Hong Kong bolsters currency board
Sunday 06 September 1998
Joseph Yam, chief executive of the Hong Kong Monetary Authority, said the package of seven measures would make Hong Kong's currency board arrangements less susceptible to the activities of international speculators.
George Soros's Quantum Fund and other hedge fund operators have been targeting Hong Kong to follow others in the region and abandon its dollar peg.
But Mr Yam said the currency board would stay whatever the cost: "These meas- ures aim at strengthening the currency board arrangements and achieving an even higher degree of transparency and disclosure."
The currency board system, the cornerstone of Hong Kong's past economic stability, obliges the authorities to swap local currency for dollars in all circumstances, thus ensuring a vigorous monetary discipline that local politicians cannot break.
Viktor Chernomyrdin, the acting Russian Prime Minister, has indicated he may be prepared to introduce such a system in Russia.
The Hong Kong Monetary Authority has launched a range of initiatives over the past fortnight to thwart the speculators and counter the downward pressure on its currency and stock market.
In the process, it has spent billions of dollars of reserves buying shares in a range of blue-chip stocks, including a near 9 per cent stake in HSBC, owner of the Midland Bank in Britain.
Commentators in the West have condemned the buying binge as a futile attempt to influence the markets as well as amounting to a back-door nationalisation of assets by the Chinese.
However, the Hong Kong Monetary Authority insists that Peking has not been consulted on any of its recent actions, including the stake-building in HSBC and other leading companies.
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