[HONG KONG] Hong Kong's de facto central bank is bidding farewell to its chief after a decade, starting the search for a successor at a time when the city faces an outlook made uncertain by the slowing Chinese economy and the trade war with the US.
Norman Chan, who has been the Chief Executive of the Hong Kong Monetary Authority since 2009, will retire on Oct 1 at the end of his second five-year term, the government announced Thursday.
The HKMA's main task is defending the city's currency peg to the US dollar, meaning the former British colony's monetary policy is imported from Washington even as its status as a center for trading in China's currency, the yuan, grows. Mr Chan took office as Hong Kong was being buffeted by the global financial crisis, and leaves it amid increasing vulnerability due to record property prices and the protectionist threat to the open trade that the city thrives on.
"Norman has been leading the HKMA since 2009 and has worked tirelessly over the years to strengthen the city's monetary and banking systems and promote Hong Kong's position as an international financial center in Asia," Financial Secretary Paul Chan said in a statement. He will chair a selection panel to identify the next chief executive, the government said.
Chan, 64, is one of the world's best-paid central bankers, despite his institution's limited role in setting policy. He earned HK$10.8 million (S$1.8 million) in 2017, including HK$2.6 million in performance-linked variable pay and HK$1 million in benefits such as life insurance. His total remuneration was more than four times that of Bank of Japan Governor Haruhiko Kuroda's, about 40 per cent above Bank of England Governor Mark Carney's and more than seven times that of the Federal Reserve chairman.
The HKMA chief has acted as a determined advocate of the Hong Kong dollar peg, once referencing his memories of long queues and empty shelves in supermarkets due to currency instability. In 1983, the local currency slid sharply against the greenback as China and the UK negotiated Hong Kong's return to mainland rule.
"On my way home from work I saw a long queue of people outside a large supermarket, waiting to snatch whatever goods they could for fear of further devaluation of the Hong Kong dollar," Chan recalled in a blog post in 2013.
Calm was restored after the city pegged its currency to the greenback at a rate of about HK$7.80. During the 1997-98 Asian financial crisis, Hong Kong used US$15 billion of reserves to defend the link from a speculative attack. Throughout the years, Mr Chan, along with other senior Hong Kong officials, repeatedly said the peg has served well as an anchor to the economy and is here to stay, even with the increasing importance of the yuan as a global currency.
"The Linked Exchange Rate System is entirely rule-base and there is no room for discretion on how the HKMA manages the exchange rate," said Ines Lam, an economist at CLSA Ltd. "There is more human input in the financial regulation sphere but overall we expect a continuation in policy with Mr. Chan's retirement."
Hong Kong's borrowing costs also move in lockstep with those of the Fed. As a result, the ultra-low interest rates in the past decade have sent Hong Kong housing prices to levels so high that they're now the least affordable in the world.
Soon after taking office, Chan oversaw measures attempting to quell the city's red hot property market. He introduced more stringent stress tests on home buyers and less generous mortgages. However, these haven't stopped Hong Kong property prices from more than doubling in the past decade.
Chan has also presided over the boom of Hong Kong's offshore yuan market. Yuan savings have shed almost 40 per cent from the peak, however, as the Chinese currency weakened.