HKMA Annual Report 2003

The Hong Kong Monetary Authority (HKMA) today (Monday) published its Annual Report for 2003. The Report reviews recent trends and events in monetary and banking affairs and reports on the HKMA's work during the year. It also sets out plans for the coming year.

In his statement on the Annual Report, Mr Joseph Yam, Chief Executive of the HKMA, said that after six years of difficulty and uncertainty, Hong Kong's economy had experienced a strong rebound in the second half of 2003. The rebound was helped by a more benign global environment and was boosted by measures to strengthen economic ties between Hong Kong and the Mainland China. The economic impact of SARS (severe acute respiratory syndrome) had been short-lived, and some important sectors of the economy, such as merchandise trade, were hardly affected at all.

"During this eventful and turbulent year the HKMA achieved its objectives of maintaining currency stability, promoting the safety and stability of the banking system, and enhancing the efficiency, integrity and development of the financial system," said Mr Yam.

Mr Yam noted that, despite the difficult second quarter and considerable volatility in the world's main currencies, the Hong Kong dollar continued to be stable under the Linked Exchange Rate system in 2003.

Hong Kong's banking system remained stable and effective while the banking sector as a whole managed to show an increase in profits for the year, thanks to the markedly improved economic conditions in the second half of the year and to their own efforts to diversify business, he added.

The Annual Report contains the audited Exchange Fund accounts for 2003. Hong Kong's Exchange Fund, which is managed by the HKMA, produced an investment return of 10.2%. This was 70 basis points above the return on the benchmark set by the Financial Secretary on the advice of the Exchange Fund Advisory Committee.

With regard to infrastructural and market development, Mr Yam noted that in April 2003 the HKMA had launched a euro clearing system, and in November, following approval from the State Council, the People's Bank of China had agreed to provide clearing arrangements for personal renminbi business in Hong Kong. Other developments in 2003 included the introduction in June of cheque imaging and truncation, which greatly reduces the need for physically delivering cheques for clearance, and the launch of new $100 and $500 banknotes, with improved security features.

In June 2003 the joint IMF-World Bank mission under the Financial Sector Assessment Programme delivered its comprehensive report on Hong Kong. One of the recommendations was that the legal foundation of the HKMA should be clarified and the operational autonomy of the HKMA for the implementation of monetary policy should be explicitly recognised in a formal document.

"On 25 June the Financial Secretary and I, as Monetary Authority, exchanged a series of letters setting out the division between the two of us of functions and responsibilities in monetary and financial affairs," said Mr Yam.

The HKMA Annual Report 2003 may be purchased in hard copy at the HKMA Information Centre or by post at HK$100 per copy. A mail order form for the purchase of the Report can be found on the HKMA's website. The Report is also available in interactive form on the HKMA's website http://www.info.gov.hk/hkma/ar2003/english/index.htm. Accompanying the Annual Report is a separate publication, An Introduction to the Hong Kong Monetary Authority, which contains the summary version of the Annual Report: this booklet is available free of charge at the HKMA Information Centre.

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 28788246
Thomas Chan, Senior Manager (Press), at 28781480

Hong Kong Monetary Authority
26 April 2004