Strong US dollar vowed
BARRY PORTER in Langkawi
United States Treasury Secretary-designate
Lawrence Summers has reassured financial
markets the centrepiece of US economic policy
- a strong dollar - will remain when he takes
over the reins from Robert Rubin in July.
"As Secretary Rubin and I have both said
many times, a strong dollar is very much in
America's national interest," he said.
Financial Secretary Donald Tsang Yam-kuen
yesterday welcomed the news, even though a
weaker US dollar would help restore the SAR's
lost competitiveness because of the Hong Kong
dollar peg.
"I think it is good news. I want to see a stable
US dollar," Mr Tsang said.
There had been concerns Mr Summers, now
deputy treasury secretary, may not turn out to
be as vocal a proponent of a strong US dollar
as his boss.
In his previous career as an academic, Mr
Summers published a number of articles and
books favouring the idea of trying to talk the
dollar's value down to help reduce trade
deficits, particularly those with Japan.
But Mr Summers, nominated for the top
treasury job by US President Bill Clinton last
week, yesterday insisted those were no longer
his views.
"Mr Rubin and I have seen in the same way
for many years," said Mr Summers, standing in
for Mr Rubin at a summit of Asia-Pacific
Economic Co-operation forum finance
ministers on the Malaysian resort island of
Langkawi.
"We believe that a strong dollar is very much
in America's national interests," he said.
"The dollar cannot and should not be a tool of
trade policy. Experience suggests that nations
cannot devalue to gain prosperity."
The strong dollar policy advocated by Mr
Rubin has widely been seen as a key factor in
the recent strong performance of the US
economy, by helping to keep inflation and
interest rates down.
A weaker dollar makes US exports cheaper
abroad while raising the price of imports,
which risks fuelling inflation.
Conversely, a stronger dollar makes it cheaper
for US companies and consumers to buy
foreign goods. That keeps import prices down
but has contributed to a ballooning US trade
deficit with the rest of the world, particularly in
recent years.
Japan's Vice-Finance Minister for International
Affairs Eisuke Sakakibara said Tokyo would
also be seeking to maintain its yen-dollar policy
through the transition.
"Just because the person is changing, you
cannot change the policy," Mr Sakakibara said.
Tokyo has recently favoured exchange-rate
stability above all else, believing excessive yen
strength to be undesirable at this stage for a
Japanese economic recovery.
The US dollar's continuing strength means the
Hong Kong dollar will also remain expensive
compared with many of its trading partners,
but Mr Tsang yesterday stressed the SAR's
other achievements towards regaining lost
competitiveness.
"Now wages have gone soft, rental values have
come right down and the cost of capital has
been moderating. You have to look at how
quickly the Hong Kong economy has been
adjusting," he said.
Mr Tsang also expressed hope that Mr
Summers' appointment would not impact on
the mainland's expected early entry into the
World Trade Organisation.