Of course, it is not so for any economy, and is still less so for Hong Kong, which is going through structural transformation. The nominal exchange rate is relevant, but more relevant is the real effective exchange rate (REER), which also takes into account the inflation rate and the trade patterns. The REER for the Hong Kong dollar has depreciated by around 13% since the crisis period in 1998. During the same period, the REERs for other Asian currencies have appreciated by various degrees, reflecting both a rebound in nominal exchange rates as well as higher domestic inflation. Hong Kong's competitiveness can also be measured by our economic achievement in terms of real GDP growth over the past few years. Here again the figures show that Hong Kong, with an annual average of around 3% growth in GDP between 1997 and 2000, has not performed badly compared with other economies in the region. And remember, these other economies have had their currencies devalued substantially. The sharp deceleration in growth this year is due mainly to the slowdown in the major industrial economies outside the region, not because of our competitive position, and certainly not because of the strength of our currency. All of us within the region are affected to one degree or another, and some, such as Singapore, Taiwan and Korea, have been badly affected because of their strong dependence on exports of electronics and computer parts. Hong Kong has done rather less badly so far, though we are still slowing down.
Joseph Yam: Building stability in unstable times Speech by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong Institute of Bankers Lunch Talk, Hong Kong, 24 October 2001. *  *  *  Thank you for inviting me to speak today. It is a pleasure to see such an excellent attendance - a sure sign of the vitality of the Institute and the relevance of its work to the banking community. It is less of a pleasure to be speaking at a time when the international situation is a grave and unstable one, when our own economy is under immense strain, and when conditions are likely to get worse before they get better. What is the role of our financial community in times like this? And, more specifically, what should the regulator be doing to ensure that monetary and financial systems are conducive to stability and are an aid to recovery? The answers, I believe, are to safeguard the strength of our banking system, to ensure that our financial infrastructure remains sound, even under stress, and to maintain steady policies that are conducive to stable, robust and efficient markets. I shall, in this talk, give some examples of how, thanks to the hard work that has been put in over the years, Hong Kong is well equipped to deliver on these aims. The examples may provide reassurance.