Yu Weiwensaid: There is no need or intention to change the Hong Kong exchange rate system.

Hong Kong Monetary Authority Chief Executive Eddie Yue recently talked about the exchange rate system, he mentioned that Hong Kong's linked exchange rate system (Linked Exchange Rate System) adopts the highest degree of transparency and institutionalized currency issuance model, and strictly adheres to rigorous discipline in actual operation. In addition to Hong Kong's huge foreign exchange reserves of over 420 billion US dollars, equivalent to about 1.7 times the entire monetary base, it has sufficient ability to ensure the smooth operation of the linked exchange rate system. It can be said that the stability of the system is highly recognized by the market and has been affirmed by the International Monetary Fund for many years. He said that risks need to be controlled, but there is no need to panic, and reiterated that there is no intention or need to change the linked exchange rate system. Eddie Yue pointed out that the linked exchange rate system in Hong Kong has been in place for over forty years since its implementation in October 1983, and has experienced multiple economic and interest rate cycles, as well as multiple global and regional financial crises. It has become a core component inseparable from the Hong Kong economy and financial system. The linked exchange rate system provides a lasting stable monetary environment for Hong Kong, and has been effective. Looking back over the past forty years or so, every now and then, especially when facing challenges from economic cycles or external environmental factors, discussions about its advantages and disadvantages are triggered. One argument involves more fundamental economic cycle issues, simply put, if the Hong Kong dollar strengthens against the US dollar, and if the US reduces its interest rates at a slower pace, it may not be conducive to the economic recovery of Hong Kong. He mentioned that for a small open economy like Hong Kong and such an important international financial center, exchange rate stability is extremely important. Over the past year, the global exchange rate market has been very volatile, with many currencies against the US dollar depreciating significantly, such as 9% for Australian dollar, 12% for South Korean won, and more than 20% for Mexican peso, while the Japanese yen has also fallen by more than 9%. The stability of the Hong Kong dollar against the US dollar reduces exchange rate risk, which is an advantage for the business and investment environment. Exchange rate stability and an effective currency system are key elements in attracting international investors to use Hong Kong as a financial trading platform and intermediary, which is crucial for consolidating Hong Kong's position as an international financial center. Regarding Hong Kong dollar interest rates, since the US entered a rate-cutting cycle, the banking industry in Hong Kong has responded relatively quickly, having cut interest rates three times so far, which has helped reduce borrowing costs for businesses and individuals. The challenges facing the Hong Kong economy are both cyclical and structural. The Hong Kong government and the private sector are taking practical measures to explore new industries and economic growth points, and to enhance the competitiveness of the Hong Kong economy. Of course, the structural adjustment process takes time and requires cooperation from all parties. The Hong Kong Monetary Authority focuses on providing assistance for cyclical issues within its functional scope, including actively introducing measures to ease the burden of loan costs for citizens and the business sector, especially for small and medium-sized enterprises, coordinating measures with the banking industry to support SMEs in obtaining financing, and lifting the countercyclical macro-prudential regulatory measures for property mortgage loans that have been implemented since 2009, in order to minimize the impact of economic cycle fluctuations as much as possible. Some commentators are concerned about the foundation on which the linked exchange rate system is established. Any economy can independently decide its currency system according to its own wishes and actual circumstances, including pegging the local currency to individual or a basket of currencies. In fact, according to statistics from the International Monetary Fund, there are currently 37 countries and regions worldwide (including Hong Kong) that have adopted arrangements in different forms pegged to the US dollar, where the model is anchored to the US dollar exchange rate through buying and selling by the relevant monetary authorities, essentially operating as a market behavior. The current linked exchange rate system in Hong Kong was established in October 1983 and it has been operating based on this model ever since. There are also concerns that geopolitical issues may lead to extreme situations that could affect the operation of the linked exchange rate. The connections between the global financial systems are deep and wide, it can be said that what affects one, affects all. Past experiences clearly show that if financial markets in a certain region become volatile, the rapid and chain reactions can have significant spillover effects, triggering fluctuations in global financial markets and even causing crises, which can impact the economy and society greatly. Hong Kong is the most important international financial center in Asia, and the stability of Hong Kong's financial system not only concerns itself, but also is crucial for regional and international financial stability. Of course, as emphasized on various occasions, the authorities have been conducting comprehensive assessments of the various risks that could impact the financial stability and security of Hong Kong, to ensure that there is sufficient capacity to address various challenges.