Kin-ming Liu at PostGlobal

Kin-ming Liu

Hong Kong

Former Washington-based columnist for The Hong Kong Standard, The New York Sun, and Insight on the News, an online weekly published by The Washington Times. Covered economic and political relations between the United States and East Asia, with an emphasis on China, Taiwan and Hong Kong. Former chairman of the Hong Kong Journalists' Association. Currently a business executive at a Chinese-language newspaper in Hong Kong. Close.

Kin-ming Liu

Hong Kong

Former Washington-based columnist for The Hong Kong Standard, The New York Sun, and Insight on the News, an online weekly published by The Washington Times. more »

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Market Freedom Takes a Break

The Current Discussion: Will the current financial crisis discredit free-market policies in your country? Is socialism an echo of the past or a preview of the future?

Bank run is never fun, anytime, anywhere. And bank run amid the current financial tsunami would be worse than a nightmare. A major Hong Kong bank, Bank of East Asia, suffered from this fate just this week. The authorities reacted quickly and injected a lot of cash into the financial system; things have returned to "normal," more or less, for the meantime. These days, governments in Hong Kong or elsewhere wouldn't hesitate to do anything they see fit to help the financial sector. And the population at large would also go along.

This free-market supporter must admit that this is a depressing and frustrating time for our camp. The Financial Times' U.S. managing editor Chrystia Freeland was correct to declare that the Reagan era officially came to an end on September 15, 2008. "It's mourning again for Americans," she said .

Economist Gary Becker had his own take: "Despite my deep concerns about having so much greater government control over financial transactions, I have reluctantly concluded that substantial intervention was justified to avoid a major short-term collapse of the financial system that could push the world economy into a major depression," the Nobel laureate wrote in his blog. I share his sentiment completely.

Last week, Hong Kong was again named the world's freest economy by Canada's Fraser Institute. However, even this beacon of the free market in the eyes of the late Milton Friedman cannot always resist the pressure to intervene the market when push comes to shove. A decade ago, the Hong Kong government spent more than US$15 billion to launch an intervention into the local stock and futures markets to counter what it called speculative "double market play" which threatened financial stability in the former British colony.

Ironically, this very controversial move, which was severely criticized at the time, has now provided a strong case for intervention. Financial Times, for example, argues that "history has shown time again that bold moves can pay off: witness Hong Kong's much-derided intervention in the stock market in 1998." And Matthew A. Winkler, editor-in-chief of Bloomberg News, said in Hong Kong this week that "Joseph Yam has been vindicated." Mr. Yam, chief executive of the Hong Kong Monetary Authority, the local central bank, was a key figure in the market intervention ten years ago. The market, according to Mr. Winkler, not only recovered, but has also prospered.

Perhaps it is too difficult to argue for free-market policies now. We probably have to wait for a long time before the pendulum swings back.

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