Chief Executive urges economies to map out exit strategy

Hong Kong Chief Executive Donald Tsang (far right) attends the second day of the Retreat Session of the Asia-Pacific Economic Cooperation (APEC) Economic Leaders' Meeting in Singapore on November 15.

At the Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting in Singapore on November 15, Hong Kong Chief Executive Donald Tsang urged regional economies to map out an exit strategy and to coordinate action to prevent future financial crises.

Speaking on the second day of the meeting, Mr. Tsang discussed sustaining growth from a historical perspective.  

“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.

The Chief Executive noted that during the Asian financial crisis of 1997, 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 is essential, Mr. Tsang said this is 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.

Mr. Tsang (first row, second from right), attends the announcement of the Leaders' Declaration after attending the APEC meeting.

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” savers by offering them a near-zero interest rate for their deposits, while “rewarding” non-viable firms.

The previous day, Mr. Tsang urged a strong show of leadership by APEC to secure the conclusion of the Doha Round in 2010.  He said Hong Kong strongly believes in the multilateral trading system, and breaking down trade barriers is APEC’s mission.

The Chief Executive remarked that APEC could show free trade works and generates wealth. Hong Kong has been working with like-minded World Trade Organization (WTO) members, including some APEC economies, to fight protectionism.

“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.

Mr. Tsang answers an attendee’s question November 16 at Singapore Management University’s Ho Rih Hwa Leadership in Asia Public Lecture Series. On his left is Ho Kwon Ping, university chairman.

“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, have been leading efforts to boost connectivity through establishing a supply-chain connectivity framework.

On November 14, Mr. Tsang met with Chinese President Hu Jintao and updated him on Hong Kong’s latest developments. Mr. Tsang also joined other economic leaders in a meeting with APEC Business Advisory Council members to discuss ways to further APEC’s work. That evening, he and other leaders donned Singapore’s Peranakan-style attire and attended the official dinner, hosted by Singapore Prime Minister Lee Hsien Loong.

Mr. Tsang remained in Singapore for one day after the APEC meeting. He officiated at the opening ceremony of Bank of East Asia’s new branch building and also called on Singapore’s Senior Minister Goh Chok Tong. In addition, the Chief Executive spoke at Singapore Management University’s Ho Rih Hwa Leadership in Asia Public Lecture Series.