The Hong Kong dollar’s global impact may diminish amid the growing use of the renminbi in global payments, according to HSBC’s Asia-Pacific chief executive Peter Wong Tung-shun.
“The community should hold more discussions on the impact of the renminbi’s rapid internationalization on the Hong Kong dollar,” RTHK quoted Wong as saying.
He said such discussion does not necessarily mean “a review” of the Hong Kong dollar’s 30-year-old peg to the US dollar.
He spelled out several options for Hong Kong dollar, including maintaining the status quo, a shift to a free-floating currency, a peg to a basket of currencies, or a peg to the yuan.
The Basic Law provides that the Hong Kong dollar will be the territory’s currency until 2047, and as such, replacing it with the yuan is not an option, Wong said.
However, the use of Hong Kong dollar will gradually be limited to the city as the yuan is set to gain a larger share of global payments in coming years, he said.
Also, it’s difficult to adopt a “free-floating” currency amid volatile and complex market environments, while a peg to a basket of currencies like the Singapore dollar may help mitigate inflation pressure.
But the Hong Kong dollar should not be pegged to the renminbi as long as the Chinese currency is not yet fully convertible, Wong said.
Hong Kong’s status as a premier offshore renminbi center is now being challenged by other nations like France and Australia who want to have a piece of the action, he said.
In addition, the Occupy Central movement has damaged global investors’ confidence in the city’s rule of law and they have been holding off their investment plans in Hong Kong.
“In the past, I will stress rule of law as the main edge of Hong Kong when discussing with global investors for their listing or debt financing plans. However, I doubt now whether the city still holds that edge,” Wong said.
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