Key Information

inSight
Speeches
Speeches by Speaker
Norman T.L. Chan
Peter Pang
Eddie Yue
Arthur Yuen
Zeti Akhtar Aziz
Raymond Li
Edmond Lau
Esmond Lee
Meena Datwani
Vincent W.S. Lee
James Lau
Joseph Yam
Y K Choi
William Ryback
David Carse
Tony Latter
Andrew Sheng
Hans Genberg
Simon Topping
Michael Taylor
The Honourable Donald Tsang
Chen Yuan
Dai Xianglong
Don Brash
Jaime Caruana
Andrew Crockett
Mario Draghi
David Eldon
Stanley Fischer
Timothy F. Geithner
Stephen Grenville
Kenneth G. Lay
William McDonough
Ernest Patrikis
Glenn Stevens
Jean-Claude Trichet
Tarisa Watanagase
Zeti Akhtar Aziz
Carmen Chu
Alan Au
Press Releases
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Press Releases by Category
Bogus Voice Message Phone Calls
Banking in Hong Kong
Fraudulent Websites, E-mails and Telephone System, and other fraud cases
Granting of Banking Licences
Exchange Fund
Table of Multiples of Notes and Payments for Allotted Amount under non-competitive tender
Table of Multiples of Notes and Payments of Application Amount under non-competitive tender
Tender of Exchange Fund Bills and Notes
Tender Results of Exchange Fund Bills and Notes
Tentative Issuance Schedule for Exchange Fund Bills and Notes
Appointments and Departures
HKMA Pay Review
HKMA Publications
Speeches
The Hong Kong Mortgage Corporation
Hong Kong Note Printing Limited
Hong Kong Institute for Monetary Research
Exchange Fund Investment Limited
Others
Hong Kong Financial Infrastructure
International Relations
Investment Products Related to Lehman Brothers
Monetary Policy
Notes and Coins
Renminbi business
Credit Card Lending Survey
Monetary Statistics
Residential Mortgage Survey
Year 2000
Others
Guidelines and Circulars
Guidelines
Circulars
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
515.5995

Press Releases

Record of Discussion of the Meeting of the Exchange Fund Advisory Committee Sub-Committee on Currency Board Operations held on 2 November 2001

(Approved for Issue by the Exchange Fund Advisory Committee on 29 November 2001)

Currency Board Operations for the Period 27 September - 19 October 2001

The Sub-Committee noted that, despite the unstable world situation, the Hong Kong dollar exchange and money markets had remained generally stable throughout the reporting period. Hong Kong dollar interbank interest rates had eased following the 50 bp cut in the US Fed Funds Target Rate on 2 October, and reflecting market expectations of further US rate cuts. They had stayed below their US dollar counterparts for most of the period, although towards the middle of October, they had risen slightly above US rates, following market reports and concerns that a change to Hong Kong's monetary system was being contemplated, and worries about the impact of the crisis in Argentina. Members noted that market sentiment on these issues had also been reflected in the Hong Kong dollar 12-month forward points, which had moved sharply higher in mid-October, registering a premium against the US dollar.

2. The Sub-Committee noted that, in accordance with Currency Board principles, changes in the monetary base continued to be fully matched by changes in foreign reserves.

3. The report on Currency Board operations for the period under review is at Annex A.

Monitoring of Risks and Vulnerabilities

4. The Sub-Committee noted the regular information paper on external and internal risks facing Hong Kong. Members noted that there was no evidence that the economic downturn in the US was moderating, moreover, the slowdown in economic activity in the euro zone was now clearer. The repricing of risks and the inevitable boost in insurance and security-related expenditure by both the public and private sectors were likely to have long-term macroeconomic effects. Members also noted the deteriorating situation in Japan. Against the backdrop of worsening economic conditions worldwide, Argentina's public debt problem had developed into a major financial crisis, the impact of which had created some slight volatility in the Hong Kong dollar 12-month forward market around the middle of October.

5. With regard to Hong Kong's economy, the Sub-Committee noted that the October consensus forecast for 2001 GDP growth had been revised downwards to slightly below zero, and that unemployment was increasing. They observed that this deterioration was a reflection of the world downturn, which was having a particularly severe impact on Asia, and was not the result of risks or vulnerabilities specific to Hong Kong.

Sources of Unemployment

6. The Sub-Committee noted an information paper on the main determinants of unemployment in Hong Kong with reference to the two components of the unemployment rate: the natural rate and the cyclical component. The analysis suggested that the natural unemployment rate had edged up from around 2-3% in the early 1990s to around 3-4% in more recent years, reflecting structural changes in the economy. This rate was still nevertheless low by international standards, and it suggested that Hong Kong's labour market had been highly flexible in adapting to changing conditions. The paper also observed that most of the variations in the unemployment rate in recent years were attributable to cyclical conditions.

Measures of Core Inflation in Hong Kong

7. The Sub-Committee noted an information paper examining different approaches to measuring core inflation in Hong Kong. The paper observed that in many economies alternative indicators to the "headline" statistic based on the overall Consumer Price Index were found to provide superior measures of underlying inflation. By contrast, the evidence suggested that in Hong Kong the headline inflation rate and various core inflation measures showed strikingly similar trends, and did not differ significantly in terms of volatility. Thus, the CCPI constituted a very good measure of inflation in Hong Kong.

Inflation Targeting in Asia

8. The Sub-Committee noted an information paper reporting on inflation targeting policies in various Asian economies.

Hong Kong's External Claims and Liabilities vis-a-vis Mainland China

9. The Sub-Committee noted an information paper on the considerable increase in 2000 in Hong Kong's banks' net external liabilities vis-a-vis the Mainland. The main contributory factors to this increase included fund-raising activities of H-share enterprises, surplus foreign currency liquidity in the Mainland's banking system, changes in the Mainland's foreign exchange policy, and foreign banks' cautious lending attitude towards the Mainland. Although still small as a proportion of total Hong Kong funding, the significant rise in Hong Kong dollar net liabilities vis-a-vis the Mainland accounted for nearly two thirds of the overall increase in Hong Kong dollar funding in Hong Kong's banking system. The increase may also have contributed to a softening of Hong Kong dollar interest rates.

 

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246

Hong Kong Monetary Authority
29 November 2001

Last revision date: 1 August 2011
ABOUT THE HKMA
The HKMA
Tender Invitations
Careers@HKMA
Legislative Council Issues
Links
The HKMA Information Centre
KEY FUNCTIONS
Monetary Stability
Banking Stability
International Financial Centre
Exchange Fund
PUBLICATIONS & RESEARCH
Annual Report
Half-Yearly Monetary & Financial Stability Report
Quarterly Bulletin
HKMA Background Briefs
Reference Materials
Research
MARKET DATA & STATISTICS
CMU Bond Price Bulletin
Economic & Financial Data for Hong Kong
Monthly Statistical Bulletin
Monetary Statistics
KEY INFORMATION
Press Releases
Speeches
Guidelines & Circulars
Forthcoming Events
inSight
OTHER INFORMATION
Information in Other Languages (Bahasa Indonesia, हिन्दी, नेपाली, ਪੰਜਾਬੀ, Tagalog, ไทย, اردو)
Account Opening
Consumer Corner
Consumer Education Programme
Complaints about Banks
Complaints about SVF Licensees
Internet Banking
Fraudulent Bank Websites, Phishing E-mails and Similar Scams
Be Careful of Bogus Phone Calls and SMS Messages
Authenticate the Callers and Bank Hotline Numbers
Register of AIs & LROs
Register of Securities Staff of AIs
Register of SVF Licensees
Investment Products Related to Lehman Brothers
Photo Gallery