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Foreign Exchange Market

Keep peg, ex-stock exchange chief says

PUBLISHED : Sunday, 17 June, 2012, 12:00am
UPDATED : Sunday, 17 June, 2012, 12:00am

The former chairman of Hong Kong Exchanges and Clearing says the city's currency peg to the US dollar should stay and any evaluation of the system should be done internally, not in public.

Ronald Arculli, now Executive Council convenor, is the latest to speak out over a controversial academic paper released last week by Joseph Yam Chi-kwong in which the former central banker - a long-time defender of the peg - suggested it might be time to consider a change.

Arculli said there had been internal and private reviews of the system since its implementation in 1983.

'If the government and the Monetary Authority are to do the review regularly ... they should do it internally. It would not be necessary for them to announce their findings and to reconfirm the peg is to be continued [after each review], or else the markets would be destabilised,' he said.

The incoming government should also address the small-house policy, which grants male indigenous villagers the right to build a three-storey, 2,100 sq ft house once they reach the age of 18, he said.

Secretary for Development Carrie Lam Cheng Yuet-ngor sparked fierce debate after telling the South China Morning Post last week that the policy should be ended, possibly by 2029.

Almost three decades have passed since Hong Kong pegged its currency to the US dollar, but Yam said in his paper that the city could do away with it to curb inflation and asset bubbles.

Arculli said it would be appropriate to carry out a step-by-step evaluation of the mechanism. In the meantime, he did not see the necessity for the peg to go.

'Most people do not see the necessity [to do away with the peg], because of the small size of the economy, high transparency and active market we see in Hong Kong.'

Keeping the peg would guarantee more stability, especially for merchants, he added.

On a Commercial Radio programme, he said he had very high expectations of chief executive-elect Leung Chun-ying, describing him as 'smart' and 'with long years of political experience'.

While some people have accused staff of the central government's liaison office of interfering with Hong Kong's decision-making, Arculli said it was natural for Beijing to have an opinion on major issues in the city. He would rather have the office express its opinion in public than giving hints under the table, he added.