XN000022-1995-01-23 — Page 5

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Thirdly, whoever are the principal leaders in Peking will face the same agenda both here and throughout China in the next few years and you know as well as I do what that agenda consists of. We would like to be able to work as closely as is reasonably possible with Chinese officials and with those they choose to join the Preparatory Committee in the year and a half or so before the transition. And we would like to be able to be discussing with Chinese officials as soon as possible, ways in which they think we could best co-operate with and help that Preparatory Committee. Of course we have ideas about that but our ideas aren't set in concrete and what we can best do will obviously depend a great deal on what Chinese officials think we can most usefully do. Discussions on an issue like that can't wait indefinitely because time presses and it is in the interests of the future members of the Preparatory Committee, as it is in the interests of the Hong Kong Government and the Hong Kong public, for us to be able to settle down and talk about those things sooner rather than later.

So I hope that decisions won't be delayed or postponed. And I'm sure that the leadership in China will continue with the economic revolution begun so notably by Deng Xiaoping. And I will no more today than I have in the past, speculate about his health. I'm sure Chinese officials don't speculate about mine.

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Question: This question is asked not so much in memory of your former colleague Mr Lamont in the EMS, but more in recollection of 1984, the last bursting of the Hong Kong asset bubble which led, at the time of political disturbances as well, to the collapse of the Hong Kong dollar and the establishment of the peg. The question is, how high are you prepared to see Hong Kong interests go to protect the peg? Is there any limit?

Governor: Well I am grateful for the comparison with Norman Lamont which I'm sure was well intentioned. I have never shared his financial responsibilities but I know enough about markets not to give an answer to your question. All I will say, as somebody who has shifted his position intellectually on fixed and floating rates over the years, and normally been wrong in the past, all I will say is that I believe that the peg has been an important element in the stability of the Hong Kong economy and Hong Kong society, though I recognise the limitations which it places on the customary conduct of monetary policy and know that you and others have written stimulatingly on the subject. But just in case there is any doubt about it, our position, which I have enunciated on many occasions, is that the peg stays so long as we do, up to the 30th June 1997, and I know that Chinese officials have made it clear, not least at a seminar organised by the PWC which one of our officials attended, that they intend that the link should continue after 1997 too.