Hong Kong peg 'could last another 20 years', says its designer John Greenwood
The economist behind the local currency's link to the US dollar says mechanism still needed and that a tie to the yuan is unlikely soon
The Hong Kong dollar's peg to the US dollar could easily be in place for the next 20 years with a potential switch to the yuan an unlikely prospect, according to John Greenwood, the economist who designed the currency board system that marks its 30th anniversary this week.
"A number of people take the view that the [yuan] could become fully convertible and a competitor international reserve currency with the US dollar and in that case, it might make sense to peg to the [yuan], but, in my view, that is many, many years away," Greenwood told the South China Morning Post.
Asked if he thought the peg could feasibly mark 50 years of operation, he said: "Given current conditions in China, I think that is true.
"It will take China a very, very long time to achieve that sort of status for its currency and so I don't envisage any near-term factors that would render the linked exchange rate system past its sell-by date."
The Hong Kong dollar's peg was created on October 17, 1983, after a slide in the value of the currency on growing investor concern at the time over talks between Beijing and London on the return of the city to mainland rule.
The currency had fallen as much as 32.5 per cent between January and October, triggering an inflation spike as the price of goods rocketed. It culminated in the so-called "Black Saturday" crisis that forced the Hong Kong authorities to intervene and introduce the peg on Monday, October 17.
Greenwood's analysis of the options available was the basis for the peg's introduction and remains core to why it is likely to persist.