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Meetings in Washington this week amongst world leaders and financial ministers have succeeded in spurring action to solve the current global financial crisis, the Financial Secretary, Mr Donald Tsang, said early today (Thursday, HK time).

Mr Tsang was speaking at the end of a solid five days of meetings in the US capital during annual IMF/World Bank Meetings and a special meeting called by US President Bill Clinton of the G-22 finance ministers.

Mr Tsang said Hong Kong had succeeded in raising international awareness of the need for greater transparency in global capital flows.

He said world leaders and finance ministers were more acutely aware of the need for quick and decisive action to deal with the financial problems in Russia and Brazil to prevent contagion effect and a global meltdown.

"Most finance ministers in the world now share a sense or urgency," said Mr Tsang, who was one of the finance ministers invited by Mr Clinton to speak during the G-22 meeting last Tuesday.

"The next challenge lies with follow-through measures in terms of urgent financing packages for Russia and Brazil and how to tackle this phenomenon of rogue capital flows.

"Hong Kong has a particular interest in the capital flow issue because secretive and manipulative capital flows caused severe instability in our stock and money markets in August.

"Following this week's meetings, we will continue to work with the IMF and the Bank of International Settlements to develop a code on the degree of transparency required by the financial institutions which generate these huge capital flows.

"There also needs to be greater discipline and risk assessment by the banks in their lending to these institutions.

"This is a problem partly created by the private sector but solved by tax-payers the world over through IMF bailouts.

"At the same time we must beware of over reaction or excessive control."

Mr Tsang said his Washington visit ended with a sense of hope.

"I think everybody now understands more clearly that we are all really in the same boat and that we have to work together to solve these problems and achieve the aim of sustainable global growth," he said.

Mr Tsang said that during his meetings with American officials, bankers, think-tankers and the business sector there had been considerable interest in Hong Kong's stock market incursion in August.

The Financial Secretary said the action was a 'surgical strike' to prevent a market manipulation which was destabilising the money and stock markets.

"Many of those to whom I spoke were reassured to hear that our actions were not taken to prop up the market at any particular level but to prevent anti-trust activities and to protect our linked exchange rate," Mr Tsang said.

"I explained that we bought shares across the entire spectrum of the 33 Hang Seng Index constituent stocks and in line with their index weighting to prevent claims we were supporting one share or company more than another.

"I also explained that we did not secretly buy shares but told the world when we entered the market and when we left it.

"Those with whom I spoke were also reassured that we were setting up a separate company, at arm's length from the government and regulators, to professionally manage our portfolio and that we would adopt a passive market position."

Yesterday (Wednesday), Mr Tsang met New Zealand Finance Minister Bill Birch, former US Secretary for Commerce Mickey Kantor, US Undersecretary of State for Economics, Business and Cultural Affairs Stuart Eizenstat and Malaysian Minister of Finance II Mustapa Mohamed.

Mr Tsang also attended a lunch with the American Enterprise Institute, an influential think-tank, and held a round-table discussion with the Securities Industry Association and Bond Market Association.

Later today Mr Tsang flies to New York for a four-day visit which will include a comprehensive round of meetings with investment bankers, institutional investors and credit rating agencies and a keynote address at a lunch co-organised by the Hong Kong Economic and Trade Office New York and the US-China Relations Committee.

End/Thursday, October 8, 1998

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