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The Chief Executive, Mr Donald Tsang, urged economies to work together to map out exit strategy and to co-ordinate action to prevent future crisis at the Asia-Pacific Economic Cooperation (APEC) Economic Leaders¡¦ Meeting in Singapore today (November 15).
Speaking on the second day of the meeting, the Chief Executive addressed the subject of sustaining growth from the historical perspective.
¡§Although history seldom repeats itself, but understanding history enables us to discuss common features of events and hidden risks. Our ability to understand these risks and overcome them may help us sustain global economic growth,¡¨ said Mr Tsang.
Mr Tsang noted that during the Asian financial crisis, the Yen carry trade was utilised to great effect by hedge funds and other speculators. A similar risk is emerging now, with zero or near zero interest rate policies, particularly with regard to the US dollar, leading to rapid carry trades and leveraged capital flows.
Emphasising that a deft exit from extraordinary measures was essential, Mr Tsang said that this was not only a question of ¡§how¡¨ but also ¡§when¡¨ to exit. ¡§There appears to be a penchant for late exit, given the uncertain economic outlook,¡¨ he added.
Noting that with extremely loose monetary conditions, a late exit could enhance the risk of asset bubbles, Mr Tsang said a late exit is also tantamount to ¡§punishing¡¨ the savers by offering them near-zero interest rate for their deposits, while ¡§rewarding¡¨ non-viable firms.
After the APEC meeting, Mr Tsang will stay in Singapore for a one-day official visit tomorrow. In the morning, he will officiate at the opening ceremony of Bank of East Asia¡¦s New Branch Building.
He will call on the Senior Minister, Mr Goh Chok Tong in the afternoon, and speak at the Singapore Management University¡¦s Ho Rih Hwa Leadership in Asia Public Lecture Series.
Mr Tsang will return to Hong Kong in the evening.
Ends/Sunday, November 15, 2009
Issued at HKT 20:02
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