SO YOU THOUGHT Financial Secretary Antony Leung Kam-chung had been scared off talking about tampering with the peg by now? After all, there has been so much scathing criticism of his earlier admission, on August 30, that the Hong Kong dollar's link to its United States counterpart is an obstacle to economic recovery. And of his recent suggestion that abandoning the peg might give the SAR more flexibility in adjusting prices.
Many observers blame these remarks for creating an air of uncertainty about the future of the 18-year-old link that helped fuel the recent surge in forward rates for the Hong Kong dollar, as traders speculated that the local currency will be worth less in a year from now.
And it certainly put the Government on the defensive, prompting a series of hasty denials that there are any plans afoot to scrap the peg. These included Chief Executive Tung Chee-hwa's famous 'no, no, no' on October 21, when asked under what circumstances he would consider making such a change.
But despite all this, Mr Leung was at it again last week, albeit in more cautious terms. Indeed, he almost went out of his way to raise the issue of the peg's long-term future during a question-and-answer session at the East Asia Economic Summit in Hong Kong last Monday. When asked a very general question about how countries in the region could best co-operate to boost economic growth, Mr Leung chose to answer by floating the possibility of a common Asian currency. This would, of course, also mean an end to the peg, at least in its current form.
Evidently having learned from the controversy over his earlier comments, Mr Leung was careful to stress that he was only talking about 'the very long run'. In other words, that there is no prospect of scrapping the peg in the short term. Mr Leung noted that it took Europe 50 years to introduce a common currency. Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong pointed to other obstacles, such as a lack of leadership in the region, that would have to be overcome before Asia could move in the same direction.
Nonetheless, the Financial Secretary has once again suggested there is a better alternative to the present peg, even if there are practical difficulties about implementing it in the short-term.