Hong Kong protests: no plans for foreign exchange controls finance chief says amid online rumours of more curbs after anti-mask law
- City’s leader Carrie Lam invoked a tough, colonial-era emergency law to ban masks during public assemblies in bid to stop escalating violence
- Free convertibility of Hong Kong dollar continues to be in place, financial secretary writes in his blog
Hong Kong’s finance chief Paul Chan Mo-po says the government is committed to keeping the city free from any foreign exchange controls, quashing rumours that a controversial anti-mask law will be followed by restrictions on capital flows in and out of the city.
Dozens of MTR stations still closed with more Hong Kong protests coming
The Basic Law stipulates that the government will ensure the free convertibility of the Hong Kong dollar, and will not impose foreign exchange controls.
Meanwhile, Chief Secretary Matthew Cheung Kin-chung, the city’s No 2 official, wrote on his blog that the law was a necessary and difficult decision taken to curb the violence.
Chan said the city’s foreign currency reserves, at US$430 billion, were equivalent to two times Hong Kong’s monetary base.
The linked exchange rate system, under which the Hong Kong dollar is pegged to the US dollar in the range of 7.75 to 7.85, had functioned effectively for the past 36 years, enabling businesses and investors to operate and transfer capital in a stable financial environment, Chan wrote.
The peg had withstood previous economic cycles and operated effectively during cycles marked by massive capital outflow and inflow, he added.
Hong Kong’s fiscal reserves, at HK$1.14 trillion (US$146.15 billion) as at the end of July, was equivalent to 38.3 per cent of the city’s gross domestic product and could sustain the government’s operating expenses for 23 months.
“These factors point to the strong support backing the Hong Kong dollar,” he wrote.
Chan said the banking system remained sound, with overall liquidity ratio at 150 per cent and average capital adequacy ratio at 20 per cent.
Chan’s commentary came after investment bank Goldman Sachs estimated in a research note last week that, as at the end of August, between US$3 billion and US$4 billion in Hong Kong dollar deposits had flowed to Singapore, the city’s rival international financial centre.
But that was “still small” compared with the Hong Kong dollar and US dollar deposits in the city, which amounted to about US$1.5 trillion at the end of August, the investment bank said. Goldman did not link the outflow to the ongoing social unrest in Hong Kong.
