Hon KP Chan on change to the Linked Exchange Rate system:
Noting that the speed of appreciation of Renminbi in 2010 was much slower than that of other Asian currencies, the Deputy Chairman [KP Chan] enquired whether the appreciation of Renminbi would accelerate in 2011. In view of the rapid increase in the amount of Renminbi deposits in Hong Kong, the Deputy Chairman [KP Chan] enquired whether consideration would be given to pegging the Hong Kong dollar with Renminbi when the total amount of Renminbi deposits had reached a substantial level.
CE/HKMA [Chief Executive, Hong Kong Monetary Authority] responded that he expected that the currency market would continue to be volatile in 2011. Coupled with the influx of capital into the Asian markets, volatile exchange rates would add pressure on inflation. CE/HKMA [Chief Executive, Hong Kong Monetary Authority] added that one of the reasons for the increase in Renminbi deposits in Hong Kong might be the transfer of foreign currencies deposits into Renminbi deposits. With the development of off-shore Renminbi settlement business in Hong Kong, more overseas enterprises would use the Renminbi settlement service and therefore increase their Renminbi deposits in Hong Kong. CE/HKMA [Chief Executive, Hong Kong Monetary Authority] remarked that the conditions for making any change to the Linked Exchange Rate system did not exist.