UK: HONG KONG MONETARY AUTHORITY CHIEF JOSEPH YAM SPEECH

• published: 21 Jul 2015
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English/Nat People in Hong Kong will likely keep feeling the pain of higher interest rates until economic troubles ease in Indonesia and Japan, the chief executive of the Hong Kong Monetary Authority told a city seminar in London on Wednesday. But Joseph Yam would not predict how long what he called an Asian premium would compel Hong Kong bankers to charge the high rates. And Yam warned that the exchange rate link between the Hong Kong and US dollar must be maintained if another economic crisis in Asia is to be avoided. In his seminar speech which he chose to title 'Eye of the Storm', Hong Kong Monetary Authority's chief executive Joseph Yam explained to his audience how Hong Kong had managed to survive the financial storm which has swept through Asia. Hong Kong had to raise interest rates late last year to preserve a tight link between the Hong Kong dollar and the U.S. dollar. Yam said that although this had been economically painful to individuals and businesses in Hong Kong, the link had proved to be sound monetary policy for Hong Kong. SOUNDBITE: (English) \"The bitter experience of others in the region is perhaps a sharp reminder to Hong Kong that the exchange rate link must be kept. This is obviously for our own good, but I imagine also for the good of the region and possibly beyond, for if the Hong Kong dollar's fixed link with the US dollar were to be broken, the likelihood of yet another shock wave of gigantic dimensions sweeping across financial markets worldwide cannot be dismissed.\" SUPER CAPTION:Joseph Yam, Chief Executive, Hong Kong Monetary Authority. And Yam insisted that there was no need for the Hong Kong dollar to break its link with the US dollar and instead be pegged to the renminbi, the currency of Mainland China. SOUNDBITE: (English) \"But this does not necessarily mean that the Hong Kong dollar will need to move in sync with the RMB, in the highly unlikely event that the RMB is devalued. The Hong Kong dollar is linked to the US dollar and not to the RMB. The economic relationship has always been very close between Hong Kong and the Mainland of China. There has always been separate currencies for Hong Kong and the Mainland, and 'one country, two currencies' is further enshrined in the Basic Law governing Hong Kong for 50 years after the resumption of sovereignty. The many differences between Hong Kong and the Mainland of China argue for monetary segregation and not monetary union.\" SUPER CAPTION:Joseph Yam, Chief Executive, Hong Kong Monetary Authority. And Yam added that while most countries in Asia had weathered the financial storm, it remained to be seen whether Indonesia could overcome its problems. SOUNDBITE: (English) \"I think the problems in Asia are being resolved, other than in Indonesia where perhaps it will take a little more time. Thailand, for example is turned around, Korea is turned around, and their currencies have actually rebound. So I think, I hope, Asian financial turmoil will settle down within this year, that is my hope. As to China, its economy continues to quite robustly. In 1998 there is a forecast of growth rate of 8 per cent in real terms, of course that would be beneficial to Hong Kong because Hong Kong does provide quite a lot of services, including financial services to the Mainland of China.\" SUPER CAPTION:Joseph Yam, Chief Executive, Hong Kong Monetary Authority. Yam said only time could tell whether serious economic mistakes could be rectified in the near future. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/7c911c7c1122f40cf6e103f624ce4475 Find out more about AP Archive: http://www.aparchive.com/HowWeWork