The Director of the Hong Kong Economic and Trade Office of the Hong Kong Special Administrative Region (SAR) Government, Mr Donald Tong, said on February 20 that any fundamental change in policy on the Hong Kong-US dollar linked exchange rate will cause grave uncertainty and undermine investment sentiments and confidence.

Speaking at a business seminar in Edmonton, the capital of Alberta province, Mr Tong said this view was shared by the business and financial communities in Hong Kong.

The seminar, organised by the Hong Kong Canada Business Association, Edmonton Section, was attended by business people, bankers and government officials.

Mr Tong told the audience that the 14-year link had weathered many financial crisis in past. It has become a symbol of economic stability and confidence in Hong Kong as a major international and financial centre.

"Delinking will damage Hong Kong, and cause further damage to the regional economy," he said.

"The peg has been the key factor in the stability of the Hong Kong dollar since 1983, and coupled with our greatly improved market regulation and supervision, it has enabled us to become one of the world's leading financial centres."

"The financial services sector has increased its contribution to our GDP by over 500 per cent in the last decade and we are now the world's fourth largest banking centre and the sixth largest securities centre."

Mr Tong admitted that the unwavering stance taken to protect the peg had brought about short term problems, such as increases in interest rates, but with a solid economic foundation, a huge fiscal reserve and a sound financial and monitoring system, Hong Kong is confident that it will be among the first -- if not the first -- to rebound.

On concerns that China could be forced to devalue the Renminbi (RMB) in order to stay competitive, the Director gave several reasons why Hong Kong thought this unlikely.

� The Chinese leadership has recently categorically stated that the RMB will not be devalued.
� China's strong external payments position makes it impractical for the RMB to depreciate.
� Given China's huge visible trade surplus, a move to depreciate would intensify trade friction between China and its major trading partners.
� Depreciation of the currency will increase the cost of imports for its domestic production and consumption and thereby affect its debt repayments.

� the opening of world's latest state-of-the-art airport at Chek Lap Kok on July 6;
� further expansion of the container port, already the world's busiest;
� major expansion programmes for the underground railway and conventional rail system;
� upgrading the teaching of English in schools with plans to recruit 700 additional native speaking English teachers from overseas;
� the first SAR elections to the Legislative Council will be held on May 24; and
� Hong Kong remains one of the safest cities in the world with the 1997 crime figures being the lowest in two decades.