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Following is the speech by the Financial Secretary, Mr John C Tsang, at the 9th Hong Kong Forum Luncheon at Grand Hyatt Hong Kong Hotel today (October 30):
Jack (So), Barry (Macdonald), distinguished guests, ladies and gentlemen,
Good afternoon.
It's indeed a great pleasure for me to join you all today at the 9th Hong Kong Forum, the annual flagship event of the Federation of Hong Kong Business Associations Worldwide.
First of all, I would like to extend a warm welcome to you all, and especially to those of you from overseas who have travelled great distances to be with us today. We like to call Hong Kong Asia's world city not only for our world-class infrastructure and status as an international financial centre, but also for our lively cosmopolitan lifestyle. I hope you will get a chance to enjoy it while you are here. Remember, wines are now duty free in Hong Kong.
Since its establishment in the year 2000, the Federation has been doing an excellent job in promoting opportunities for networking and information exchange among Hong Kong's overseas business partners. It has also helped to facilitate their business development in the region.
Keep up the good work.
The past few months have been a difficult time for the world economy. The financial tsunami has spread from the US to Europe and other parts of the world, including Asia. A number of international financial institutions have run into difficulties, and major economies are now on the verge of recession.
The financial crisis that we are now facing highlights the importance of how today's global community could and must act together when the need arises. Last week, more than 40 leaders from Asia and Europe met in Beijing to discuss the financial crisis. Next month, the G20 group of countries is due to meet in the US to review progress in addressing the financial turmoil, and to agree on a common set of principles for reform of the regulatory and institutional regimes for the world's financial sectors.
As well as keeping a close eye on global market developments, we are also taking steps to ensure Hong Kong's financial system remains stable, and our economy steers a smooth course during these difficult times.
Hong Kong's banking sector overall remains healthy and robust, with local banks' capital adequacy ratio well above international requirements, but we must remain vigilant. Earlier this month, I announced two new precautionary measures to further strengthen confidence in our banking system.
First, the use of the Exchange Fund to guarantee the repayment of all customer deposits held in Authorised Institutions in Hong Kong, following the principles of the existing Deposit Protection Scheme. The guarantee applies to both Hong Kong-dollar and foreign-currency deposits with Authorised Institutions in Hong Kong, including those held with Hong Kong branches of overseas institutions. It will cover the amount of deposits in excess of that protected under the existing Deposit Protection Scheme.
The second measure is the establishment of a contingent bank capital facility. This makes available additional capital to locally incorporated licensed banks, on request and subject to supervisory scrutiny.
Both measures are in effect and will remain so until the end of 2010 when a decision will be made in the light of international financial conditions on whether they should be extended or not.
The present financial turmoil has given rise to a series of questions, such as whether a new global financial order will emerge, and how we should chart Hong Kong's development as an international centre for finance.
Enhancing our status as a global financial centre to help the economy power ahead is a well-considered strategy. In the face of current market volatility, we need to keep calm and take a critical look at our own strengths as well as our own weaknesses. By so doing, we can move in the right direction and turn the crisis that we are facing into new business opportunities.
The rapid pace of economic development in the Mainland has brought with it enormous potential for growth in the entire region. After 30 years of reform and opening up, the Mainland is not just increasingly well-integrated with the world economy, it is one of the key engines of global economic growth.
Urbanisation and industrialisation have changed the face of our nation. The growth in domestic consumption has been phenomenal, not just in terms of quantity, but also quality. This has driven manufacturing industries up the value chain and speeded up the development of the service sector. As a result, our own economy here in Hong Kong has shifted towards higher value-added services.
One way we are helping the Mainland companies to upgrade and move up the value chain is by encouraging them to list on our stock market. This allows them to draw on our broad and deep pool of international best practices in key sectors, such as accounting and legal services, and to leverage our global network of contacts. Investors from both the Mainland and overseas use Hong Kong as a platform for developing regional and international business.
