HK dollar can be strong again

PUBLISHED : Monday, 05 November, 2012, 12:00am
UPDATED : Monday, 05 November, 2012, 2:31am

The influx of mainlanders into Hong Kong, high property prices as well as the government's need to defend the Hong Kong-US dollar peg are all related.

Who stands to gain from the currency peg resulting in a weak Hong Kong dollar - the government, the middle class, property developers, home mortgage payers or mainland shoppers visiting the city?

We cannot complain if the US dollar is artificially low and this is to our detriment, as it is self-inflicted.

Low interest rates increase inflation, something we don't need in Hong Kong. There is also the problem of the government's expansionary fiscal policy such as low tax.

Property developers and home owners benefit from low interest rates, and mainland shoppers from a weak Hong Kong dollar, but not everyone here is happy.

We are offering our labour, paid for in a devalued currency. The price for currency stability has been costly - imported inflation, high property prices, a shrinking middle class, erosion of savings and purchasing power and, of course, a rising influx of mainlanders.

In the past, Hongkongers were proud when they travelled overseas to flaunt what was a strong currency. Now, we are providers of cheap labour services to rich mainland shoppers. We gain little from this, as we impose no form of tax on them.

The tourism industry has not created quality jobs, unlike, say, the financial industry. Singapore's medical tourism develops hi-tech treatments, whereas our doctors sell Caesarean procedures to mainland expectant mothers (natural deliveries are told there are insufficient beds).

As the mainland moves to a more consumption-based economy, we are in reverse. In Tsim Sha Tsui, our youths work at luxury shops carrying bags for rich mainland shoppers to their hotels. We created jobs for porters and waiters for hotels and restaurants.

Is this the so-called economic integration with the mainland that we want?

People talk of Hong Kong being a laissez-faire economy, yet the government intervened to uphold the peg. It should be set at US$1 to HK$6.

Do this and we shall see the reverse direction flow as more Hongkongers cross the border to spend once again.

We may not even experience any economic losses as we attract fewer visitors but receive higher-valued dollars.

Warren Buffet describes inflation as a "cruel tax" on people. We tax the middle class here with inflation "tax", but in a way subsidise rich property owners here and mainland consumers.

Bernard Lee, Tsuen Wan