Further interest rate pain has - naturally enough - focussed critical attention on one of the key policies pursued by the HKMA. It is worth putting things in perspective and looking at the layer functions that we provide for the community.
Last week I attended the symposium to mark the 200th anniversary of the Banque de France. The theme was independence and accountability of central banks, and the discussions, with panelists such as Wim Duisenberg and Alan Greenspan, were most thought-provoking. The insights offered by central bankers around the world provided me with a helpful perspective in reflecting on how Hong Kong is faring on this count.
The HKMA now has frequent discussions with those who are in day-to-day contact with the community, for example, Legislative Councillors and members of the press. In those discussions, we often ask for and obtain feedback on how the community sees the roles of the HKMA and the effectiveness with which those roles are being performed. This is to ensure that, in formulating our policies, and within the technical constraints that govern our operations, we take fully into account the interests of our community. It also helps us to monitor whether we have adequately discharged our duty of explaining clearly to the community, to which we are ultimately accountable, what it is that we do for them.
I am glad to note from such feedback that the HKMA is seen to be highly transparent and that there is widespread, albeit quiet, endorsement of what we do and how we do it. Our intensified drive to be open and forthcoming, and to reach out to the Hong Kong people, directly and through their elected representatives and through the media, seems to have been working. But we are also told that the HKMA is still seen to be aloof, engaging in rather technical and esoteric ventures that cannot readily be associated with the immediate interests of the community. Indeed, we are sometimes seen to be doing things that increase rather than relieve the burden of the community: for example, interest rates have been rising at a time when people feel they are already paying far too much of their incomes in mortgages. In our communication with the public, we obviously have to try even harder, and we will.
We do care about those facing an increasing burden in servicing their mortgages while their incomes continue to be frozen, particularly when some of them may additionally be sitting on negative equity. We do care about those having to borrow money rather than having excess money and being able to enjoy a higher interest return. Believe it or not, I am in that embarrassing position myself, with property being about the only thing in Hong Kong that I can invest in, so as to be clearly free of any conflict of interest. Personally, I want interest rates to be much lower. I want property prices to recover and possibly even climb at a sustainable rate so as to produce for me a stable rate of return on my "investments". But, much, much more, I also want the Hong Kong dollar in my pocket to have a stable value. I want the comfort of knowing that it can buy me essentially the same things tomorrow - and a year from now - as it can today. I do not want, to wake up in the morning to find that the Hong Kong dollar in my pocket can only buy 90%, or 80%, or 70% of what I could buy the day before. And if this comfort takes the form of a clear assurance from Government that HK$7.80 will always buy me what US$1 can buy, I will be content with paying the short-term price of having to service expensive mortgages with a frozen salary and to sit on negative equity. This is one of the things that the HKMA delivers for the community.
There are others. The HKMA tries its best to ensure that the banks to which people in Hong Kong entrust their money are prudently run. Anyone who has lived through the last half century will know that the peace of mind this provides is not something that can be taken for granted. It takes a great deal of effort to achieve, mostly among the banks but also, significantly, on the part of the HKMA. The HKMA works closely with the banks to deliver this.
We are also responsible for making money work for Hong Kong. For the community, as consumers or businessmen, this means the availability, the acceptance, the efficiency and the integrity of money as a medium for day-to-day transactions. The coins, the banknotes, the credit cards, the electronic payment mechanisms, the large value payment system between banks all have to function smoothly and safely, to facilitate the myriad economic activities that go on every day. They are an essential part of the sophisticated financial system of Hong Kong. They are in effect the plumbing of the financial system and the HKMA is the plumber. If the job is not done properly, there will be disruptions and inconvenience will be caused on the community. For example, we underestimated, very much to our regret, the extent to which the coins of the colonial days would become collectors' items, resulting in a shortage of coins during the handover years. But we have also built for Hong Kong one of the best interbank payment systems in the world. And we run one of the most efficient cheque-clearing systems in the world, in that cheques are cleared with the shortest of time lags.
We also manage Hong Kong's reserves that belong to the community, and our track record speaks for itself.
The HKMA works, and works hard, for the community.
Joseph Yam
8 June 2000
More information on our Policy Objectives can be found here.
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