Too early to consider yuan as HK dollar peg, says HKMA chief
HONG KONG: Hong Kong has no immediate plan to adopt the Chinese currency as an alternative to its peg to the US dollar even though the city is the key hub for widening yuan usage in global trade, Hong Kong's central bank chief said yesterday.
In an article posted on the Hong Kong Monetary Authority (HKMA) website to mark the 30th anniversary of the Hong Kong dollar's pegging to the US currency, chief executive Norman Chan defended the city's policies on the dollar peg.
"If the anchor currency were changed to the renminbi, the Exchange Fund would have to hold nearly two trillion yuan (RM1.04 trillion) worth of assets, which far exceeds the amount of renminbi assets in the offshore renminbi market presently in existence," Chan wrote.
"Therefore, it is too early to consider the use of the renminbi as our anchor currency while it is not yet freely convertible and the capital account of the mainland is still not fully liberalised," the HKMA chief said.
Chan's comments come at a time property price inflation in Hong Kong is rampant and the city's strengthening ties to the mainland have raised questions about the local dollar's future.
China's push to promote its currency in international trade has seen the renminbi overtake the local Hong Kong dollar in trading volumes in the global currency market. Growing numbers of multinational companies are tapping the offshore yuan bond market to finance operations on the mainland.
Chan also pointed out the impact a stronger Hong Kong dollar would have on the local economy if it was pegged to the yuan.
The corrosive effects of a stronger currency on its exporters would far outweigh the benefits to imports and substantially weaken the overall competitiveness of the economy, he said. Reuters