He must take a view on whether this would introduce an avenue for political interference in the work of the HKMA, in particular in monetary management. He must also take a view on whether this would undermine the effectiveness of the relationship between the Administration, in particular himself, and the HKMA. 28. Insofar as getting things done at the technical level is concerned, for example in achieving the broad policy objectives of monetary and banking stability, and the development of the financial infrastructure, the existing relationship between the Administration and the HKMA has worked well. The Hong Kong dollar exchange rate has remained very stable and the banking system robust, and Hong Kong now has one of the most sophisticated financial infrastructures in the world. BIS Review 87/1998  -7-  29. It is of course up to the Administration to consider whether, for political reasons, the unusual arrangements for the appointment of the Monetary Authority and the framework defining his accountability should be looked at. But it should be remembered that those unusual arrangements had the agreement of the Legislative Council as recently as late 1992 when it approved the required amendments to the Exchange Fund Ordinance. Admittedly, the details of the amendments then reflected expediency dictated by political considerations at the time. But the arrangements have worked well for Hong Kong. 30.
Our critics have told us that we should not have squeezed so hard on interest rates last October and that we should not have increased the cost of borrowing for business and for those who have to service their home mortgages. We should have introduced our measures to strengthen our monetary and financial systems earlier. We should not have departed from our free market policy and intervened in the stock and futures markets. That there was a lack of a “sense of crisis” in how we handled the situation. These are the more significant criticisms. 4. I can fully understand the sentiment behind these criticisms. The people of Hong Kong have been suffering the worst conditions we have had to face for many years. Even the most patient and understanding community will have grievances when the value of the assets they hold has been halved while they have to pay significantly higher interest costs for their liabilities. Furthermore, income has not been growing, and, for some, it has been shrinking. And, worse still, the probability that they may lose their jobs has doubled in the past year. 5. So, whatever the cause of this difficult situation, whether or not it arose from events outside the control of the authorities, it is considered, and rightly so, the responsibility of a caring government to do what it can to relieve these grievances. Refusal or reluctance to do so, even for very sound reasons in the larger long-term public interest, is not looked upon kindly.