Review urged on future role of Hong Kong dollar
Options include linking to the yuan or making the yuan the legal tender in the city
HSBC Holdings is calling for a review of the future role of the local currency, including possibly severing its link to the US dollar and switching it to the yuan instead, or even making the yuan the legal tender in the city.
"The yuan is not yet a convertible currency so it cannot be pegged to. However, once it becomes convertible, it will be a different story," Peter Wong Tung-shun, the Asia-Pacific chief executive of HSBC, said yesterday.
Wong said that when the yuan became convertible in 2020, as some mainland officials had indicated, Hong Kong should explore the future of the Hong Kong dollar. "If China trades continue to increase, the block of yuan that you carry is going to be bigger, so the Hong Kong dollar will be used less," he added.
Possible options include letting the Hong Kong dollar link with the yuan or a basket of currencies, a free float of the unit or keeping the peg. Hong Kong could even name the yuan as the legal tender for the city, he said.
"If the Hong Kong dollar is linked to a basket of currencies, when these currencies appreciate, it will solve Hong Kong's inflation problem, too," he said.
Wong also blamed high inflation and house prices on the peg when he and other business leaders spoke with President Xi Jinping in September, said two sources, though he stopped short of telling Xi the peg should end.
Wong's views echoed those of former Hong Kong Monetary Authority (HKMA) chief executive Joseph Yam Chi-kwong, who also called for a review of the future role of the Hong Kong dollar.
An HKMA spokesman said yesterday: "The government has reiterated that it sees no need and has no intention to change the [peg]. For 30 years, the [peg] has been tested through different financial crises and has been the cornerstone of Hong Kong's financial stability."
