Tsang enlists Brown in war on speculators
Friday 16 October 1998
Mr Tsang, whose unprecedented $13bn (pounds 7.6bn) intervention in the Hong Kong stock market in August raised the spectre of a wholesale retreat from the territory's robust pro-capitalist stance, said yesterday that the Chancellor had agreed "very substantially" with his calls for a three- pronged approach to the financial crisis
Mr Tsang, who met Mr Brown in London this week, is canvassing global support for the measures, which include:
The immediate deployment of funds to Brazil to arrest the contagion in Latin America;
The imposition of "discipline" on capital flows through greater disclosure and exchange of information between central bankers; and
A review of the architecture of the global financial system to avoid "gaps and overlaps" between the International Monetary Fund and the World Bank.
Mr Brown, he said, had agreed to pursue the matter with the Group of Seven leading industrialised nations while the Hong Kong authorities tried to marshal support in Asia.
"He agreed very substantially," Mr Tsang said, "there was more or less consensus on all our points, particularly on capital flows and the architecture."
The financial secretary said that in the wake of the crisis at Long-Term Capital Management, opinion internationally was moving in his direction.
However, Mr Tsang deliberately stopped short of calls for outright controls on capital flows, while defending the right of individual countries to defend themselves against massive speculative attacks.
By discipline he meant "greater monitoring, disclosure and transparency", he said, calling for consultation with hedge fund operators on how this could be achieved.
However, Mr Tsang pointed out that hedge funds, while based offshore, had to operate through one or more of the major financial centres.
Central banks should insist on more information and share that information between themselves. "We should ensure the capital flows are being put to good use rather than being used to fund speculative attacks on currencies," he said.
Mr Tsang rejected claims that Hong Kong's actions in August were inconsistent with the Hong Kong government's belief in the free market. He rejected charges that the intervention was inspired by the People's Republic of China, adding that no sovereign nation should be expected simply to yield in the face of speculative attacks.
"The one entity that cannot be blamed was the mainland," Mr Tsang said. "There was no memo, no telephone call, no e-mail. Nothing."
Hong Kong Monetary Authority officials say hedge funds bet more than $3.8bn against the Hong Kong dollar in August and would have made $4bn for every 1,000-point drop in the Hang Seng stock index.
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