Chief Executive Donald Tsang briefs the media after the first meeting of the government-appointed task force

Recent measures by the Hong Kong Government to safeguard the stability of its financial system have been effective, according to an International Monetary Fund (IMF) report. An IMF mission visited Hong Kong in October to hold discussions with government officials and private-sector representatives on the impact of the global financial crisis. "All indicators suggest that Hong Kong's banking system remains sound, very liquid and well capitalised," the report said.

The IMF attributed the resilience of Hong Kong's financial system, which it said was "no accident," to a robust monitoring system. "The ability of the regulatory authorities to step up their supervisory activities in recent months has been impressive. In addition, the substantial attention to contingency planning and the authorities' continued willingness to look critically at their current system and explore areas for further improvement are now fully paying off."

The IMF also credited Hong Kong's banks, which it said "managed risk prudently, provisioned for losses and are well-positioned to manage a worsening in credit quality." It added that it was "encouraging that the authorities are fully prepared to act decisively, if necessary. In this regard, the announcement of a time-bound, blanket deposit guarantee and a contingent facility, that can be activated in the event there is a need to provide capital to Hong Kong banks, was fully warranted in the current extraordinary global circumstances."

Strong fundamentals

Against the backdrop of the global slowdown, the IMF backs the government's infrastructure-driven stimulus and forecasts two per cent growth for Hong Kong in 2009, and five per cent in the medium term.

The Head of the IMF Asia and Pacific Department, David Burton, recently gave a briefing about the global financial crash and its impact on Asia. He addressed the task force set up by Hong Kong Chief Executive Donald Tsang to monitor the impact of the financial turmoil on Hong Kong. Hong Kong, said Mr Burton, "is extremely well-placed to weather these pressures because it has very strong fundamentals," he said in an interview with the South China Morning Post.

At its first meeting last month, the government task force decided to focus its work on four key economic sectors: financial services, trade and logistics, tourism and consumption-related services, and real estate and construction services. The group will look at ways of tapping into new opportunities for these sectors.

The task force will hold monthly meetings to assess the impact of the financial turmoil on the city, with an eye to considering further measures to support SMEs. The task force's 10 members come from various sectors in the community, many from finance and business. They include Stephen Roach, Chairman of Morgan Stanley Asia; Margaret Leung, HSBC Global Co-Head Commercial Banking Group General Manager; and Dr Victor Fung, Chairman of Li & Fung and the International Chamber of Commerce.

Another task force member, Mervyn Davies, Standard Chartered Chairman, told The Standard that he is upbeat about the city's prospects because of Hong Kong's strong fundamentals, its proximity to the mainland and its rule of law. "I think this market correction gives Hong Kong, as a regional financial centre, a huge opportunity to stand side by side with New York and London."

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International Monetary Fund (IMF)