London Daily

Focus on the big picture.
Wednesday, Jul 30, 2025

Currency peg vital for Hong Kong’s status as global finance centre even as US dollar declines, says former monetary authority chief Joseph Yam

Yam, who helped set up the peg in 1983, still believes it is in the best interests of Hong Kong because it gives confidence to international investors. US unlikely to ‘weaponise’ the peg or capital markets as it would hurt itself in the process, says Yam

Hong Kong should hang on to its 37-year-old currency peg to the US dollar because a link to the world’s most used currency is the best option to maintain its role as an international financial centre, said the city’s longest-serving monetary authority chief.

Joseph Yam Chi-kwong, who helped set up the peg in 1983, still believes fixing the Hong Kong dollar to the greenback at 7.8 is in the best interests of Hong Kong because it gives confidence to international investors to come here to do business.

It marked the second time in a week that Yam – now an executive council member – has spoken out to shore up confidence in the peg and in Hong Kong as a reputable global finance hub. He gave a video interview on Monday, released by the Hong Kong Monetary Authority he headed between 1993 and 2009, on the same subject.



Over the years, critics have periodically called for the Hong Kong dollar to be decoupled from US monetary policy. Those calls have escalated recently amid a spike in US-China political tensions and fears that Washington may introduce measures of its own that would break the peg.

On Wednesday, Yam gave an hour-long speech and media interview via a Zoom conference arranged by the Our Hong Kong Foundation, a think tank established in 2014 by former Chief Executive Tung Chee-hwa.

“Tying the local dollar with the most important currency in the world is the most appropriate monetary policy for Hong Kong,” he said, rejecting the idea that the peg should be modified to link with a basket of currencies or the yuan.

Yam’s supportive voice comes after the recent decline of the US dollar and a sharp rise in the gold price led the US investment bank Goldman Sachs to warn on Tuesday that the US dollar’s reign as the world’s reserve currency is coming under threat.

The Hong Kong dollar strengthened to 7.7505 on Wednesday afternoon, putting it right at the strong end of the permitted trading band beyond which the HKMA steps in to intervene. This year, the HKMA has intervened 29 times and sold a total of HK$106.3 billion Hong Kong dollars to weaken the currency after hot money flooded in as investors chased mega IPOs.

The exchange rate is allowed to move within a trading band of 7.7500 to 7.8500. When it breaches either the upper or lower limit, the city’s de facto central bank, the HKMA, is mandated to either buy or sell the local currency to bring the exchange rate back within the band.

The Hong Kong dollar peg system is credited with sustaining Hong Kong’s economy during a number of major economic disasters including the Asian financial crisis and the severe acute respiratory syndrome epidemic in 2003. It remained intact even when the city was returned from British to Chinese rule in 1997.

While Yam agreed the US dollar and investment markets might be at risk of sharp declines, he insisted it would not affect the peg because it has happened in the past, and the system still worked smoothly.

He is also not worried about the US imposing sanctions that would damage the peg or the city’s capital markets. Washington has threatened to impose a penalty on Hong Kong and China in response to Beijing's enactment of the national security law last month, a move widely condemned as undermining the city’s autonomy.

Yam considers the new law essential to restore social order after months of damaging anti-government protests, and thereby protect Hong Kong’s image as an international financial centre.

While Hong Kong does not need Washington’s approval, the peg cannot work if the US cuts off the city’s government and financial firms from trading the US dollar. That, however, is viewed as a last resort that could trigger global financial turmoil, because Hong Kong is the third-largest US dollar trading centre worldwide, behind only the US and the UK.

“I hope clever politicians like Trump and Pompeo would not opt for the nuclear option,” Yam said.

Given the sheer size of the US financial system and dominance of the dollar, Yam said the US “has a powerful arsenal at its disposal”, but “deploying the powerful arsenal could well end up hurting itself badly.”

He therefore believes the possibility of the “weaponisation” of the financial system is low, with the US sanctions likely only to focus on certain individuals and firms.

The currency peg and the resilience of the city’s capital market is an anchor helping Hong Kong to weather its worst economic recession in decades. The city’s financial coffers comprise one of the world’s largest currency reserves, at US$445.9 billion as of the end of June.

The local government has handed out HK$300 billion (US$38.7 billion), or 10 per cent of economic output, to support an economy hammered by the Covid-19 pandemic and help residents survive the slump.

Yam described the rescue package as “entirely appropriate and affordable” but said there is room for more, when the figure is compared with the aid provided by some other regional governments – Singapore spent 20 per cent of gross domestic product on handouts, Thailand spent 13 per cent and Malaysia handed out 19 per cent.

“Hong Kong has zero debt,” he said, while its accumulated fiscal reserves amount to about HK$1.2 trillion (US$154.83 billion), he pointed out.

“The running of a large but temporary budget deficit would not erode the fiscal discipline in Hong Kong that has underpinned its status as an international financial centre.”

For Hong Kong to move forward after the pandemic, he said the Greater Bay Area project would be the key. Beijing unveiled the blueprint in February last year for the ambitious plan to integrate Hong Kong, Macau and nine Guangdong cities into an economic powerhouse.

To make it successful, Yam said it needs to encourage more capital flow. He suggests allowing Hong Kong banks to accept deposits and lend money in the Greater Bay Area’s mainland cities, and vice versa, while Beijing ring-fences the capital flow within the region to avoid the risks spreading to other parts of the country.

Newsletter

Related Articles

0:00
0:00
Close
Former Judge Charged After Drunk Driving Crash Kills Comedian in Brazil
Jeff Bezos hasn’t paid a dollar in taxes for decades. He makes billions and pays $0 in taxes, LEGALLY
China Increases Use of Exit Bans Amid Rising U.S. Tensions
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Procter & Gamble to Raise U.S. Prices to Offset One‑Billion‑Dollar Tariff Cost
House Republicans Move to Defund OECD Over Global Tax Dispute
Botswana Seeks Controlling Stake in De Beers as Anglo American Prepares Exit
Trump Administration Proposes Repeal of Obama‑Era Endangerment Finding, Dismantling Regulatory Basis for CO₂ Emissions Limits
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
A family has been arrested in the UK for displaying the British flag
Mel Gibson refuses to work with Robert De Niro, saying, "Keep that woke clown away from me."
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
The British propaganda channel BBC News lies again.
Deputy attorney general's second day of meeting with Ghislaine Maxwell has concluded
Controversial March in Switzerland Features Men Dressed in Nazi Uniforms
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
Thai Civilian Death Toll Rises to 12 in Cambodian Cross-Border Attacks
TSUNAMI: Trump Just Crossed the Rubicon—And There’s No Turning Back
Over 120 Criminal Cases Dismissed in Boston Amid Public Defender Shortage
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
Trump Announces $550 Billion Japanese Investment and New Trade Agreements with Indonesia and the Philippines
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
×