The conception of the HKMA

Eleven years ago this month the seed for the establishment of a Monetary Authority in Hong Kong was successfully planted at a historic meeting in the New Territories.

The stock of draft viewpoint articles was running a little low last week. So on Friday morning, 3 December, noting that my diary was unusually clear, I spent some time looking at old files to see if there was anything worth writing about. I noticed that, by sheer coincidence, a rather historic meeting, insofar as the Hong Kong Monetary Authority was concerned, was held on precisely that day in 1988.

The meeting on Saturday 3 December 1988 was held at the Fanling Lodge of the then Governor Sir David Wilson, now Lord Wilson. It was one of those glorious early winter days in Hong Kong, with temperatures in the high teens under the generous embrace of the sun. The air was clean and there was a gentle breeze, occasionally ruffling the many tall trees surrounding and protecting the Lodge and helping them to shed more of their old leaves. It was a perfect day to spend in the Lodge, although I much preferred to be outside instead, beyond the tall trees and the inconspicuous iron fence, at the far end of the Lodge, hitting a hole-in-one on the short par-3, thirteenth hole of the New Course at the then "Royal" Hong Kong Golf Club.

The choice of this very pleasant venue, albeit for a weekend meeting, was, however, to facilitate the convenient attendance by a few from up north. Consultation with Beijing was necessary on proposals that had significant implications for Hong Kong after the Handover. I had the privilege to receive our friendly visitors at the border and took them on the shortest helicopter flight I have ever had, from Lo Wu to Fanling. I had the further privilege of a magnificent aerial view of the vicinity and noticed the sharp contrast between urban Shenzhen and the rural New Territories, which made me confused about which side was Hong Kong and which side the Mainland. When I saw our visitors off after the meeting I was invited to cross the Lo Wu Bridge on foot to the Mainland side for a momentary visit without any identification. That was my first visit to the Mainland - strictly speaking an illegal one - as an adult.

At the meeting were three of us from the Hong Kong Administration: the then Financial Secretary, Sir Piers Jacobs, and Secretary for Monetary Affairs, David Nendick - both sadly have since passed away - and myself. A paper, among others, entitled "The Concept of a Monetary Authority for Hong Kong" was discussed. This was the first occasion the concept had been formally put on the table for serious consideration by those concerned. Although there was no clear consensus arrived at on the subject at that meeting, with everyone, including myself, being very cautious about such an important issue, the seed for the establishment of a Monetary Authority was successfully planted. Here I must express my admiration for the foresight and dexterity of Sir Piers. He possessed these rare qualities, which regrettably were not widely recognised and appreciated.

It took exactly four years for the idea to germinate, after very full discussions. Exactly seven years ago, on Wednesday 9 December 1992, the Exchange Fund (Amendment) Bill received its second and third readings in one sitting of the Legislative Council without debate. The Amendment Ordinance gave authority to the Financial Secretary, as controller of the Exchange Fund, to appoint a Monetary Authority. Eleven years on from that memorable day in Fanling, the Hong Kong Monetary Authority, I hope readers will agree, is now performing a pivotal role in the monetary and financial systems of Hong Kong.

Joseph Yam
9 December 1999

More information on the establishment of the HKMA can be found here.

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