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Financial Services Focus Group convenor's report on the Economic Summit(Eng only) (with video)

    Following is the report (English only) by the Convenor of the Focus Group on Financial Services, Dr David Li, at the Presentation of the Reports on the Economic Summit on "China's 11th Five-Year Plan and the Development of Hong Kong" and the Public Release of the Action Agenda today (January 15):

Chief Executive, Financial Secretary, Ladies and Gentlemen,

     Good afternoon. On behalf of the members of the Focus Group on Financial Services, may I first thank the Chief Executive for organising the Economic Summit. All of us found this exercise extremely useful, and we very much appreciate the opportunity to put forward our views to the Government for consideration.

     As Chairman of the Focus Group, I would also like to thank all the members of the sub groups for contributing so much of their valuable time during the past four months. I am also very grateful for the logistical support provided by the Central Policy Unit, the Financial Services and the Treasury Bureau, and the Hong Kong Monetary Authority.

     Our Focus Group was tasked by the Chief Executive last September to examine how Hong Kong's financial sector should respond to the challenges and opportunities arising from the National 11th Five Year Plan. We set up three sub groups to carry forward our work.

     The Sub-group on the Securities Market was led by the Honourable Ronald Arculli; the Sub-group on Foreign Exchange and Commodities Futures was led by Mr Gary He (Guangbei); and the Sub-group on Insurance, Reinsurance and Asset Management was led by Dr. Edmund Tse Sze-wing.

     Our Focus Group has prepared an Action Agenda containing some 80 specific recommendations.

     But one overriding theme stands out. With the rapid development of the Mainland economy, we believe that there is a great urgency for China to develop an international financial centre of global significance within its own borders.

     The window of opportunity will not last forever. If we do not act now, inertia will set in, and the business will gravitate to established financial centres overseas.

     We may have had some success in attracting initial public offerings to our Stock Exchange in recent years. However, our Exchange is still relatively small. Furthermore, we are far behind other financial centres as a bond trading centre; as a currency futures centre; as a commodities futures centre; and more.

     We believe that Hong Kong has the infrastructure, and the transparent legal and regulatory environment, and the market depth to contribute in these areas for the benefit of the entire Mainland economy.

     We believe that Mainland institutions should work closely with their Hong Kong counterparts to make maximum use of Hong Kong for overseas financial activities.

     We also believe that there is a room for existing restrictions on the activities of Hong Kong financial institutions on the Mainland to be reduced, and for Hong Kong financial products to circulate on the Mainland.

     From a practical perspective, Hong Kong can contribute to the Mainland's financial reform and development in three ways.

     First, by offering a range of financial services to the Mainland, our established financial platform can help raise the efficiency of financial intermediation and support financial reform on the Mainland.

     Second, Hong Kong can facilitate the two-way cross-boundary fund flows of the Mainland, which in turn will help address the increasing concern about the external imbalances in the economy.

     Third, Hong Kong is well positioned to serve as a testing ground for Renminbi to become fully convertible.

     Let me highlight several specific recommendations.

     Hong Kong has already established itself as one of the leading securities markets in the world. We further propose a series of measures to broaden and deepen our securities market. We propose that high level liaison with the Mainland be strengthened to facilitate capital formation for Mainland enterprises.

     As an international financial centre, we should take steps to make it easier for overseas issuers to list in Hong Kong. Efforts should also be made to establish a more flexible regulatory and operational infrastructure for local, Mainland and overseas financial intermediaries and investors.

     On the development of a Renminbi futures and options market, we propose to consolidate Hong Kong's lead in offshore Renminbi, and to expand the range of non-deliverable Renminbi products.

     We are pleased that the Chief Executive in his recent visit to Beijing has made good progress on expanding Renminbi business services in Hong Kong. The State Council announced last week that, upon obtaining approval, financial institutions on the Mainland can issue Renminbi-denominated bonds in Hong Kong.

     China is one of the world's largest consumers and suppliers of commodities, precious metals and other raw materials. There is an increasing need for efficient price discovery within our own time zone. As a first step, we propose that an independent consultancy study be commissioned with a view to making concrete proposals for developing a commodities futures market in Hong Kong.

     Our Focus Group considers that an effective insurance market and asset management sector are essential for efficient risk management, financial intermediation, and wealth preservation within the Mainland. In this regard, we propose further liaison with the Mainland to expand the role of Hong Kong's insurance institutions on the Mainland.

     We also propose that Hong Kong promote itself as a centre for international captive insurance; that we expand the opportunities for Hong Kong residents to become Mainland insurance practitioners; and that we foster the further development of the asset management industry.

     To conclude my presentation, our Focus Group is convinced that developing Hong Kong as an international financial centre of global significance will not only enhance China's status and competitiveness in the world, but will also help Hong Kong to grow and prosper. The proposed Action Agenda is the starting point for us to move in this direction. Let us work together to bring Hong Kong and our country to greater heights. Thank you very much.

Ends/Monday, January 15, 2007
Issued at HKT 18:31


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