HKMA Chief Warns Over Asian Stability

by Mary Swire, Tax-News.com, Hong Kong

24 May 2002

On Tuesday, Hong Kong's quasi-central bank, the Hong Kong Monetary Authority (HKMA) held its Fifth Distinguished Lecture under the title:
"The Asian Crisis: Lessons for the Future", with Stanley Fischer, ex-managing director of the IMF, as key speaker.

Introducing Mr Fischer, Joseph Yam Chi-kwong, Chief Executive of the HKMA, recalled how many had been prepared to write off the SAR during the Asian crisis just a few years back, but warned that the risks of another Asian crisis are increasing and urged countries in the region to co-operate more to monitor the risks of international capital flows.

"Five years on, very limited progress has been made in resolving one of the fundamental problems that helped make the crisis so devastating for so many economies: a deficient global financial architecture," he said. Mr Yam said many countries in the region had carried out reforms after the crisis, but it was not enough to dismiss the risks of another crisis: "Much still remains to be done, and as capital flows get bigger, the risk of further crisis remains," he said.

Dr Fischer, now Vice Chairman of Citigroup, complimented the HKMA on its "decisiveness, analytic clarity, and courage in the years since the inauguration of the linked exchange rate system in 1983, and especially in its actions during the Asian crisis in 1997 and 1998".

He warned that in many countries in the region, but not Hong Kong (which has fiscal reserves), debt ratios are high by international standards, largely a result of the financial crises of 1997-98, and said that banking system problems in several countries are far from resolved.

Dr Fischer said that the region would have problems in copying the EU's apparently successful monetary union, which he said had been possible only because of the powerful political impulse to create, after two devastating world wars, a Europe that would never again engage in internecine warfare. "That political impulse is not yet evident in Asia," he went on, "where relationships among three potentially very large economies - Japan, China, and India - are in a state of flux. Without that political impulse, regional integration in Asia is in practice likely to proceed slowly."

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