HK benefits from rising yuan
(Shanghai Daily)Updated: 2006-11-30 16:43
Tao noted that Hong Kong's basic law, which stipulates the exchange-rate regime, cannot be changed overnight to revalue the currency, and there is no political incentive to push for such move.
Abandoning the dollar peg would also have limited effects on trade as Hong Kong produces few manufactured goods, the report said.
"Given its city economy status, with a heavy weighting in the finance and property sectors, monetary stability is paramount," Tao said. "Hong Kong's strong link with Chinese mainland is through its geological and cultural ties, not based on costs."
Credit Suisse expects the yuan to trade at the parity level with the Hong Kong dollar by year end and to rise between 5 percent and 8 percent against the greenback in 2007.
Stephen Green, a senior economist at Standard Chartered Bank, shared the view with Tao.
"The Hong Kong dollar is very well served by its peg to the U.S. dollar," said Green, "Maybe after five or 10 years when the two economies are more similar, the authorities will have good reasons to rethink the Hong Kong dollar peg, but until then, no change."
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