IMF endorses HK finance policies

The International Monetary Fund endorsed Hong Kong's policies to reinforce the economy and financial system's resilience, and supported the Linked Exchange Rate System as the best arrangement, according to a report released Wednesday.

The fund made these observations in its preliminary conclusions report on Hong Kong, after visiting the city in March and speaking with government officials and private-sector representatives.

Hong Kong Financial Secretary John Tsang welcomed the fund's commendations. "The government will continue taking proactive policies to enhance the strengths of our economy and financial system, managing any external risks that may arise, while capturing new opportunities, particularly from increasing integration with the mainland," he said.

Monetary Authority Chief Executive Norman Chan welcomed the fund's continued support of the Linked Exchange Rate System and its endorsement of the authority's banking supervision work and counter-cyclical prudential measures.

The IMF Staff Mission considered the linked rate system transparent, effective and credible, and noted that it has helped Hong Kong to weather changing and volatile global conditions, according to the report.

The mission expected Hong Kong's real economic growth to rise to 3.75 percent in 2014, due to an improving global economy and solid domestic demand. The mission cautioned against volatility in capital flows and financial markets associated with stimulus tapering in the United States, and disorderly correction in local property prices, the report said.

The mission supported the government's effort to cast fiscal policy in a long-term framework, and considered the budget's fiscal stimulus unwinding appropriate and in line with the near- term improved economic outlook.

The mission recommended the authorities press ahead with plans to establish a financial-institution resolution regime and strengthen insurance-sector regulation, according to the report.