Last weekend I spent some quiet time unpacking old stuff at my new home. As I read the piles of newspaper cuttings accumulated over the years, nostalgia overwhelmed me. Let me here recall and share with you the events of one weekend back in 1983. This was when the exchange rate for the Hong Kong dollar against the US dollar hit 9.60 on the Saturday morning of 24 September 1983. The Hong Kong dollar was then free floating, but in the absence of a monetary anchor the exchange rate had been depreciating rapidly as confidence waned under the influence of uncertainty over the future of Hong Kong. Taking account also of trading on the previous day, the exchange rate had depreciated by a total of about 15 percent. Queues had appeared at supermarkets buying up rice and toilet paper and every other consumer good in sight. So much for my words of assurance that everything was all right on a one-hour RTHK programme just the previous evening!
At that time I was Principal Assistant Secretary for Monetary Affairs. I worked to Tony Latter, then Deputy Secretary for Monetary Affairs – the same Tony Latter who, at the beginning of this year, returned to Hong Kong as Deputy Chief Executive of the HKMA. Tony had, in July 1983, written a long paper on monetary policy in Hong Kong, which included the option of returning to a fixed exchange rate system through requiring Hong Kong dollar banknotes to be issued and redeemed against the US dollar. Late in the morning of 24 September he had a long discussion with Douglas Blye, then Secretary for Monetary Affairs, who agreed that the proposal needed to be appraised thoroughly and urgently at the highest level. I was not involved in that discussion, since I was busy preparing the necessary papers for taking over a locally incorporated bank which had been finding it increasingly difficult to meet its obligations.
I was later told that a meeting was to be arranged for the following morning, a Sunday, with top representatives from the two note issuing banks, the HongkongBank and the Chartered Bank (as it was then called). I helped organise that meeting, in between taking telephone calls from my family members and relatives, rudely yelling at them that there was no need to join the queues at supermarkets, and familiarising myself with the procedures for calling a Legislative Council sitting to take all three readings of a draft Bill to acquire the ailing bank. The purpose of the Sunday meeting was to examine Tony's proposal. But we already knew that some kind of announcement would have to be made before the opening of the markets on Monday if the depreciation was not to create problems on other fronts.
On the morning of Sunday 25 September 1983, a few tired bodies assembled in the conference room of the Monetary Affairs Branch, then located on the western side of the 24th floor of Admiralty Centre Tower II. There were clearly no alternatives to a return to a fixed exchange rate system. But there were also doubts about whether the plan would work in practice so elegantly as it appeared to on paper. We thought it would be prudent, before making any announcement, to seek a second opinion from someone who had developed a similar proposal and had given us sight of a paper ahead of its publication in the Asian Monetary Monitor. John Greenwood was therefore asked at short notice to have lunch at our office and give us a presentation on his idea.
Lunch came late, because my poor, overworked secretary, who was responsible for arranging it, passed out in the lift from exhaustion and remained there undiscovered for half an hour. We managed to rescue the secretary - and the sandwiches and soft drinks - but I kept this from everyone until afterwards, in order not to distract the proceedings of the meeting. This was probably my only contribution to the smooth running of this important meeting. After John's presentation we had further discussions privately in the late afternoon and decided to go ahead with the plan. So later that Sunday afternoon a press release was issued to the effect that arrangements were being worked out to implement a scheme that would bring stability to the exchange rate.
The exchange rate did indeed stabilise on the Monday (26 September 1983) on this piece of rather cryptic news. The Government took over the Hang Lung Bank on Tuesday 27 September 1983 through legislation passed after the necessary three readings in one Legislative Council sitting specially convened for the purpose. And after another three weeks of intensive logistical planning, and obtaining further advice and the necessary approvals, the details of the linked exchange rate system were made public on Saturday 15 October 1983 by Sir John Bremridge, the Financial Secretary, for implementation on Monday 17 October 1983. Present with Sir John at the press conference were Douglas Blye, Alan McLean (Government Economist) and myself. After all the hard work on the link, Tony Latter had the even tougher job that morning of receiving his second baby girl, Eleanor, to this world.
Joseph Yam
4 November 1999
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