Mr Latter looks at the implications of e-commerce for the banking and monetary system in Hong Kong  Speech by Mr Tony Latter, Deputy Chief Executive of the Hong Kong Monetary Authority, at a conference on China and the New Millennium: WTO, Entrepreneurs and New Technology for Global Trade, held in Nansha, Guangdong Province, People’s Republic of China on 24 March 2000. *  *  *  The internet has quite suddenly multiplied by a remarkable degree the number of potential suppliers and customers with whom we can do business, and the number of avenues through which we can perform financial transactions. This opens up all sorts of opportunities, but it also attracts all sorts of warnings - about needing to know the identity of those with whom we are dealing; about needing somehow to satisfy ourselves, remotely, as to the quality of the products or services on offer; about needing to be sure of the financial standing of counterparties, be it their ability to pay or to provide credit which concerns us; and so on. Speaking as a central banker, I begin to have a specific interest in the development of e-commerce at the point where payment has to be made for the goods or services that are traded via the internet, or where people deposit money into internet accounts. But I also have a broader interest relating to the overall stablity and integrity of the financial system.
With regard to operational aspects of monetary policy in pursuit of the general macroeconomic objective of stability in the value of the currency, the advent of this new means of payment would, if it caught on to a significant extent, have some impact on the public’s allocation of money holdings as between physical currency, various forms of deposit and, now, electronic forms. This in turn might affect the monetary statistics and their interpretation. However, any changes would only occur gradually. Besides, nowadays there are scarcely any central banks which rely single-mindedly and exclusively upon measures of money supply to guide their monetary policy decisions. Therefore I do not believe that there is anything much to worry about on this front. Next, it has been suggested that internet banking in its various manifestations could introduce additional and unpredictable volatility into world financial markets by enabling millions of people to switch funds between investments or between currencies at the click of a mouse. In general I am sceptical about such worries. Global financial markets have already been exploiting the IT age with its 3  BIS Review 28/2000  immediacy of information and electronic dealing for some years. Capital is already hugely mobile in both scale and speed. I doubt whether the inclusion of new players at the retail level would have much of an additional impact.