THE Hong Kong Monetary Authority has attacked a prominent monetarist's
forecast that the local currency peg with the United States dollar
will not last until the turn of the century.
Authority spokeswoman Julia Leung said she was "surprised" by the
outburst from Milton Friedman in the latest issue of the Far Eastern
Dr Friedman, 83, predicted the demise of the Hong Kong dollar within
two years of the 1997 handover. He also predicted the absorption of
the territory's financial reserves by Beijing.
He said that Beijing coveted the US$43 billion (HK$335.4 billion) held
in the authority's foreign reserves and would not be able to stomach
the US running Hong Kong monetary policy.
Ms Leung said: "I think both the Basic Law and the Sino-British Joint
Declaration have clearly stated that Hong Kong will be free to decide
its own monetary policy and mechanism in the post-1997 period."
The monetary system is protected by the law, she said.
"And therefore, I think what Mr Friedman has said is almost
anti-constitutional," she said.
Asked whether the market would be overshadowed by such statements, Ms
Leung said that the best answer was from the market itself.
Both three-year and five-year exchange fund bonds issued by the
authority, which expire after the 1997 takeover, have received
overwhelming response from investors, she said.