Civil servant No1: 'Well, I hear the mainland is buying a lot of commodities - you know, oil, copper, rubber. Perhaps we could get a slice of that cake.'

Civil Servant No2: 'Yes, I heard that commodity prices have gone up a lot. Commodity futures exchanges must be making a fortune.'

Mr Tsang: 'That's it! We'll start a commodity futures exchange. Singapore has one, why can't we? Hong Kong's position is underpinned by various factors, including strong government, the rule of law, high efficiency, and a business-friendly environment aligned with international standards. Why didn't those dozy bankers in Exchange Square think of it first? This is one more proof that Hong Kong needs proactive and pragmatic government to promote the sustainable development of a harmonious society in line with blah blah blah...'

There is just one problem. There is absolutely no demand for a commodities exchange here.

Think about it. Hong Kong produces no commodities. We have no mines, no plantations, no oil fields. We consume relatively few commodities. We have no steel mills, no tyre factories, no oil refineries. We do not even ship many commodities. We have no facilities to load, unload and store bulk cargoes of iron ore, grain or crude oil. There is simply no natural underlying market for commodities here. Mr Tsang might argue that that should not matter; that China has the demand and Hong Kong the financial know-how. But markets do not work like that.

Mainland commodity traders are not going to come to Hong Kong. For one thing, they have their own commodity futures markets. Since 1999 China has had three exchanges, trading everything from aluminium, fuel oil and rubber to soya beans and wheat. They may not be the world's most reputable markets, but last year they traded contracts worth a combined 14.7 trillion yuan. There is no way the central authorities are about to let that liquidity flow to Hong Kong.

And even if China's regulators did allow more mainland companies to trade in international markets, they would not come here. They would go straight to the deep pools of liquidity on the established commodity futures exchanges of London, New York and Chicago.

Similarly, international commodity brokers and investors would trade in China's onshore markets if allowed. But they have no interest in Hong Kong, where there is no underlying physical demand. In commodity trading, liquidity is everything. Hong Kong has no natural liquidity, and so stands no chance of attracting new business.

If Mr Tsang doubts this, all he has to do is check the history books. Hong Kong had a commodity futures exchange 30 years ago. It listed contracts on cotton, sugar, gold and soya beans. Volumes were dismal, and in 1985 the market was reconstituted as the Hong Kong Futures Exchange offering wildly popular contracts on the Hang Seng stock index. The commodity futures were quietly dropped.

The lesson is clear. Instead of trying to deal in things Hong Kong simply does not have, like commodities, Mr Tsang should be looking at setting up an exchange to trade something that Hong Kong has in plenty, like pollution.

By working with China's southern provinces to establish an effective regulatory regime, Mr Tsang could help create a market trading reductions of sulphur dioxide, nitrogen oxides and the other noxious emissions that kill an estimated 2,000 Hong Kongers every year.

Not only would that pay for cleaning up our environment, it would establish Hong Kong as a real centre of expertise in a rapidly growing market, helping to create a harmonious society all round.