Chapter 1160: Christmas Battle

The Hong Kong stock market and futures market were in a great shape, and each company was developing in an orderly manner. The return of funds from the Milky Way Fund was also going very smoothly, which made Xia Yu's mood quite good for a while.

However, someone happened to affect his good mood at this time!

On the morning of December 15th,

Xia Yu had just returned from inspecting the Tiangong Automobile Group's factory in the Yuen Long Science and Technology Industrial Park when Wang Qi came running over to report some news to him.

In order to create a stable investment environment as much as possible and optimise the inflation problem in Hong Kong, the Hong Kong government's Financial Secretary's Office is preparing to reform Hong Kong's exchange rate system. There is a relatively large voice within the government suggesting that the floating exchange rate system implemented in 1974 be changed back to a fixed exchange rate system, pegged to the British pound!

'Those who agree with this idea are mainly British?'

Xia Yu asked Wang Qi with a cold face.

Wang Qi nodded and said, 'Yes!'

'These people are too selfish. Now that Britain is long behind, the exchange rate of the pound sterling fluctuates greatly. Linking the Hong Kong dollar to the pound sterling will completely destroy the promising situation we have just emerged in.'

'Even if it has to be linked, it should be linked to the US dollar, not the pound sterling!'

'These people should just get lost!'

'If you make a list, I'll have someone dig up dirt on them and get rid of them all. Replace them with 'better' Chinese people.'

Xia Yu snorted.

Wang Qi understood immediately, and nodded with a smile, saying, 'Okay, Chairman, I'll have Zhou Shanwen make the list by tomorrow at the latest.'

'Mm!'

Xia Yu nodded slightly, his expression softening.

At this point, Wang Qi paused for a moment and said, 'Chairman, in fact, Hong Kong's floating exchange rate system does have major problems. Although the banking, stock and futures markets are currently booming, the current exchange rate system is a major hidden danger.'

'Two years ago, the US dollar was still worth about 4.6 Hong Kong dollars.

'But the Hong Kong dollar has been depreciating for the past two years, and this year it even fell to 7.2 Hong Kong dollars to the US dollar at one point.'

'Fortunately, the publication of the Sino-British Joint Declaration gave Hong Kong's economy a shot in the arm, and coupled with the booming stock and futures markets in recent months, it has helped the Hong Kong dollar to re-appreciate.'

'But now the exchange rate is fluctuating around 6.2 Hong Kong dollars to the US dollar, which is a relatively large depreciation compared to a few years ago.'

'However, the massive inflow of foreign capital into Hong Kong during this period has also led to the continuous appreciation of the Hong Kong dollar, which will have a significant impact on Hong Kong's export economy, real economy and employment. It is also not conducive to foreign investment in Hong Kong, which seriously affects Hong Kong's economic foundation.'

Xia Yu nodded with approval, saying, 'You're right, Hong Kong's exchange rate system does have major problems, and it's time to plug the loophole!'

Wang Qi's eyes lit up, and he looked at Xia Yu expectantly, saying, 'Chairman, Zhou Shanwen told me that there are mainly three views within the Financial Secretary's Office, and the loudest voice is to switch to a fixed peg exchange rate system, linked to the British pound.'

'The second opinion is to maintain a floating exchange rate and maintain monetary policy independence, but it is necessary to increase foreign exchange reserves, expand the Monetary Authority, and improve the Hong Kong government's ability to control the exchange rate.'

'The third opinion is also to change to a fixed linked exchange rate, but it is linked to the US dollar. Zhou Shanwen holds this opinion.'

'Chairman, which exchange rate system do you think is more suitable for Hong Kong now?'

Xia Yu's gaze was a little absent-minded, and the exchange rate system of the previous life of Xiangjiang appeared in his mind, and the pros and cons flashed through his mind one after another.

In this world, there are two types of exchange rate systems: a floating exchange rate system and a fixed exchange rate system.

The mainland is currently a fixed exchange rate system, and it was not until 2005 that it was changed to a floating exchange rate system.

Different exchange rate systems behave differently when faced with the impact of international capital flows on the domestic economy, and they have different advantages and disadvantages.

In general, the choice of a floating exchange rate is mainly to allow market forces to control the cross-border flow of capital.

There are many advantages to implementing a floating exchange rate system, such as the fact that a floating exchange rate system can ensure the independence of monetary policy; a floating exchange rate can help to mitigate external shocks; government intervention is reduced, the exchange rate will be determined by the market, which is more transparent; and the government does not need to maintain huge foreign exchange reserves.

However, the disadvantages are also obvious. Under a floating exchange rate system, the exchange rate tends to fluctuate greatly and excessively, which may be detrimental to trade and investment. Moreover, due to the free floating of the exchange rate, people may engage in speculative activities, leading to unstable currency exchange rates. Most importantly, a floating exchange rate system places higher demands on a country's macroeconomic management capabilities and the development of its financial markets.

