86th Congregation (2018)
Professor The Hon. Joseph YAM Chi-kwong
Doctor of Social Science
The Ming literatus Yang Shen has the following to say about the heroes of the Three Kingdoms: ‘Rolling on and on e’er eastward the River Great,/All those countless heroes by torrents are washed away,/Right or wrong, successes or losses, ending in smoke./Mountains green alone remain from days of old./Merely several times, it seems, have sunsets glowed!’* In the 1990s, attacks on Asian currencies caused multiple East Asian economies to collapse. When the instigators of the attacks turned their attention to Hong Kong, targeting its currency, stock, and futures markets, a hero rose to meet the challenges, successfully defending the city’s century-old financial foundation. His exceptional experience, expertise, and wisdom helped ensure Hong Kong’s mountains to remain green and its sunsets glow.
A Guangdong native, Professor Joseph Yam Chi-kwong graduated from the University of Hong Kong in 1970, and in 1974 received his Postgraduate Diploma in Statistics and National Accounting from the Institute of Social Studies in Hague, the Netherlands. In 1971, Professor Yam joined the Hong Kong government as a Statistician, and was promoted to Economist in 1976. In 1979, Professor Yam was appointed Principal Assistant Secretary for Economic Services. In 1982, he became Principal Assistant Secretary for Monetary Affairs, taking part in Hong Kong’s monetary and financial affairs. In 1985, Professor Yam became Deputy Secretary for Monetary Affairs. In 1991, he was appointed Director of the Office of the Exchange Fund. When the Hong Kong Monetary Authority was established in 1993, he was appointed its first Chief Executive. During his tenure, he helped develop the linked exchange rate system which remains in force today since it was first established in 1983. It was also in Professor Yam’s tenure that other reform measures were implemented to shore up Hong Kong’s monetary system and successfully launch its debt market. These measures have contributed to the city’s monetary stability and development into an international financial centre. Though Professor Yam retired in 2009, he is still known by the Hong Kong public as ‘Chief Yam’, a testament to his contributions and popularity.
Of his many accomplishments perhaps the best known and most often cited is the defeating of George Soros to defend Hong Kong’s currency and stocks in 1998. In the 1970s, Soros founded the Quantum Fund, specialising in global currency and stock speculations. His investment acumen and massive capital enabled him to emerge victorious in almost all battles. In 1992, Soros sold the pound sterling short, forcing British banks to buy pounds in the market to steady their currency. The effort proved futile, and the UK government had to withdraw from the European Exchange Rate Mechanism. The Quantum Fund made its name and over US$1 billion overnight. In July 1997, Soros sold the Thai baht short, bringing down the Thai currency and its stock market, triggering the Asian financial crisis. The currencies of Indonesia, the Philippines, Malaysia, and Korea devalued one by one, throwing Asia’s stock markets into turmoil. Soros next switched his attention to Hong Kong, short-selling the Hong Kong dollar and its stock futures. The resulting widespread panic and pessimism caused the Hang Seng Index to plummet from 17,000 to 6,000 in an eyeblink. The market scare and public panic made it the ultimate battle in the financial crisis. It was also a defining moment for the Hong Kong economy. As then Chief Executive of the Hong Kong Monetary Authority, Professor Yam worked alongside then Financial Secretary Donald Tsang Yam-kuen to take the bull by the horns. They mobilised HK$120 billion from Hong Kong’s foreign currency reserve to buy Hong Kong stocks as well as a large amount of Hong Kong dollars. Through sharp financial insight and judgement, Professor Yam turned the situation around, changing crisis into opportunity. Caught off-guard, Soros suffered heavy losses when the Hang Seng Index Futures settled at the end of August in 1998. When he acknowledged defeat in an interview with China Central Television, Soros gave credit to the efforts of Hong Kong’s financial officials in defending the Hong Kong dollar. Professor Yam’s actions dealt a heavy blow to international speculators, giving battered Asian countries some much-needed breathing space and time to recover. Moreover, the value of stocks purchased to steady the market rebounded rapidly and significantly afterwards, adding hundreds of billions to the Exchange Fund. Citizens who subscribed to the Tracker Fund of Hong Kong founded right after the crisis also benefitted greatly from the appreciable returns. Professor Yam’s decisiveness and wise strategies have earned him numerous accolades. For his remarkable contributions during the Asian financial crisis, Professor Yam was named by Euromoney as ‘The Best Asia Central Banker’ in 1996 and ‘The Central Bank Governor of the Year in Asia’ in 1998. ‘The Central Banker of the Year in 1997’, and ‘Lifetime Achievement Award in Asia’ in 2009. He was named the ‘Central Bank Governor of the Year’ by Asiamoney in 1998. Alan Greenspan, former Chairman of the Federal Reserve of the United States, also praised Professor Yam for making the right decisions and recognised him as one of the world’s most efficient, irreplaceable central bankers.