To further enhance our role as a bridge between the Mainland and the rest of the world, we have been laying the groundwork for even closer cross-boundary links. In terms of hardware, we are working to speed up the implementation of a number of large-scale infrastructure projects. These include the Guangzhou-Shenzhen-Hong Kong Express Rail Link, as well as a proposed railway connecting Hong Kong International Airport and Shenzhen Airport. We are also making progress on the 29-kilometre Hong Kong-Macao-Zhuhai Bridge, which will further open up the Pearl River Delta to international trade.
Complementing infrastructure development, Hong Kong has become more closely integrated with the Mainland since our reunification in 1997.
In the financial field, our stock exchange has successfully hosted the largest initial public offerings of Chinese enterprises globally. Today, more than 450 Mainland enterprises are listed in Hong Kong, covering a wide spectrum of businesses, ranging from financial institutions, telecommunications, coal mining to supermarkets.
To advance the financial co-operation between the Mainland and Hong Kong, we have been working hard to more closely align our two financial systems. Key initiatives include:
(1) encouraging Hong Kong financial institutions to expand their presence in the Mainland;
(2) encouraging Mainland funds, investors and financial institutions to go overseas through Hong Kong;
(3) strengthening the links of the financial markets in Hong Kong and the Mainland;
(4) continuing to expand renminbi business in Hong Kong; and
(5) strengthening the financial infrastructural links between Hong Kong and the Mainland.
Some of these strategies are made possible by the liberalisation measures under our Closer Economic Partnership Arrangement with the Mainland, what we call CEPA. These measures help facilitate Hong Kong financial institutions and service providers to establish and develop businesses on the Mainland, and vice versa.
Many of you will be familiar with CEPA, our unique free trade pact with the Mainland. In July this year, further liberalisation measures were announced which will expand the number of service sectors covered by CEPA from 38 to 40. Overseas firms with a base in Hong Kong can take advantage of CEPA, and enjoy the same benefits as local firms, including zero tariffs for goods that qualify for the "Made in Hong Kong" label, and preferential treatment for services.
Strengthening cross-boundary ties is only part of the story. At the same time, we are also reinforcing our strengths as an international business centre and as a global financial centre.
We will continue to tap new business opportunities in emerging markets. This includes establishing Hong Kong as a platform for Islamic finance, developing our commodities market, and encouraging foreign firms to list in Hong Kong through depository receipts.
Underpinning our strength as an international business centre is the stability, depth and diversity of our financial sector. In these turbulent times, we will take every opportunity to reinforce the financial infrastructure to ride out the current storm and protect against future shocks.
We will review and strengthen the supervisory framework for Authorised Institutions. Our actions on this front are in line with recommendations from the Financial Stability Forum, the Basel Committee on Banking Supervision and other international organisations charged with analysing the causes and effects of the global credit market crisis.
Our world is now more interconnected, open and fast-changing than ever before. This global financial crisis is a real big test for all of us. I assure you that the Government of Hong Kong will continue to take all necessary measures to deal with the issues and respond quickly to the changing global economic landscape.
Our Chief Executive in his Policy Address this month announced the establishment of a Task Force on Economic Challenges. Its membership was announced earlier this week. The Chief Executive will chair the Task Force and I will be the vice chairman. The aim is to assess the impact of the global financial crisis on Hong Kong's economy, and its industries, and propose specific options for the Government and business community to address the challenges. This includes identifying new business opportunities in enhancing the competitiveness of Hong Kong. The first meeting of the Task Force will be held next Monday. I look forward to working with this committee.
Ladies and gentlemen, when this Federation was established eight years ago, we were feeling the after-effects of the Asian financial crisis. Since then we have also overcome the economic fallout of the September 11 attacks in the US, and the devastating SARS outbreak in 2003.
I am fully confident that our strong fundamentals, sound regulatory framework and prudent risk management by financial institutions will stand us in good stead in tackling the current difficulties, so that we can all look forward to an even brighter future.
Thank you for this opportunity to speak with you today. I commend the Federation for your great work in strengthening the links between Hong Kong and overseas entrepreneurs.
I wish you all a very successful Forum, and an enjoyable stay in Hong Kong. Do find an opportunity to go and look around and see the latest developments in Hong Kong. I am sure that you will find lots of bargains in all our shops. Shop a lot!
Thank you very much.
Ends/Thursday, October 30, 2008
Issued at HKT 17:09
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