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Monitor

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Why you can trust SCMP

I ASSURE YOU it is not spite on my part to have another go at Jim Walker, the chief economist at CLSA Securities, just when CLSA is hosting its big annual forum for investors in Asia.

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Rather I am doing it because my ammunition for it has just been given to me by Stanley Fischer, the former big wheel at the International Monetary Fund, who was in town yesterday to deliver a lecture as a guest of the Hong Kong Monetary Authority.

You missed nothing, by the way. Aside from that piece of ammunition his speech was an absolute grinder of dullness. Could someone please tell him that the expression 'uhh' carries no meaning and should not be inserted twice into every sentence?

But back to the matter at hand. Mr Walker believes China will have a fully convertible currency as early as 2007 and it will then be time to end Hong Kong's peg to the US dollar and unify the currency with the yuan. 'Two currencies in the same country with two different [interest] rates is just ridiculous,' he said.

I did not take notes when Mr Fischer was asked to comment on the two-currencies issue - my pen had earlier dropped out of my hand when I nodded off and I could not find it on the floor - but the substance of his remarks was that it all depends on how the money flows with China.

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If the relationship is primarily one of Hong Kong buying mainland-made goods for its own consumption, then eventual linkage with yuan makes sense. If, however, it is rather one of Hong Kong intermediating US-dollar trade and financial transactions in China, then there is no good reason why we cannot retain our US dollar peg, Mr Fischer said.

Well, it is the second of those two, as you well know. Why link to the yuan instead of the US dollar when the business we do with China is almost all US dollar-denominated?

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