Sage-Tips

How was Hong Kong able to maintain the value of its currency against the US dollar?

The currency board system ensures that Hong Kong’s entire monetary base is backed with US dollars at the linked exchange rate. The resources for the backing are kept in Hong Kong’s exchange fund, which is among the largest official reserves in the world.

How did China survive the Asian financial crisis?

The central thesis of this paper is that China avoided the Asian financial crisis primarily because its financial system was relatively closed. Sustaining strong economic growth and avoiding a banking crisis will depend very much on skillful implementation of further financial and other economic reforms.

How did the Asian financial crisis affect Hong Kong?

1Hong Kong’s economy has gone from one of high inflation in the early 1990s into one of high deflation after the Asian financial crisis. Over the past five years, product and property prices, rents and wages have all been adjusted downwards. Residential property prices have fallen 65\%.

Which currency was first attacked by the speculators during the Asian financial crisis?

Hong Kong faced several large but unsuccessful speculative attacks on its currency peg to the dollar, the first of which triggered short-term stock market sell-offs across the globe.

How stable is the Hong Kong dollar?

Despite speculation over the years that Hong Kong’s currency peg may be abandoned, leading the HKD to depreciate against the USD, it has remained unchanged, except for minor technical improvements, since its introduction in October 1983, almost 40 years ago.

Why is the Chinese economy so strong?

Economists generally attribute much of China’s rapid economic growth to two main factors: large-scale capital investment (financed by large domestic savings and foreign investment) and rapid productivity growth. These two factors appear to have gone together hand in hand.

What are the external factors that contribute to the outbreak of the financial crisis in 1997?

Causes which precipitated the crisis

• Higher US interest rates.
• Contagion.
• Debt default.
• At this stage, the IMF intervened to try and stabilise the crisis.
• The IMF insisted on fiscal restraint – lower spending, higher taxes and privatisation.

How did the 2008 financial crisis affect Hong Kong?

Economic activities slowed notably in the second half of 2008 as a result of the global financial crisis and the downturn among Hong Kong’s major trading partners. Inflationary pressures receded following weaker domestic demand and smaller increases in food prices and rental costs.

How did Hong Kong defend its currency link with China?

The HKSAR government defeated Soros, who was forced to walk away with losses. The intervention committed as much as 10 billion U.S. dollars of Hong Kong’s 96 billion forex reserves. Not only was the currency link successfully defended, but it was also strengthened. Both the HK dollar and Chinese renminbi stood firm.

Why did George Soros attack the Hong Kong dollar?

Why did George Soros attack the Hong Kong dollar during the Asian financial crisis, given that the HK government has more reserves and is much richer than the emerging Southeast Asian nations such as Thailand and Indonesia? 8 clever moves when you have $1,000 in the bank.

What caused the Asian currency crisis of 1997?

A second sub-period of the currency crisis can be identified starting in early November, 1997 after the collapse of Hong Kong�s stock market (with a 40 percent loss in October). This sent shock waves that were felt not only in Asia, but also in the stock markets of Latin America (most notably Brazil, Argentina and Mexico).

What would happen if China cut off the Hong Kong channel?

Cutting off the Hong Kong channel will put an end to these ambitions. The dismantling of the Hong Kong financial system will likely drive down the value of the yuan and threaten the Hong Kong dollar with inanition, if not extinction. As to the dollar…