WEDNESDAY, OCTOBER 24, 1984
24
BILL BROWN SUPPORTS CONTINUATION OF LINKED EXCHANGE RATE *****
THE U.S. DOLLAR LINK COULD NOT BE TURNED ON AND OFF LIKE A TAP AND TO SUGGEST OTHERWISE WAS TO MISUNDERSTAND HOW THE SYSTEM WORKS, THE HON BILL BROWN SAID IN THE LEGISLATIVE COUNCIL TODAY.
MR BROWN SAID HE WELCOMED THE GOVERNOR'S STATEMENT THAT THERE WERE NO PLANS TO CHANGE THE LINKED EXCHANGE RATE SYSTEM.
+1 WELCOME THAT STATEMENT, FOR I DO NOT SUBSCRIBE TO THE VIEWS OF THOSE WHO BELIEVE WE SHOULD REVERT TO A FREE-FLOATING CURRENCY, + HE SAID.
HE NOTED THERE HAD BEEN SUGGESTIONS THAT AS THE UNITED KINGDOM HAD NOW REACHED AGREEMENT WITH CHINA OVER THE FUTURE OF HONG KONG AND AS STABILITY HAD RETURNED TO THE HONG KONG MARKETS, THE LINK SHOULD BE ABANDONED OR THE LINKED RATE OF 7.80 SHOULD BE ALTERED.
+ IT IS TRUE THAT THE LINK WAS ADOPTED AS A MEASURE TO RESTORE CONFIDENCE IN OUR CURRENCY. BUT IT IS ALSO TRUE THAT THE LINKED RATE SYSTEM, WHICH OFFERS A STABLE EXCHANGE RATE, HAS ITS OWN MERITS,+ HE SAID.
HE POINTED OUT THAT DURING PERIODS OF TURBULENCE, BOTH PRIOR TO THE SINO-BRITISH ACCORD BECAUSE OF POLITICAL UNCERTAINTY, AND MORE RECENTLY BECAUSE OF THE EXCEPTIONAL STRENGTH OF THE U.S. DOLLAR, HONG KONG'S EXCHANGE MARKET HAD BEEN RELATIVELY CALM.
+UNDER THE SYSTEM THIS STABILITY HAS BEEN PURCHASED AT THE COST OF MORE VOLATILE INTEREST RATES, BUT THE COMBINATION OF A STABLE EXCHANGE RATE AND THE AMOUNT OF CHANGE IN INTEREST RATES HAS PROVEN TO BE MORE ACCEPTABLE TO THE BUSINESS COMMUNITY THAN A FLOATING EXCHANGE RATE SUSCEPTIBLE TO EXAGGERATED MOVEMENTS CAUSED BY ANXIETY AND SPECULATION DURING PERIODS OF INSTABILITY.
+ IT WOULD TAKE A BRAVE MAN TO DISCOUNT ANY POSSIBILITY OF SOME ELEMENT OF INSTABILITY AND TURMOIL REAPPEARING IN OUR MARKET, AT SOME POINT IN THE FUTURE, AND INDEED CHINESE LEADERS THEMSELV... HAVE WARNED US OF THAT POSSIBILITY RECURRING AT SOME POINT IN THE LONG COUNT DOWN TO 1997, HE SAID.
HE CONCEDED THERE WAS OF COURSE A COST TO PAY FOR LINKING THE HONG KONG DOLLAR TO THE US CURRENCY AND THAT HAD BEEN LIKENED, CORRECTLY, AS PLACING HONG KONG'S ECONOMY ON A ROLLER-COASTER POWERED BY THE US ECONOMY.
+THAT RELATIONSHIP TO DATE HAS BROUGHT HONG KONG AN EXPORT BOOM WITH ONLY MODEST INFLATIONARY PRESSURE, BUT IN THE EVENT OF THE US CURRENCY ITSELF SUFFERING ANY DRAMATIC REVERSAL OF FORTUNE IN THE YEARS AHEAD IT IS NOT INCONCEIVABLE THAT WE WOULD WISH TO RECONSIDER THE MERITS OF LINKING OUR EXCHANGE RATE TO AN ALTERNATIVE ANCHOR, SUCH AS A BASKET OF CURRENCIES REPRESENTATIVE OF OUR MAJOR TRADING PARTNERS, HE SAID.
THERE WAS,