Replacing the Hong Kong dollar with the yuan would not only benefit Hong Kong’s economic growth in the long run, but also help the city to better integrate with Greater China.
It’s important to remember that the Hong Kong dollar is pegged to the US dollar. Since that went into effect back in 1983, the close-knit relationship between the two systems helped stabilise the local currency, and prevent currency fluctuations. That is, until the end of 2003, when many international companies came to Hong Kong to tap into the yuan market. So, in recent years, the peg has proved to be unreliable and detrimental to the stability of our dollar.
However, given the heavy involvement of the Chinese government in currency manipulation and its obsession with stability, Hongkongers can rest assured that the yuan rate would not climb steeply.
As the world’s largest trading nation, China’s currency is bound to become the “universal currency” – just like how English has become the “universal language”. What’s more, by using Hong Kong as a stepping stone, the yuan could easily become more internationalised and bypass the US dollar to be converted directly into other currencies.
Apart from the practicality of adopting the yuan, it would also represent a sense of unification. As early as 230BC, one of the greatest achievements of emperor Qin Shi Huang was standardising currency. This was not just beneficial to the economy, but also allowed cultural exchange to take place and led to more people identifying themselves as proper Chinese citizens. Likewise, it would be much easier for Hongkongers to embrace the mainland culture as soon as their similarities begin to overshadow their differences.
Legally, the Hong Kong dollar will also no longer be protected by the Basic Law, as soon as the “One Country, Two Systems” principle ends in 2047.
So I believe this is the right time to replace the Hong Kong dollar with the yuan, and ensure a brighter future for the city.
The system we have in Hong Kong now is fully functional, and there’s simply no need for the yuan to take over the Hong Kong dollar – at least not before 2047, with the expiry of Hong Kong’s SAR status.
There’s no point doing it before then, because replacing a sovereign currency needs a lot of financial, human, and political effort. This includes physically recalling all of the old currency, redistributing the new notes and coins, and re-establishing the prices of all goods and services in the market.
As a centre of trade and commerce, all business in Hong Kong would have to be negotiated using the yuan. This would add a lot of extra costs which should be avoided if at all possible, especially because the government has to deal with more important issues, such as the housing shortage and health care.
The Hong Kong dollar is based on the Linked Exchange Rate System, which plays a significant role in keeping the exchange rate stable and providing a favourable business environment. If we switch to the yuan, there could be huge swings in the exchange rate, and this could have a negative impact on the city’s reputation as an international financial centre.
Also, Beijing does not interfere in Hong Kong’s governance and trade, so there is no reason for the SAR to use the yuan. Such a decision could cause many foreign governments to question the city’s autonomy. Part of Hong Kong’s success as a financial hub is its autonomy from China, and to take this away would mean a massive blow to investor confidence.
At present, Hong Kong has the ability to control its monetary policy. This is extremely important, as Hong Kong’s economy is very different from that of the mainland. Hong Kong could lose out if it is absorbed into China’s massive financial system.
In conclusion, the Hong Kong dollar represents our identity and culture. Coins which feature Britain’s Queen Elizabeth are still in circulation. They reflect our colonial history, which is different from cities on the mainland. Scenery, such as the Victoria Harbour, are printed on Hong Kong’s banknotes, and this is something we are very proud of.
In a society where the Hong Kong dollar is doing very well, a no-change policy is certainly the best way forward.