In the past, the vast and resource-rich mainland, with its abundance of talent, also experienced many setbacks before it matured in its management of the RMB exchange rate, but it still faces challenges from time to time.

How can Hong Kong, a small place with a small population, compare with a big country?

The past seven or eight years of implementing a floating exchange rate system have shown how capable the Hong Kong government is in this regard, and the tuition fees paid have been considerable.

Choosing a fixed exchange rate, on the other hand, requires the government to control the cross-border flow of capital, which is conducive to the stable development of the economy.

Under a fixed exchange rate system, the exchange rate has relative stability, and the fluctuation range of the exchange rate is either maintained spontaneously or artificially. This makes it possible to determine the prices of imports and exports, calculate and control the cost of international trade, and settle international creditor's rights and debts more stably, reducing the risks brought about by exchange rate fluctuations.

In addition, a fixed exchange rate is conducive to cost and profit accounting by economic entities engaged in international trade, international credit and international investment, avoiding the risk of exchange rate fluctuations and promoting the development of the world economy to a certain extent.

However, fixed exchange rates also have significant disadvantages. For example, the most obvious one is the loss of monetary policy independence and the loss of the country's 'leverage' to adjust the economy. It is also prone to transmitting inflation internationally, which in turn triggers economic problems.

The advantages and disadvantages of the two exchange rate systems are obvious, and they have long been understood by elites from all over the world.

The theory of the 'trilemma' proposed by American economist Paul Krugman argues that the three goals of independent monetary policy, stable exchange rates and free capital flows cannot be achieved simultaneously, and only two can be achieved at the same time.

In fact, countries can only choose the two goals that are beneficial to them.

Combining the path taken by Hong Kong in the past and the current situation in Hong Kong,

Xia Yu feels that in the next twenty years, Hong Kong is still best suited to a linked exchange rate system, which is essentially a fixed exchange rate system pegged to the US dollar.

However, once the linked exchange rate system is activated, Hong Kong must have huge foreign exchange reserves in US dollars.

Because when more people want to exchange Hong Kong dollars for US dollars, if there are not enough US dollar foreign exchange reserves to supply, then the foreign exchange will appear to be in short supply, the Hong Kong dollar will depreciate, and the linked exchange rate system will collapse.

Of course, as long as there are enough foreign exchange reserves, there is no fear of attacks by international speculators.

In the financial crisis of the previous life in 1997, Hong Kong itself had huge foreign exchange reserves, and with the full support of the mainland, it made international speculators like Soros, who were invincible in Southeast Asia, lose in Hong Kong.

The situation of Hong Kong being very different from other Southeast Asian countries fully demonstrated the important role of the linked exchange rate system for Hong Kong.

As for what path Hong Kong should take after its return and whether the exchange rate system should be replaced, there was no need for him to worry about it.

Back then, with the support of the mainland's talent system and financial system, Hong Kong was fully qualified to withstand all kinds of storms and implement the linked exchange rate system.

Now, he, who is obviously just a businessman, has to worry about the present and future of the whole of Hong Kong from a political perspective.

What a life of toil!

But he has paid so much, and he deserves the benefits as a reward for his hard work...

Xia Yu shook his head slightly, looked back at Wang Qi, and commanded, 'The linked exchange rate system is the best for Hong Kong, pegged to the US dollar. The exchange rate is currently 6.2 Hong Kong dollars to the dollar, so we can set it at that benchmark.'

'As for the details, I also have some ideas.'

'But you already have enough on your plate, and you don't need to follow up on these matters.'

'Zhou Shanwen is the deputy director of the Monetary Authority of the Financial Services Bureau, right? You tell him to come to me as soon as possible, and I'll have a good chat with him.'

'Okay!' Wang Qi obediently replied.

...

Zhou Shanwen did not dare to neglect the call of the big boss behind the scenes, and took special leave the next morning to report to Xia Yu.

That morning, Xia Yu asked him in detail about the internal situation of the Financial Secretary's Office and the Monetary Authority, and then talked to him about the linked exchange rate system, which made Zhou Shanwen's thinking very clear.

At the end, Xia Yu also told Zhou Shanwen to prepare to be the director of the Monetary Authority for a while, which made Zhou Shanwen very happy and he thanked Xia Yu for his cultivation again and again.

After Zhou Shanwen left, Xia Yu ordered the Luo network to begin operations.

He, on the other hand, focused his energy on sorting out his assets and making next year's development plan.

...

The Christmas holiday in European and American countries is equivalent to the winter vacation. The holiday period generally lasts from December 22nd to January 5th, a period of two weeks.

As Christmas in the West gradually approaches,

companies in all industries have also begun large-scale advertising and marketing campaigns, trying to earn enough revenue during the grandest holiday of the year.

