Monetary and financial co-operation between the Mainland and Hong Kong

An important part of "one country, two systems".

About twenty years ago I made my first duty visit to Beijing at the invitation of Mr Chen Yuan, the then Deputy Governor of the People's Bank of China who is now the Chairman of China Development Bank. Embarrassingly my Putonghua at that time was so bad that I had to bring an interpreter, and that was when I decided to seriously learn Putonghua. But the significance of that trip, to me at least, was not about learning the language: it symbolised the start of a strong, professional relationship between the Mainland and Hong Kong on monetary and financial affairs and, more specifically, an excellent working relationship between the monetary authorities of the two jurisdictions.

While this may now seem a natural thing to say, at that time when Hong Kong was still a British Colony going through a political transition, such contacts were, to put it mildly, unusual. The presence of Chen Yuan in Hong Kong in June to launch the renminbi bond issue and open a branch of China Development Bank brought back vivid memories of the ground-breaking initiative that started two decades ago. I was struck by his sincerity towards working with the monetary authorities in Hong Kong (the HKMA had not yet been established) to ensure monetary and financial stability over a very sensitive period of political transition leading up to 1997 and beyond. Obviously, any breakdown of confidence in the future of Hong Kong would have been manifested in destabilising volatility in the financial markets that could have systemic implications, undermining the stability and prosperity of Hong Kong. There was clearly a need to take pre-emptive moves to strengthen the monetary and financial systems of Hong Kong.

This sincerity was in fact evident in both the Mainland and the British sides, although it was often clouded by political overtones. Readers may recall that there were accusations of interference by the Mainland side in the affairs of Hong Kong before 1997 and suspicions that the British might hock the place before they left. These were delivered mostly at the political level but sometimes affected discussions at the professional level. This could be frustrating for those of us who had Hong Kong's interests strongly at heart but sometimes felt caught in the middle. I can remember being labelled both a colonialist and a defector, to which I am afraid I sometimes reacted with a bad temper. But the reward for the work was an invaluable sense of confidence that one was doing something important. It was not a calculated risk that I took, but something I thought was the right thing to do. So all’s well that ends well, and a decade of close and effective Sino-British co-operation on Hong Kong's monetary and financial affairs, and strategic moves to reform the monetary and financial systems ahead of 1997 ensued.

I hope to have opportunities to write more about my impressions on the important and interesting events and developments in the monetary and financial affairs of Hong Kong after my retirement, before my memory fails me. To have been involved so closely and to have had the opportunity to contribute was a privilege I consider unmatched by any other duties during my years of public service on monetary and financial affairs in Hong Kong.

As I listened to Chen Yuan's speech during the branch-opening ceremony, I could not help recalling the road shows that we did together before 1997 in Europe, America and other places, with the help of our colleagues in the central-banking community, to talk about how "one country, two systems" would work after 1997 on the monetary and financial front. What we predicted then has indeed come to pass.

Joseph Yam
27 August 2009

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