A decade after the Asian financial crisis, Asia had barely recovered when another catastrophe struck in 2008 — a financial tsunami caused by the subprime mortgage market in the United States. As investors lost their confidence in collateral securities, many financial institutions and funds under their management suffered heavy losses. This subprime mortgage crisis triggered a global financial tsunami that engulfed and destroyed economies across the world, with aggregate losses estimated by the International Monetary Fund at over US$4 trillion. However, of the $1,600-billion Exchange Fund under Professor Yam’s management at that time, not a single dollar was invested in subprime loans, collateralised debt obligations, or collateralised loan obligations. His extraordinary wisdom and keen eye for financial management helped Hong Kong’s economy steer clear of the tsunami and sail towards a safe haven.
At the very beginning of the crisis, Professor Yam wrote an article about the many structured financial products and derivative instruments in the market, which he described as ‘Alphabet Soup’. The Hong Kong Monetary Authority repeatedly reminded citizens to take heed of the risks when selling and buying related financial products. However, lured by massive profits, many banks and citizens turned a deaf ear to its advice. When Lehman Brothers went bankrupt, their related minibonds were perceived to have become worthless, and citizens who were about to lose money accused the Monetary Authority of inadequate supervision. At the Legislative Council, Professor Yam demonstrated his broad-mindedness and charisma by calmly facing Legco members’ harsh questions without shirking responsibilities. Afterwards, he made constructive suggestions to the government on how to enhance investor risk management and further improve the system.
In 2009, Professor Yam retired after 40 years of public service. Throughout his illustrious career, Professor Yam was honoured with many awards, including the Gold Bauhinia Star and the Grand Bauhinia Medal by the HKSAR Government. In 1995, he was awarded the Commander of the Most Excellent Order of the British Empire (CBE), and received The Banker of the Year Award from the Hong Kong Institute of Bankers. He has also received many honorary doctorates from various universities in Hong Kong. Professor Yam has maintained an especially close relationship with CUHK, where he has served as an Honorary Professor of the Faculty of Business Administration since 2006, and a Distinguished Research Fellow of the Lau Chor Tak Institute of Global Economics and Finance since 2010. Through his lectures on Economics, Business Administration and courses for students of Master of Business Administration, Professor Yam has continuously shared his extraordinary experience in financial management and helped foster new talent, benefitting students enormously.
Despite his retirement, Professor Yam’s concern for Hong Kong’s socio-economic development has never abated. He has published his views on how to preserve the city’s currency and financial stability, urging agents of the local capital market to provide diversified currency options and avoid large amounts of capital flow into and out of Hong Kong that can adversely affect Hong Kong. Last year, the current administration convinced Professor Yam to make a comeback as member of the Executive Council, to offer his tremendous insights and expertise on Hong Kong’s financial and economic affairs.
‘Hoar-haired fisher and woodcutter live by the riverside,/Vernal breeze and autumn moon refreshing their lives.’* For half a century, Professor Yam has used his immense financial finesse to steer Hong Kong through stormy weathers, leading Hong Kong’s monetary and financial systems to navigate multiple international crises. His accomplishments in the sector are remarkable, and his contributions will benefit us for generations to come. Madam Chancellor, in recognition of his heroic contributions to Hong Kong in the past half century, it is my privilege to present to you Professor the Honourable Joseph Yam Chi Kwong for the award of Doctor of Social Science, honoris causa.