PWC grey areas highlighted
SENIOR Chinese and Hong Kong monetary officials took part in an unprecedented meeting on the linked exchange rate policy in the territory yesterday.
The closed-door meeting, which also involved senior bankers, highlighted ambiguities in the Government's policy of banning officials from participating in 'formal meetings' of the Preliminary Working Committee (PWC).
Deputy chief executive of the Hong Kong Monetary Authority (HKMA), Andrew Sheng Len-tao, delivered a seven-page speech to the meeting.
Mr Sheng became the first member of the Government's executive-arm to attend a PWC meeting after the Chief Secretary, Anson Chan Fang On-sang, issued a set of guidelines early this month.
Under the guidelines, civil servants should not take part in formal meetings of the PWC.
A HKMA spokesman said Mr Sheng's presence at the seminar did not violate any of the guidelines because the meeting was an 'informal' one.
The meeting was attended by 12 PWC members and 15 local banking and financial leaders including the Hongkong Bank's chief financial officer, Vincent Cheng Hoi-chuen, and the head of Citibank's country corporate office, Anthony Leung Kam-chung.
Deputy governor of the People's Bank of China, Chen Yuan, was among the mainland members who flew from Beijing for the meeting.
In his speech, Mr Sheng said: 'The linked exchange rate has been a firm anchor for monetary stability and has more than proved its resilience to external shocks.
'The Hong Kong Government is fully committed to maintaining the link.
'In addition to its existing monetary armoury, the HKMA will continue to review the existing mechanism for monetary management to see whether, and if so what, further reform measures would be needed to further maintain monetary stability, both before and after 1997.' Speaking after the meeting, Mr Chen said any drastic change to the currency system would be undesirable.
He said PWC members had received an assurance from both the Government's representative, Mr Sheng, as well as other leading bankers of the need to maintain the link.
He said the seminar was held to assure the financial sector, both local and overseas, of Hong Kong's determination to carry on with the pegged system in the future.
Mr Chen stressed the stability of the currency system would be crucial to the stability and prosperity of the territory.
The Hong Kong dollar should not be unhooked from the US dollar, nor should it be linked to other foreign currencies, he said.
Noting the pegged system had resulted in a failure by the Government to combat inflation by adjusting the interest rate, Mr Chen said: 'Still, for Hong Kong, the price it paid to maintain the link was much smaller than [the fluctuation] it would pay for changing the exchange rate system.' He pledged the People's Bank of China would maintain its co-operative relationship with the future Special Administrative Region.