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In the Bulletin
Legco Report
From the Director
Cover Story
Economic recovery around the corner
Government, business toiling to ensure HKSAR's future
Competition to speed up reform of Mainland's SOEs
SAR is a global player, not merely a China middleman
WTO heaven, or WTO hell?
SAR to suffer short, sharp recession, but will recover in mid-2002
Q&A with the Business Summit Panel
WTO challenges to boost Hong Kong SAR's edge
Special Feature
SMEs uptake of IT slows
i-Perkin
HKSAR's economy feels the effects of world events
Face to Face
With David Ting
Business
China-Hong Kong Free Trade Agreement
Dutch celebrate China trade excellence
WTO Corner
Member Profile
Chamber Programmes
China's WTO membership no threat to Hong Kong
Study Mission returns from Guangxi and Yunnan
I found my roots
FACE TO FACE
January 2002 Issue  Face to Face with David Ting  On January 1, 2002, exactly three years after the
launch of Europe's single currency, euro notes and coins finally came into circulation. Twelve of the 15
European Union (EU) members have joined the single currency, and internal borders have
been abolished in nine countries to further streamline the flow of goods and services. Bulletin
Editor Malcolm Ainsworth spoke with David Ting, head of the EU's office in Hong Kong,
about the implications of the single currency on Hong Kong businesses. Following are
extracts from that interview.
THE BULLETIN: What impact will the circulation
of the euro have on Hong Kong businesses?
DAVID TING: It will be positive. A more integrated market makes it easier for Hong Kong exporters to sell their goods in Europe. Their existing contracts will not be affected as a result of the changeover. There are established regulations that ensure the continuity of all legal contracts with the substitution of amounts denominated in national currency units by their equivalents in euros. With buyers and sellers trying to round off the old currencies into euros, what problems could arise?There are precise rules for rounding and conversions. Hong Kong traders are concerned that price rounding may lead to significant price differences, particularly when large quantities of goods are involved. But I don't think this is a cause for concern. European citizens are concerned there may be abuses in pricing during the changeover period, but relevant authorities will be intensifying their price checks during the changeover period. I might add that for Hong Kong businesses rounding off prices, they may need to take into account the psychological price factor, for example they may like to price things at $2.99 instead of $3. So whether they round their prices up or down, it is entirely up to them. Won't the unfamiliarity of the euro encourage businesses to deal in US dollars?The euro has been a legal tender since January 1, 1999, and has been a tested currency in the financial markets for three years. So Hong Kong companies trading with euro area countries should be better cushioned to mark prices in euro and trade in the euro. Also, they will save on exchange rate fluctuations.  Some people believe that with EU citizens having euro notes and coins in
their pockets, the value of the euro will rise. If this happens, will the European Central
Bank step in to stop it spiralling too high?
The main task of the European Central Bank is to maintain price stability, not the exchange rates of the currency. With the circulation of the euro, its primary task will still be on maintaining stable prices in Europe. One reason that the euro has fallen since its launch in 1999 was mainly due to the fact that the economic growth in the U.S. was stronger than in Europe. So many people went to invest their money in the U.S. The other reason is that people trust the US-dollar more. Up until five minutes ago you had never seen a euro. But this is not a concrete reason. Business fundamentals in Europe are good, and in the first six months of 2001, the economic growth rate of Europe was higher than that of the U.S. But even if this helps strengthen the euro, I think the central bank's principle focus will still be on maintaining the stability of prices in Europe. Will companies still be able to go along dealing in francs, deutsch marks, etc, and for how long?From January 1, 2002, euro notes and coins replace notes and coins in national currencies, which will be withdrawn by the end of February at the latest. From then on the national currency will no longer be valid for everyday use. Also, from January 1, 2002, old national currency units can no longer be used in written form, such as cheques, contracts, accounting, pay slips, et cetera. But this does not apply for the three countries -- the U.K., Denmark and Sweden -- that are not participating in the euro. How will Hong Kong traders benefit from the euro?As I said, the market will be more integrated. Also, a more efficient and liquid financial market in Europe provides additional business opportunities to financial service providers in Hong Kong. Businesses will buy, sell and borrow within a larger and more competitive market, so doing business will be easier and less expensive, and the exchange rate risks will be greatly reduced. What should Hong Kong firms be doing to ease their transition into the euro?Hong Kong traders need to adjust all documentation indicating price references to the euro, such as catalogues, price lists, quotations, advertising materials and databases, et cetera. |
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