Hong Kong’s de facto central banker dismisses warning by credit ratings agency

Norman Chan plays down Moody’s concerns about filibustering by new lawmakers and refuses to be drawn on chief executive election

PUBLISHED : Monday, 03 October, 2016, 7:03am
UPDATED : Monday, 03 October, 2016, 7:03am

Hong Kong’s de facto central banker has dismissed a warning by an international credit ratings agency that a new generation of radical lawmakers could harm the city’s credit rating by resorting to more delaying tactics in the legislature.

The remarks by Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, came after Financial Secretary John Tsang Chun-wah challenged Moody’s forecast that the city’s policymaking could get bogged down by anti-establishment legislators elected last month. Chief Executive Leung Chun-ying took a different approach and said filibustering had harmed Hong Kong’s economy.

Political analysts believe Tsang could challenge Leung in the city’s leadership race next March, and Chan is seen as a top candidate to succeed him as financial secretary. Chan declined to comment on whether he would support Tsang or serve as a minister next year.

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Speaking in an interview in Frankfurt last week as he co-led a promotional tour of the Hong Kong Trade Development Council, Chan was asked if he agreed with Moody’s warning about new pan-democratic and localist lawmakers taking up the filibustering torch in the next four years.

“The lawmakers haven’t formally been sworn into office yet, so it is difficult to speculate on their stance on non-political issues,” Chan said.

Citing the United States, he argued that unapproved bills did not necessarily mean a bleak economic outlook.

“Plenty of new policies [can be introduced] without legislative amendments,” Chan said, in reference to a forthcoming scheme that will link the stock markets of Hong Kong and Shenzhen as soon as next month.

Chan added that there would be “negative effects” if lawmakers blocked bills that sought to improve the city’s financial systems. But rather than derailing proposals, Legco had approved several important financial amendments in recent years.

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The pan-democratic camp, along with localist groups, won 30 seats in the 70-member legislature – three more than at the 2012 polls. In the previous Legco term, radical lawmakers repeatedly filibustered in a bid to block unpopular government proposals. Six localists elected this time are threatening even tougher action.

The “big three” credit ratings agencies – Moody’s, Standard & Poor’s and Fitch – have issued repeated warnings about Hong Kong this year.

The credit ratings agencies have never been correct
Norman Chan Tak-lam

Asked why he was not worried about the warnings, Chan replied: “I am paid to worry because my job is to consider risks ... but you have to prove me wrong on my macro views. Whether they are looking at things on a scale of five years or several decades, the credit ratings agencies have never been correct.”

Chan added that it was hard to comment on the financial implications of Hong Kong’s leadership race next March, saying: “We have to see who will run and look at his election manifesto. It’s too early to say.”

But Chan, who succeeded Tsang as director of then-chief executive Donald Tsang Yam-kuen’s office from 2007 to 2009, declined to comment whether he would like to see a chief executive familiar with financial policies, or whether he would back Tsang.

“I wouldn’t comment on these,” he said.

Chan also refused to say if he would stay as the city’s central banker until his term ended in 2019, or if he expected a ministerial promotion next year.