No Change To Currency Peg

Hong Kong has no intention to change the Linked Exchange Rate System which is backed by solid foreign exchange reserves and a sound banking system, Financial Secretary Paul Chan said today.

Meeting the media after briefing legislators on Hong Kong’s latest economic situation, Mr Chan said the city’s banking system has ample liquidity and the sector is healthy and strong.

“We are very confident that we will be able to defend our linked exchange rate. The Linked Exchange Rate System will be there. We have no intention to change it. We have about US$440 billion in our foreign exchange reserves which is more than twice our monetary base.”

He also said US actions announced last week in light of the national security legislation in Hong Kong would have a limited impact on the city.

“What has already (been) mentioned by President Donald Trump is more about goods manufacturing in Hong Kong exporting to the US, subject to possible additional tariffs.

“On that, the impact on Hong Kong would be pretty limited because manufacturing only accounts for 1% of our GDP and goods manufactured in Hong Kong exported to the US last year was only in the order of about $3.7 billion, so, very small. It only accounts for 0.1% of our total exports.”

Mr Chan added the Government will not speculate on whether there could be additional measures imposed by the US.

“On the one hand we (should) get ourselves prepared, we do the scenario analysis and the possible response planned by the Hong Kong SAR Government. On the other hand, we do not need to overreact to such possibilities.”