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It could have been worse

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Financial Secretary Donald Tsang Yam-kuen must have been struck by the irony of the message he delivered to the International Monetary Fund (IMF) and World Bank annual conference in Washington last month.

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Only a year earlier he was a key speaker at the same function in Hong Kong, extolling the virtues of the SAR's laissez-faire business environment. Nothing could tame Hong Kong's commitment to free and open markets, the audience of world leaders was told.

Yet, within the space of 12 traumatic months, the rules have been rewritten. After embarking on what the Government saw as a fight to the death to defend the Hong Kong dollar peg against international hedge funds, it unleashed an unprecedented tidal wave of intervention to prop up local markets.

Amid criticism from the international investment community, the Government delved into reserves and filled its boots with blue chips during a $100 billion buying binge.

The Financial Secretary's mission this month was to justify the action to sceptical audiences during a road show in the US and Europe. The message was that while the Government adheres to a commitment to free markets, these were extraordinary times calling for extraordinary responses.

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There is little doubt that Hong Kong's international reputation has suffered as a result of the intervention. Leaving aside the act itself, critics have found ample scope to question the timing of the intervention and the way in which it was executed.

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