Hong Kong linked to financial stability

Mr Tsang said that if the link was decoupled, it would attract large inflows of hot money. (Photo from: Hong Kong Government Information Department) November 30 the Hong Kong economic recovery is strong, the Financial Secretary, Mr John Tsang, raised the forecast of real economic growth for the whole year to 6.5% and raised the annual base inflation rate to 1.7%, with an average overall consumer price inflation of 2.5% per cent throughout the year. He stressed that in the face of the external economic environment, such as the introduction of a new round of quantitative easing in the United States led to the influx of hot money into emerging markets, leading to asset bubbles, inflation and other issues, Hong Kong should not be complacent, must be prepared.　　Mr Tsang reiterated that although the linked exchange rate was not autonomous, it was effective and there was no need and no intention to make any changes, and in the current external economic environment, higher interest rates or the exchange rate would increase the inflow of hot money. Mr Tsang yesterday attended a meeting of the Legislative Council panel on financial Affairs to brief us on the latest economic situation in Hong Kong and pointed out that Hong Kong had been able to overcome the crisis in the past through a number of economic crises, relying on the hard work of the people of Hong Kong and the spirit of solidarity with the government. In the past year, Hong Kong's economic "green shoots" are growing, but we still face many challenges, especially the external environment, which still has many hidden worries and uncertainties.　　He disclosed that the basic inflation rate in October was 2.3%, slightly above the average of 2% in the third quarter, but the inflation rate was milder than the strong economic growth in the third quarter of 6.8%, but the upward pressure on prices was gradually increasing and could be more pronounced next year.　　Economic momentum Mr Jeffrey Lam concerned that the depreciation of the Hong Kong dollar following the US dollar, the problem of inflation is likely to deteriorate further and many SMEs are reflecting the rising cost of raw materials, which has kept their operating costs rising, and he urges the Government to introduce appropriate measures to ease the inflation problem. Mr Tsang's response showed that the inflation rate had been modest this year, but the upward risk had increased, Hong Kong's position as an outward-looking economy was relatively passive, inflation was an international problem, and the Asian economies were generally faced with the view that the authorities would pay close attention to the impact of inflation on the low-income people,　　I hope members will provide more suggestions on how to fight inflation. In response to soaring food prices, he pointed out that the recent upward pressure on the renminbi, coupled with a faster increase in food prices in the mainland, and the mainland as a major supplier of food in Hong Kong, inevitably affected food prices in Hong Kong. However, according to the HKMA's tests, if the renminbi rose by 10% against the US dollar, it would increase Hong Kong's inflation by 0.5%, hence the direct impact of the revaluation on Hong Kong's inflation, and the regulation of food prices in the mainland is believed to help ease the problem. The Government's introduction of measures to combat the property market has also helped to curb rent increases.