, rather than forcing all transactions to be carried out in the city’s currency.
“The volume of international financial activities in mainland China will rise to a substantial level at some point in the future,” Yam said. “It is unrealistic to require the currency system of the Hong Kong dollar that serves seven million in the city to orient to the mainland market that has to deal with 1.3 billion people.”
Yam urges multi-currency platform for HK to keep renminbi edge
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