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Following is a speech by the Financial Secretary, Mr John C Tsang, at Roundtable Meeting in London on October 15 (London time):
Lord Mayor, Leaders of the City of London, Your Excellencies, Ladies and Gentlemen:
You have given me huge honour by inviting me here to join you at this Roundtable discussion today. It is extremely appropriate in terms of timing for us to meet right before your visit to Hong Kong, a place, Lord Mayor, that you know well, having lived there for some time and having established a strong relationship. I wish you a useful visit.
Lord Mayor, the term Roundtable always reminds me of Camelot, but I believe the roundtable was not really invented by King Arthur. I understand from my friends back home that it was invented in China, like a multitude of other things. Except here, you use the roundtable for talking. We in the East use the roundtable for banquets and other culinary purposes.
Economically speaking, Hong Kong is entering the Camelot era, working in close harmony with the Mainland economy. And there is much to feast on at our table. I would like to talk a bit today about the many opportunities at this table of ours.
Ladies and Gentlemen, as denizens of this globalised planet, I think you would quite likely share my strong interest in the ebbs and flows of economic opportunities in the life of a city. And Hong Kong has had our share of ebbs and flows, in fact.
I don't think any major world city has gone through more trials and tribulations than Hong Kong has in the past 10 years since Reunification. We had three massive obstacles to clear: a transfer of sovereignty, a fundamental economic transformation from a producing city to a servicing city, and a rash of natural and financial disasters during the same period.
Hong Kong was not given much of a chance of coming through unscathed. In fact, quite a few punters have in a high profile way predicted our early demise.
By a happy coincidence, the City of London Corporation has just published its second Global Financial Center Index. In it, Hong Kong is ranked only behind London and New York, ahead of Singapore, Zurich, Frankfurt, Chicago, Tokyo and others. It is deemed the city best qualified to achieve a future parity of status with the world's two leading financial centres.
What accounts for this rosy prognosis? What accounts for our dramatic turn-around? Sure, we get a lot of mileage out of the usual favourable factors: our rule of law, our independent judiciary, an aggressively free press, low taxes, business-friendly regulatory structure, splendid infrastructure, and an educated workforce, with English as our working language. There is something else. The single most important factor that has been driving our new prosperity is China.
This year marks the 10th Anniversary of Hong Kong's return to Chinese sovereignty. When the Mainland joined the WTO, there were dire predictions that Hong Kong would be losing its unique role as "the Gateway to China", and become another Chinese city.
But it did not so turn out. If anything, Hong Kong has become even more important as a base of operation for trading with China. That unique role has been reinforced. Hong Kong has all the software and hardware necessary for facilitating trade with the mighty Mainland. We are riding the crest of the Chinese wave of opportunity. China's growing wealth has logically found its international financial centre in a well-ordered city within its national boundary, and has made excellent use of its uniqueness.
A dynamic city needs new sources of growth and renewal. For Hong Kong, the Mainland has been our source of regeneration. Without a doubt, the Mainland has been a powerfully positive force in Hong Kong's economic resurgence.
The Hong Kong everybody loves is still the world's freest economy. But now our economic freedom is married to a gigantic economic opportunity. This special relationship is presumed on the "One country, two financial systems" set-up.
This special relationship spells opportunities for foreign as well as Hong Kong businesses. Let me just cite the example of CEPA, which stands for Close Economic Partnership Arrangements, giving Hong Kong-based businesses and professionals privileged access to the Mainland market. CEPA is our free trade pact with the Mainland. It covers 27 services sectors which will be expanded to 38 by January 1, next year. These sectors include accounting, banking, insurance, legal, securities and futures.
The good news for foreign-owned corporations is that CEPA offers unprecedented access to the Mainland by Hong Kong incorporated businesses, because we have a nationality-neutral policy. It does not discriminate between foreign-owned or local-owned businesses, so long as they are incorporated in our city.
With the exponential growth of wealth on the Mainland, its enormous benefit to Hong Kong may best be summed up by the phrase: "the southward flow of northern funds" when we refer to the many investments from the Mainland to Hong Kong. Last month, a pilot scheme was announced that will allow Mainland individuals the right to buy Hong Kong stocks. In anticipation of this unprecedented orderly outflow of Mainland funds, the Hang Seng Index has skyrocketed past 28,000, threatening to triple its 1997 high-water mark.
It will be of interest to those of you in the financial services sector to know that another scheme is already in operation - the so-called Qualified Domestic Institutional Investor scheme, or QDII for short. Under this scheme, Mainland banks, securities and insurance companies that meet the required standards are free to invest in Hong Kong and overseas. So far, according to official sources, 21 banks and two fund management funds have been approved for QDII purposes, with quotas reaching US$16 billion and US$2.5 billion respectively. As the scheme gathers steam, a much greater outflow of Mainland funds are expected.
With China's escalating clout on global markets, its currency Renminbi (RMB) is fast gaining importance. Hong Kong has a head start in the handling of Renminbi-denominated transactions, beginning in 2004. We now have 38 banks offering RMB services to their customers.
Another important recent development is that beginning in June this year, Hong Kong has become the first, and the only place outside the Mainland to operate a Renminbi bond market. In just three months, there have been three RMB bond issues offered by the China Development Bank, the Export-Import Bank of China and the Bank of China with a total value of $10 billion yuan. All three issues were spectacularly over-subscribed. More offers are expected, with even greater activity and volume.
I have referred to the "one country, two financial system" reality in talking about the Hong Kong and Mainland financial infrastructure. Hong Kong boasts a world-class multi-currency system, and we are working hard to encourage the Mainland to settle its foreign currency transactions through Hong Kong. In the months and years to come, you can expect even broader and deeper links to develop between the two systems, with as much benefit to Hong Kong as it is to the Mainland.
Hong Kong's role as the Mainland's international financial centre has already been officially confirmed in our nation's latest 11th Five-Year Plan which emphatically validates our unique position in serving the interests of the Mainland as it trades with the world.
So, Ladies and Gentlemen, come early for a seat at our roundtable, and make sure you don't miss out on the next courses of this incredible banquet.
Thank you.
Ends/Tuesday, October 16, 2007
Issued at HKT 14:25
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