Hong Kong's secret strength

Chris Burford cburford at gn.apc.org
Thu Jul 30 23:18:55 PDT 1998

At 02:56 PM 7/30/98 -0500, Barkley wrote:

> Actually this is not on the land arrangements in HK
>but on its non-devaluation. It is clear that a, if not
>the, major reason HK did not devalue is that the PRC did
>not want them to. The two economies are deeply linked
>financially in many ways and an HK devaluation would have
>put tremendous pressure on the PRC to do so. But,
>listening closely to Uncle Larry Summers, the PRC had
>decided not to and ordered HK to hold the line. The real
>question then becomes how the PRC will pay off the real
>estate holders in HK who took a hit from the high interest
>rates needed to defend the HK $.
>Barkley Rosser

The PRC of course would not have wanted the Hong Kong Dollar to devalue, and presumably has more than one committee monitoring this issue daily. But currency raiders and ordinary foreign exchange managers for the big corporations must have tested the water repeatedly in the last year to see whether an attack on the Hong Kong Dollar would work.

Do we know that a really serious attack was held at bay only by massive intervention from Beijing? That would indeed have been newsworthy, and would have greatly weakened the position of the Chinese currency in turn. That is not generally known to have occurred. Do you have evidence of hitherto unpublicised massive support by Beijing for the Hong Kong Dollar?

If not, my general thesis to which you are resistant, remains that a combination of factors, including the currency board system and the public ownership land, gave this city state reason for greater business confidence at a time of considerable adversity, than say, Japan.

Chris Burford


More information about the lbo-talk mailing list