*******************************************************
Following is the transcript of the question-and-answer session (English only) by the Chief Executive, Mr Donald Tsang, at the luncheon hosted by the Hong Kong Association of Banks today (April 26):
Question: My question is as the Renminbi is appreciating, do you think the Hong Kong economy is prepared for what we should do to get ready for it, as a lot of business people are talking about how it might impact on inflation for example?
Chief Executive: Where were you in this Easter weekend? The appreciation of Renminbi is taking place steadily. I am sure the move is in a way in which the Mainland authority is going to produce a steady progress of the market as the market matures in the Mainland. But Hong Kong has a very firm monetary base. We are linked to the US dollar. In fact, the appreciation of Renminbi will make Hong Kong¡¦s economy even more competitive, at least in the short run. And as far as the monetary stability is concerned, we are well prepared. The various measures which the Monetary Authority introduced, for instance, in relation to Hong Kong dollar, tell the market what we are going to do when the Hong Kong dollar becomes too strong, all these are in the present arsenal in dealing with it as far as the monetary regulations are concerned. But as far as the market is concerned, I am sure Hong Kong will be able to adjust any movements in Renminbi in the same way as we have coped with such movements in the past. You remember the Hong Kong linkage to US dollar has been done here for over two decades. Look at the movement of Renminbi over the last two decades. You will find it has not been a straight line completely in parallel movement to Hong Kong dollar linked to US dollar. We have been coping. I am sure we will continue to be able to cope. And if it never happens, just remember one thing: this provides not only a challenge, but enormous opportunities for Hong Kong. You turn that challenge around to produce greater wealth for all of us.
Question: Hong Kong has been facing a huge number of competitors in the past from Singapore to Shanghai. What would be your opinion on how to face the competition as well as aspiring to be one of the leaders like Tokyo, New York or London?
Chief Executive: Well we faced competition from the time when we emerged in the 1970s as an international player. Hong Kong is never scared about competition. We are on a different growth path, and different stages of development, indeed on different development priorities from Singapore or Shanghai. As you know, we are now 90% services. Shanghai is still a manufacturing centre. We cannot specialise, we cannot do the things that Shanghai is doing ¡V producing motor cars, iron ore and producing massive infrastructure. We are not in that league but we have our little niche. A niche which is high-value added, producing enough jobs for Hong Kong people and producing continuous prosperity and that is our financial status. What we are able to do here, relying on the freedoms we enjoy, the rule of law, the level playing field for business, the cosmopolitan nature of our business makeup, all these things to me contribute to our own competitive edge, now and for the future, against Singapore, against Shanghai, against Seoul, against Sydney. I mention all the ¡§S¡¨s first. Then you go onto the ¡§T¡¨ ¡V the Tokyos and all this.
Look around us. Look around the world today. Where are the major centres in terms of the areas in which we are interested in as a financial centre, underpin, of course, all the massive infrastructure we have. You have the New York servicing the whole America, north and south. You have London which by the way is situated in a country not circulating the Euro, is a centre of finance for the whole of Europe despite competition coming from Frankfurt, Paris and others. They are working a completely different time zone from Hong Kong right where we are right in the middle of East Asia. And when the international finance book is passed around, where will London pass the book on in this part of the world. Here, right here. We share with the world, eight hours each. We are able to produce the international fund transaction facilities, we are able to clear and settle any Euro dollar instruments when Wall Street is sleeping. Equally we can clear Euro instruments when London is sleeping. We have got infrastructure here. We are the premier international financial centre and we will continue to be like that provided if we have lunches like this, you allow me to bully you and tell you and reassure you that I am working for you. I am not frightened about Singapore, I am not frightened about Shanghai. In fact I love that competition to keep us on the edge, to make sure we are at the forefront of financial frontiers. When I mention about adherence to Basel standards this is what I mean; that we continue to distance ourselves from all the competitors in this important field of ours.
Question: We are delighted to see the Central Government offering such opportunity to let the capital flow outside the Mainland. I think certainly we have more opportunities. One thing we need to rely on you that the bankers cannot do. That is, there are a lot of complaints about pollution in Hong Kong, that a lot of foreign expatriates may not be willing to come here when compared to Singapore because of the air quality. We have heard a lot about this. I know the Government has put a lot of effort into this but I would like to hear from you especially what your strategy in the future to clean up the air.
Chief Executive: This is a very serious issue for us as a government. As a territory we are pretty clean. We have the cleanest vehicle fleet in Hong Kong, our commercial practices are generally quite good in this regard. The only thing we need to tackle, important issue, in this regard is our power companies and I have told you my determination in this. We have told the power companies in the connection of their next franchise, the next scheme of control, they have to comply with our pollution standards. They have to reduce the pollution levels from the chimneys of the power companies. The only issue we have to resolve is co-operation with the Mainland. In that regard we have already signed a deal. We promised ourselves we should reduce our total effluent level by half by the year 2010 and I¡¦m going to see that it¡¦s done in Hong Kong. I am working closely with our counterparts in Guangdong Province and I believe they are delivering their part of the deal as well. This takes time and I know this is crucial, not only for us but for everybody else.
I have heard about this thing of moving away from Hong Kong to go back to Shanghai or go to wherever you are and it will get worse in fact. This is what we have seen here in Hong Kong is a lot better. When you guys play golf ¡V and I¡¦m not talking about last Easter weekend ¡V when you drive from Hong Kong right onto the Mainland, once you cross the bridge, immediately you see a different world, a world of a little more smoke, a little more haze. But that¡¦s part and parcel of development and we are at different stages of development. And the Guangdong authorities realise this and they are working on it. And we have to play our part too. All the guys here who run factories on the Mainland. There are 70,000 of them by the way and they employ 11 million people in the Pearl River Delta alone. They should sign the charter and clean up their factories because in the past they thought that the dirty field, the dirty air or the dirty water that pours out from the factories would not be theirs. No, these things come back to haunt us. You breathe that air in Hong Kong, you drink that water in Hong Kong, so if the 70,000 factories got on the move and cleaned up their act, it will be a tremendous help to ourselves. I can assure you that I will deliver on my part. We will bring the Hong Kong air to the 1970s standards, going back to that level then we will see a lot more blue skies. I won¡¦t forget that.
Ends/Wednesday, April 26, 2006
Issued at HKT 17:38
NNNN
Windows Media format
Real Media format