ONS
81305
F.02
Seminar on Monetary Management held by the Hong Kong Monetary Authority on 18-19 October 1993 at the Hong Kong Convention and Exhibition Centre
1.
The Hong Kong Monetary Authority held a Seminar on Monetary Management on 18 - 19 October 1993. This coincided with the tenth anniversary of the linked exchange rate system. The seminar was attended by about 330 participants, and was opened by Mr Hamish Macleod, the Financial Secretary. Many of the speakers were involved in advising the Hong Kong Government when the link was put together in 1983.
2.
Mr. Hamish Macleod welcomed the speakers, particularly those from abroad, in his greeting address. He hoped that there would be more such seminars in future. He also announced the introduction of the three-year Exchange Fund Notes on 25 October, which would help to extend the benchmark yield curve for HKD debt instruments.
3.
A
In his keynote speech, Professor Charles Goodhart of the London School of Economics and Exchange Fund Advisory Committee Member, examined two alternative routes to price stability having independent central banks to manage discretionary monetary policy or linking the currency value to another currency through the currency board system. He advised Hong Kong to stick to the link. In his view, while Hong Kong's public finances continue to be managed with prudence and fiscal rectitude, there might be worries over monetary instability stemming from the political transition. The link had three important advantages in building up public confidence: the link system is transparent, relatively simple and immediate in operation, enhances accountability and minimizes the need for discretionary trust. Moreover, the simple link with the USD was close to an arrangement which would have minimised the trade-weighted variability of Hong Kong's exchange rate, as China and US were Hong Kong's major trading partners and the Chinese currency was managed primarily in the relation to the USD.
4.
Professor Goodhart was concerned about the potential dangers of asset price inflation and speculative bubbles given the negative real interest rates. He emphasized the need for banks to maintain strict self discipline over credit expansion and to manage credit risks prudently. On inflation in Hong Kong, he distinguished between inflation in the traded goods sector which had been low and in the non-traded goods sector, which had been under the influence of heavy demand arising from rapid economic development in the region, particularly China.