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The Financial Secretary, Mr Antony Leung, has reiterated that Hong Kong has no plan nor does it intend to change the linked exchange rate with the US Dollar.
"This is not an option for Hong Kong", he told a gathering of business leaders, bankers, academics, and media guests at the Hong Kong networking dinner (Friday, February 1 evening, New York time) as part of the World Economic Forum (WEF) being held in New York.
He said some people had suggested that the link should be abolished to solve the problem of deflation which was part of the painful process of economic restructuring now affecting Hong Kong. They had even cited Argentina as an example to support their argument.
"As the Chief Executive and I have said many times before, the Hong Kong Special Administrative Region Government has no plan, nor does it intend, to change the linked exchange rate.
"The basic point here is that our financial and economic systems would not be able to withstand the tremendous shock created by the possible massive outflow of capital if the linked exchange rate were to go.
"Hong Kong is markedly different from Argentina. We do not have any external debt. We have a sizeable foreign exchange reserve of over US$100 billion. The lesson to learn is not to perpetuate the problem of fiscal deficits," Mr Leung said.
He said Hong Kong had been facing the problem of on-going deficits for a few years and as Financial Secretary he had a responsibility to bring the budget back to a balance within a reasonable timeframe.
"My task as I prepare the budget, is to send a clear and strong signal to both the domestic and international communities that the government is determined to address the problem: that we can provide a basket of measures that is workable both financially and politically, " Mr Leung said.
He said he was currently focusing on controlling government expenditure.
"Reducing the size of government will not only help address the fiscal problem, but also introduce more flexibility and efficiency in our economy," Mr Leung said.
The Financial Secretary said he had received much sound advice on the revenue side and he was reflecting on this as well.
The Financial Secretary said that in tackling the immediate challenges, Hong Kong had to look at the broader picture to ensure there was sustainable development in the medium to long term. And in this respect, Hong Kong was on the right track.
"Our policies are designed to help Hong Kong move further up the value-added chain. Our determination to revamp and upgrade our education system and to embrace innovation and technology are just two examples. I also believe we have struck the right balance between facilitating development in an increasingly complex environment, and preserving - indeed enhancing - Hong Kong's reputation as a free market economy," Mr Leung said.
On the proposed Closer Economic Partnership Arrangement between Hong Kong and the Mainland, Mr Leung said that while he was very excited about the proposal, he had to sound a note of caution: "China has just joined the WTO (World Trade Organization) and neither the Mainland nor Hong Kong has so far entered into any form of Free Trade Agreement with other trading partners. So, we need to bear in mind that this is a very complex subject and one that will take some time to bear fruit."
Earlier in the day, Mr Leung attended a breakfast meeting organized by the Hong Kong Association of New York and met with senior management of various credit rating agencies and investment banks.
In the afternoon, the Financial Secretary acted as one of the discussion leaders at a World Economic Brainstorming session. Joining this session were business leaders, policy-makers, economic experts and media leaders. They worked together to develop strategies to accelerate a global recovery. The discussion focused on the strengths and weaknesses in key industralized economies, major emerging markets and industrial sectors. Policy priorities to restore global growth were identified. The US Secretary of the Treasury, Mr Paul H. O'Neill, attended this brainstorming session as a Special Guest.
On Saturday (February 2), Mr Leung will attend a plenary session at the WEF and an Informal Gathering of World Economic Leaders which brings together the finance, foreign, trade and development ministers and the central bank governors of the G-20 countries. The Financial Secretary will also lead a discussion at a major workshop session on the regional and global implications of China's economic emergence.
Mr Leung departs New York for Hong Kong on February 2 evening, arriving in Hong Kong on February 4.
End/Saturday, February 2, 2002
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