There was an attack on the HK $ last fall. That was the immediate precipitator of the one day 700+ drop of the Dow-Jones Index, largest ever in absolute terms, but not in relative terms. The defense came through massive interest rate hikes that were tanking the Hang Seng (actually it was the latter that hurt global stock markets, FTSie got kicked too, if I remember, as did Nikkei, DAX, and the rest). Those were carried out largely on orders of the PRC authorities and they also tanked real estate prices (that is of the land lease prices). Barkley Rosser On Fri, 31 Jul 1998 07:18:55 +0100 Chris Burford <cburford at gn.apc.org> wrote:
> 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
-- Rosser Jr, John Barkley rosserjb at jmu.edu