More than three years of experience of one country two
systems have shown that China's commitment to allowing Hong
Kong autonomy in its monetary policies is a reality.
Having just returned after a rather long trip to explore
with other central bankers how global financial stability
might be enhanced, I was seated alone one rainy Sunday afternoon in
my comfortable armchair next to my bookshelf at home. I was, as
this old song called "The Lost Chord"*
playing on my stereo at the time put it, "weary and ill at
ease". As the song continued, my fingers wandered idly along
the small collection of books on the shelf. I know not what I
was looking for, or what I was dreaming then. But Two Lucky People,
by Milton and Rose D. Friedman, somehow stood out from the
shelf and offered much attraction for the occasion. A yellow
tag stuck out from a page towards the back, no doubt put
there by Eddie my Administrative Assistant to draw my
attention to a particular passage in the book. I picked it up
and turned directly to the page with the yellow tag. It was
page 557 and in it Milton described his observations on a
lunch that he had attended in Hong Kong on 29 October 1993.
Milton wrote: "We also met for lunch with a much smaller
group of about fifteen movers and shakers which Richard Wong
had arranged as part of his fund-raising effort. They all
were active in the Hong Kong economy and very well informed, so
we had a most interesting discussion, centering of course on the
future of Hong Kong after the coming takeover by China. I asked
the participants whether they had arrangements that would
enable them to exit Hong Kong if that proved necessary after
China took over. All but one did. The one who did not was
Joseph Yam, the head of the Hong Kong Monetary Authority. He
expressed complete confidence that Beijing would live up to
every detail of its agreement with Britain and in particular
would not interfere with the maintenance of a Hong Kong
dollar unified with the U.S. dollar and trading at a floating
exchange rate with the Chinese yuan and would not impose exchange or
capital controls. That is the politically correct position for
him to take, but I [...] suspect that he has private doubts.
At any rate, I expressed grave doubt that China would be
willing to tolerate two independent national monies trading
at a floating exchange rate. The only precedent in monetary
history that I recall was during the Civil War period in the
United States when gold and greenbacks both served as money
and traded at a market rate. Perhaps there are others."
It is now almost seven years since that lunch and over
three years after the "takeover", as Milton put it. My
personal position has not changed. Hand on heart, I can say
that I still have complete confidence that Beijing will "live
up to every detail of its agreement with Britain". I still have
complete confidence that Beijing will "not interfere with the
maintenance of a Hong Kong dollar unified with the U.S. dollar and
trading at a floating exchange rate with the Chinese yuan". I
still have complete confidence that Beijing will "not impose
exchange or capital controls" in Hong Kong, as clearly laid
down in the Basic Law. This is not just a "politically
correct position" for me to take, it is truly and simply the
correct position. I did not have "private doubts" and I still
don't.
But then Milton will probably say that with only three
years experience of the new system, it's far too early to
tell. I totally accept that. But it has been a very good start,
hasn't it? - a chord of music, like the sound of a great Amen, has
indeed been struck, one that emerged clearly against a very
disturbing and highly unfavourable background.
I was too tired to read on. I closed the book, sank low
into my comfortable armchair and dosed off, pleased that
Richard Wong and the other thirteen movers and shakers are
still in Hong Kong.
Joseph Yam
21 September 2000
Source: http://www.hkma.gov.hk/eng/publications-and-research/reference-materials/viewpoint/20000921.shtml
note...
source2: http://www.hkma.gov.hk/eng/key-information/speech-speakers/ntlchan/speech_230697b.shtml
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