Greenwood says Hong Kong yuan push will not undermine dollar peg
Economist John Greenwood, architect of Hong Kong's dollar peg, says the city's push for greater yuan usage will not undermine the local currency or its peg to the US dollar. He believes Hong Kong can facilitate yuan internationalisation through strong financial institutions and suggests narrowing th
Hong Kong's push for greater usage of the yuan will not undermine the local currency or its peg to the US dollar, according to John Greenwood, the economist widely regarded as the chief architect of the dollar peg.
The Chinese currency will not account for a large proportion of Hong Kong government expenditure, nor will it make up a significant share of overall transactions between the mainland and the city, Greenwood said in an interview with the media. He described the initiative as a gesture of willingness.
Greenwood said Hong Kong can facilitate yuan internationalisation through its strong financial institutions, vibrant markets and sound regulatory system. However, he noted the currency needs further development on the lending side, rather than relying on deposit growth.
While reiterating that the resilient peg system remains Hong Kong's best option, Greenwood said narrowing the trading band may increase the mechanism's stability. The local dollar is currently trading in the 7.75-7.85 band against the US dollar. He suggested the band could be narrowed to 7.79-7.81, but stressed this is purely for academic discussion.
Greenwood is a member of the Hong Kong Monetary Authority's currency board sub-committee, which monitors and reports on the currency board arrangements that underpin the peg system.