In the video game industry, the marketing war is already in full swing.

However, the companies that have invested the most money, put on the most marketing campaigns, and achieved the greatest popularity are Tencent and Atari.

In the United States alone, Tencent invested tens of millions of dollars in advertising and marketing, and since Tencent had previously approached Peter Lynch, the tens of millions of dollars had the effect of spending tens of millions of dollars.

This put Atari and its parent company Warner Bros. Entertainment under enormous pressure and forced them to invest even more money in marketing.

There was no choice: for this Christmas battle, Atari had produced 10 million new Atari 2600 game consoles, as well as 5 million copies of the E.T. game cartridge. Of course, there were also 7 million copies of the Pac-Man game cartridge in the warehouse that had not yet been sold.

Together with other game cartridges, Atari is preparing to launch 15 million game cartridges on the market.

This Christmas, Atari and Warner Bros. Entertainment are ready to make a lot of money.

The smash hit game E.T. The Extra-Terrestrial is not only expected to make money, but also play an important role in boosting sales of the Atari 2600 game console.

After all, E.T. The Extra-Terrestrial can only be played on the Atari 2600 game console!

Atari is also confident about the market prospects, because distributors have already taken 4 million copies of the E.T. The Extra-Terrestrial game cartridge in advance, as well as more than 2 million Atari 2600 game consoles.

Now, only one million copies of the E.T. game cartridge are stored in Atari's warehouse, and the cartridge manufacturer is on standby, ready to resume production as soon as the sales frenzy breaks out, to ensure an adequate supply.

So, with everything ready, the last thing they need is for their biggest competitor, Tencent, to steal the limelight at the most critical time.

On 22 December, the Christmas holiday officially began in the United States.

On this day, Atari and Taito held press conferences in New York at the same time, and the venues of the conferences were not far apart, in a head-to-head battle.

Atari still launched the Atari 2600 game console, as well as the trump card E.T. the Extra-Terrestrial game cartridge and the Space Invaders game cartridge with a newly designed level.

Tengong Electronics Group, on the other hand, launched the second-generation home game console TG – MasterSystem 2, as well as five new game cartridges, led by Clint Eastwood's 'The Man with the Golden Gun' adapted from the 'Man with the Golden Gun' trilogy, and of course the redesigned game levels of 'Super Mario', 'Chinese Tetris', 'Battle of the Tanks' and other best-selling game cartridges around the world.

In terms of the lineup, although Atari had a large number of cartridges, many of them were shoddy and poorly made. The 'Pac-Man' card had already been broken, and the only ones that could be handed out were 'E.T. the Extra-Terrestrial' and 'Space Invaders'.

After the press conference, dealers across the United States, who had been preparing for a long time, officially began selling.

On this day, I don't know how many children smashed their piggy banks and rushed to the nearest game retail store with the money they had saved up to buy game consoles and game cartridges.

...

Fourteen-year-old Jack is a game fanatic. His first game was Space Invaders, and he had long since learned through TV commercials and posters that today was the day when many game companies released new games.

Although this year Atari has disappointed him with a lot of rubbish games, his family loves the cute E.T. the Extra-Terrestrial alien.

The combination of the two – the game E.T. the Extra-Terrestrial – has been something he has longed for a long time.

After arriving at the game retail store, he, who comes from a wealthy family, did not hesitate to buy the E.T. the Extra-Terrestrial game cartridge.

However, he was also captivated by the fine games from the Tiangong Electronics Group, so he also bought a TG-MasterSystem2 game console and ten game cartridges such as 'Red Dead Redemption' and 'Super Mario'.

Afterwards, he hurried home and called his younger brother to play games together.

The first one to play was, of course, the most anticipated 'E.T. the Extra-Terrestrial' game.

It was less than five minutes...

'Damn it, Atari has developed another rubbish game. This damn abyss is so deep that you can't get out of it. It's pointless...'

'I feel like a clown being laughed at by Atari...'

'The cute and kind E.T. has been developed into such a rubbish game. It's cheating our emotions. I want to return it!'

An angry Jack threw the Atari 2600 console aside and, with the comfort of his brother, opened the TG-MasterSystem 2 console and the latest game, 'Red Dead Redemption'.

Five minutes later...

The vertical scrolling shooter, set in the American West in 1849 and featuring the bounty hunter Billy Bob, completely captivated the Jack brothers.

The two games were incomparable!

Jack was completely disappointed with Atari.

The next afternoon, after playing all the Tiangong Electronic Group games, he was amazed by the classics, but also saw the Atari 2600 he had left behind and the E.T. game cartridge. He was so angry that he put the game cartridge back in the box, angrily ran to the game retailer and demanded a refund.

There, he discovered that there were actually quite a few people like him, all there to return goods.

And the things they were returning were also the same: the E.T. game cartridge...