Hong Kong Chief Executive Urges Economies to Map Out Exit Strategy

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November 16, 2009 - Hong Kong Chief Executive, Mr. Donald Tsang, urged economies to work together to map out exit strategy and to co-ordinate action to prevent future crisis at the Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting in Singapore on November 15.

Speaking on the second day of the meeting, the Chief Executive addressed the subject of sustaining growth from the historical perspective.

“Although history seldom repeats itself, but understanding history enables us to discuss common features of events and hidden risks. Our ability to understand these risks and overcome them may help us sustain global economic growth,” said Mr. Tsang.

Mr. Tsang noted that during the Asian financial crisis, the Yen carry trade was utilized to great effect by hedge funds and other speculators. A similar risk is emerging now, with zero or near zero interest rate policies, particularly with regard to the U.S. dollar, leading to rapid carry trades and leveraged capital flows.

Emphasizing that a deft exit from extraordinary measures was essential, Mr. Tsang said that this was not only a question of “how” but also “when” to exit. “There appears to be a penchant for late exit, given the uncertain economic outlook,” he added.

Noting that with extremely loose monetary conditions, a late exit could enhance the risk of asset bubbles, Mr. Tsang said a late exit is also tantamount to “punishing” the savers by offering them near-zero interest rate for their deposits, while “rewarding” non-viable firms.

On November 14, Mr. Tsang urged a strong show of leadership by Asia-Pacific Economic Cooperation (APEC) to secure the conclusion of the Doha Round in 2010. He said that Hong Kong strongly believed in the multilateral trading system and breaking down trade barriers was APEC’s mission.

The Chief Executive remarked that APEC could show that free trade worked and generated wealth. Hong Kong, China had been working with like-minded World Trade Organization (WTO) Members, including some APEC economies, to fight protectionism.

Mr. Tsang said that the WTO Ministerial meeting hosted by Hong Kong in 2005 delivered a reasonable declaration with a view to bringing the Doha Round to a satisfactory conclusion.

“Like many WTO Members, Hong Kong is frustrated by the lack of progress in Geneva over the past year," said Mr. Tsang.

“Few moments in modern history require revitalization of global trade more than now. Global trade has shrunk significantly over the past year. Concluding the Doha Round would be a good stimulus to drive economic recovery.

“Hong Kong supports drawing up a Free Trade Area of the Asia-Pacific (FTAAP). However, any FTAAP must reinforce the multilateral trading system, and complement APEC’s work to realize the Bogor Goals.”

Mr. Tsang remarked that Hong Kong, together with Singapore and Australia, had been leading efforts to boost connectivity through establishing a supply chain connectivity framework.

On November 14 morning, Mr. Tsang had breakfast with President Hu Jintao and updated him on Hong Kong’s latest development.

Mr. Tsang joined other Economic Leaders to meet APEC Business Advisory Council members to exchange views on ways to further the work of APEC on November 14 afternoon. In the evening, he and other leaders, donned in attires with Singapore’s Peranakan style, attended the official dinner hosted by the Prime Minister of Singapore, Mr. Lee Hsien Loong.

Following the APEC meeting, Mr. Tsang stayed in Singapore for a one-day official visit on November 16. In the morning, he officiated at the opening ceremony of Bank of East Asia’s New Branch Building. He also called on Singapore’s Senior Minister, Mr. Goh Chok Tong in the afternoon, and spoke at the Singapore Management University’s Ho Rih Hwa Leadership in Asia Public Lecture Series.