The suggestion by the former head of Hong Kong's central bank that the city should review its peg to the U.S. dollar and instead think of linking it to the yuan, has not been applauded in financial circles.
Joseph Yam, the ex-chief of the Hong Kong Monetary Authority said on Tuesday that Hong Kong's focus on keeping the dollar peg was "an obsession or even paranoia." But some economists couldn't agree less.
Frederic Neumann, Co-head of Asian Economic Research for Global Banking and Markets at HSBC says he's "puzzled at the suggestion that Hong Kong should give up its peg. It has served the economy extremely well for nearly three decades."
Enzio von Pfeil, Chief Executive of Commercial Economics Asia agrees. "If it ain't broke, don't fix it. There's absolutely no reason to tinker with it," he told CNBC Asia's " The Call ." "Every time Hong Kong has gone off the peg, mayhem has resulted."
Von Pfeil is referring to Hong Kong's short flirtation with a free float currency between 1974 and 1983. During that period inflation surged, from 2.7 percent in 1975 to 15.5 percent in 1980. This was coupled with erratic economic growth. The Hong Kong economy grew 0.4 percent in 1975, a year later growth surged to 17.2 percent only to come down to 2.6 percent in 1982.
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