Hong Kong's currency peg has again come under attack from critics, who say the local dollar should be allowed to float and find its true market value on world currency markets. But the guardian of the currency's peg to the US dollar, the Hong Kong Monetary Authority, has rebuffed the latest calls, saying there will be no change to a 25-year-old system that it believes has served the economy well. Well-known commodities investor Jim Rogers said Hong Kong could be bypassed as a financial centre by Shanghai in the future unless it adapted to the changes to ensure competitiveness. 'If I were a Hong Kong official, I would definitely delink the currency with the US dollar tomorrow,' Mr Rogers said in an interview with the South China Morning Post. As a follow-up step, he added, once the yuan became freely convertible, Hong Kong should abandon its dollar and use the mainland currency. 'The currency link has meant high costs and decreased efficiency for Hong Kong. If the currency were delinked from the US dollar, it would make it cheaper and more efficient to do business here,' Mr Rogers said. The view was shared by legislator Chim Pui-chung who represents brokers in the Legislative Council. 'The [US dollar] peg was introduced 25 years ago when there were political uncertainties as the British and Chinese governments were negotiating the handover of Hong Kong,' Mr Chim said. 'But the handover passed 11 years ago and the local economy is much stronger than it was 25 years ago. So why should we remain linked to the weak US dollar that has led to our inflation problem?' The poorly performing US dollar - against which the yuan has now risen almost 20 per cent in the past few years - had led to large increases in imported prices of food and other goods, said Mr Chim. 'The peg has caused this inflation problem and many Hong Kong residents are suffering while our operating costs remain high,' he said. 'Singapore has already let its currency float freely and unless Hong Kong follows suit, we could lose out in our competitiveness to Singapore.' But the comments failed to budge the government. 'The linked exchange rate system has served Hong Kong well since its establishment,' said a spokesman for the Hong Kong Monetary Authority. 'The government believes that the link remains the best way to ensure exchange-rate stability, which is in the best interests of the Hong Kong economy and it therefore has no intention of introducing any changes to this system.' Besides scrapping the link, Mr Rogers said there were other steps that Hong Kong should take to promote its role as a financial and trading centre in the region. These steps included the abolition of alcohol tax to help the city become an alcohol trading centre. The government has scrapped duty on wines but retains the levy on spirits. The biggest challenges for Hong Kong and the mainland, according to Mr Rogers, were to solve the pollution problem. He said he moved last year from New York to live in Singapore rather than in Hong Kong or Shanghai because of the poor air quality in the two cities. 'I and my wife love Hong Kong and Shanghai and if the air quality could be improved I would move to Hong Kong,' he said. On the mainland, besides the poor air quality, water pollution and shortages represented serious challenges that had to be resolved, Mr Rogers added. 'If [the country] does not solve its water pollution problem, it could spell the end of the China growth story,' he said.
