A STUDY ON THE HONG KONG MONETARY SYSTEM BEFORE THE RESTORATION TO CHINA

Research Project

Project/Area Number	07630089
Research Category	Grant-in-Aid for Scientific Research (C)
Allocation Type	Single-year Grants
Section	一般
Research Field	Public finance/Monetary economics
Research Institution	HOSEI UNIVERSITY
Principal Investigator	YOKOUCHI Masao HOSEI UNIVERSITY,FACULTY OF BUSINESS,PROFESSOR, 経営学部, 教授 (20166870)
Project Period (FY)	1995 – 1996
Project Status	Completed (Fiscal Year 1996)
Budget Amount *help	¥1,200,000 (Direct Cost: ¥1,200,000) Fiscal Year 1996: ¥200,000 (Direct Cost: ¥200,000) Fiscal Year 1995: ¥1,000,000 (Direct Cost: ¥1,000,000)
Keywords	Hong Kong / International Finance / Hong Kong Monetary Authority / Exchange Fund / Linked Rate System / Three-tier Banking System / Interbank Market / Restoration to China / オフショア市場 / 国際金融市場 / 1997年 / アジアNIEs / 1997年問題 / 香港金融市場 / 中国の金融システム
Research Abstract	The first purpose of this study is to examine the development of the Hong Kong monetary system before the restoration to China in July 1997, and next to forecast the condition after 1997. Three findings came out in this study. First, though exchange rate system in Hong Kong is a fixed exchange rate system called the "linked rate system", not a flexible exchange rate system advanced countries now adapting, the operation of this system is very sound from the function of" arbitrage and competition". In recent years, central banking functions, for example open market operation procedures, have been added to the Hong Kong Monetary Authority which manage the exchange rate system. Second, Hong Kong banking system is called three-tier system consisted of Licensed Banks, Restricted License Banks, and Deposit-taking companies. In the money market, especially interbank market, the activity of Japanese banks is very remarkable. Japanese banks, however, devote outward business with Japan and their share of internal business within Hong Kong is unimportant. Because of the banking regulation in Japan, the Hong Kong branches of Japanese banks borrow fund from Japan and place this to Japan. This is a roundabout transaction taking advantage of Hong Kong's free money market. Third, there is a very close cooperation between the Hong Kong Monetary Authority and the People's Bank of China for the stability of the Hong Kong monetary system and Hong Kong Dollar. This is because of the defense on the restoration shock to monetary affairs. The harmony of both monetary authorities is starting before the restoration. Next problem is so to make an analysis of this cooperation in the context of "one country, two currencies" which is an analogy of the idea of Basic Law, that is "one country, two systems". It is necessary for this great experiment that the both monetary authorities cooperete with each other.