New | Former HKMA chief Joseph Yam says China quite right to take a cautious approach on allowing the yuan to become freely traded
The next global financial crisis ‘could be even bigger than previous ones’, he adds, that’s why China must be cautious with its currency
Joseph Yam Chi-kwong, former head of the Hong Kong Monetary Authority (HKMA), says the next global financial crisis could be even bigger than previous ones – and that’s part of the reason why China should not let its currency to be freely traded, but only allow it to be tradable via monitoring.
“In my opinion, the renminbi should not be freely convertible without monitoring, but the currency should be allowed to be tradable under appropriate reporting and monitoring,” he said on Friday.
He added it would only be safe and appropriate to allow people to convert large amounts of other currencies into yuan, if they report and declare the exact purpose of the usage to the authority, which should also then strictly enforce the use of the money.
“As an example, if someone reports he is to convert 1 billion yuan (US$145 million) to invest in the stock market and three months later he has not invested the money, the authority should order him to take the money out of the country,” Yam said.
Yam, who ran Hong Kong’s central bank from its creation in 1994 to 2009, and who acted as an adviser to incoming Chief Executive Carrie Lam Cheng Yuet-ngor during her election campaign, has a close working relationship with both the mainland authorities and The People’s Bank of China.
He is a strong supporter of China’s socialist-led market economy, which accepts more market opening up to the outside world under monitoring and controls.
For someone like me, who has always believed in market forces, it [the government’s intervention in August 1998, to defend against currency speculators] felt like being betrayed by a friend