XN000022-1993-10-19 — Page 2

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TUESDAY, OCTOBER 19, 1993

HK NEEDS ROBUST MONETARY MECHANISM IN TRANSITION

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HONG KONG IS IN POLITICAL TRANSITION AND IT NEEDS A MONETARY SYSTEM AND A MECHANISM FOR MONETARY MANAGEMENT THAT ARE ADEQUATELY ROBUST TO ENABLE IT TO MEET THE CHALLENGES IN THE YEARS AHEAD.

THIS WAS STATED BY CHIEF EXECUTIVE, HONG KONG MONETARY AUTHORITY (HKMA), MR JOSEPH YAM, TODAY (TUESDAY) AT A SEMINAR MONETARY MANAGEMENT.

ON

MR YAM IS HEARTENED BY THE SUPPORT GIVEN TO HONG KONG'S LINKED EXCHANGE RATE SYSTEM BY LEADING EXPERTS ADDRESSING THE TWO-DAY SEMINAR ORGANISED BY THE HKMA.

THEY INCLUDED NOBEL LAUREATE PROFESSOR MILTON FRIEDMAN; MR CHEN YUAN, DEPUTY GOVERNOR, PEOPLE BANK OF CHINA; PROFESSOR CHARLES GOODHART FROM THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE; MR DAVID PERETZ, EXECUTIVE DIRECTOR AT THE IMF AND THE WORLD BANK, AND MR ANTHONY LATTER FROM THE BANK OF ENGLAND.

CONCERNING THE OBJECTIVE OF MONETARY POLICY, THE SEMINAR GENERALLY CONVERGED ON THREE POINTS, MR YAM OBSERVED.

"FIRST IS THAT STABILITY OF THE CURRENCY SHOULD BE THE PRIME OBJECTIVE OF MONETARY POLICY.

"SECOND IS THE NEED TO ENSURE THAT THE OBJECTIVE IS CLEARLY DEFINED AND CONSISTENTLY ADHERED TO.

"THIRD IS THE NEED TO HAVE A SINGLE RATHER THAN MULTIPLE POLICY OBJECTIVES."

HONG KONG'S MONETARY POLICY HAS A HIGH DEGREE OF CREDIBILITY BECAUSE IT MEETS ALL THE ABOVE CRITERIA, REDUCES UNCERTAINTY IN A RAPIDLY CHANGING ENVIRONMENT, AND FACILITATES HONG

ADJUSTMENT IN THE DYNAMIC YEARS AHEAD, MR YAM POINTED OUT.

STRUCTURAL

IN COMMENDING THE SUCCESS OF HONG KONG'S MONETARY AND FINANCIAL POLICY, DEPUTY GOVERNOR CHEN YUAN SAID CHINA WAS ALSO REFORMING ITS MACRO-ECONOMIC AND MONETARY SYSTEMS AND THAT THERE WOULD BE A CONTINUATION OF THE EXCHANGE AND CO-OPERATION BETWEEN THE TWO ECONOMIES IN THE FIELD OF FINANCE AND BANKING.

"THE PEOPLE'S BANK OF CHINA WILL FURTHER STRENGTHEN AND DEVELOP OUR LINKS AND CO-OPERATION WITH THE MONETARY AUTHORITY UNDER THE GOVERNMENT OF THE SPECIAL ADMINISTRATIVE REGION, AND WILL NOT TAKE THE PLACE OF THE HONG KONG MONETARY AUTHROITY, ' MR CHEN ADDED.

ON THE ISSUE OF CHARGES LEVIED BY BANKS FOR THE HANDLING OF CASH DEPOSITS, MR YAM CONFIRMED THAT THE MATTER HAD BEEN CONSIDERED BY THE EXCHANGE FUND ADVISORY COMMITTEE CHAIRED BY THE FINANCIAL SECRETARY AND THAT DISCUSSIONS WERE IN PROGRESS WITH THE BANKS ON A PROPOSAL TO RESOLVE THE MATTER.

NOTE-ISSUING

/THE PROPOSAL