Hong Kong's financial secretary rejects call to change the currency peg
Hong Kong does not need to change its currency peg to the US dollar, Financial Secretary John Tsang Chun-wah said after the latest suggestion that the government should look to the yuan instead.
Hong Kong does not need to change its currency peg to the US dollar, Financial Secretary John Tsang Chun-wah said yesterday after the latest suggestion that the government should look to the yuan instead.
Tsang was responding to a suggestion by Peter Wong Tung-shun, HSBC's Asia-Pacific chief executive, that the currency's future should be reviewed. That could include scrapping the long-standing peg to the US dollar and switching it to the yuan, or even making the yuan the city's legal tender, Wong said.
His remarks echoed comments in 2012 by former Monetary Authority chief Joseph Yam Chi-kwong.
The peg was introduced in 1983 as the Hong Kong dollar and the Hang Seng Index plunged due to uncertainty surrounding talks between Britain and China.
Tsang also reiterated that the Occupy Central protests were not the reason a long-awaited link between the Hong Kong and Shanghai exchanges was not launched last month as expected.
Raymond Yeung, senior economist at ANZ Bank, said retaining the US dollar peg remained the best bet for Hong Kong. A peg to the yuan would be unsuitable because it was not a global reserve currency.
"There's still not enough international liquidity in the yuan. It's been used a lot in China's trade, but it's still a long way from becoming the world's reserve currency," said Yeung.
While he expects the yuan to become fully convertible within five years, he said it could take 15 to 20 years for it to become a reserve currency held by other countries.
And he saw a political dimension to Wong's comments.
"It is very rare for HSBC, a note-issuing bank, to comment on the currency peg," Yeung said, adding that he thought Wong's comment on Friday was an expression of patriotism. "The market should make the decision [on exchange rate policy] and not patriotism," he said.
