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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Goldman Sachs Global Macro Conference "Hong Kong's Role as a Financial Centre" today (February 9):
Mr (Yusuf) Alireza, Distinguished Guests, Ladies and Gentlemen,
Good afternoon.
It is my great pleasure to join you today for the Goldman Sachs Global Macro Conference. A warm welcome to Hong Kong to all our visitors. Also congratulations to Goldman Sachs for organising this event with its outstanding line-up of speakers.
It is encouraging to see that Goldman and other major investment banks are recovering strongly from the financial turmoil of the past couple of years. I am confident that this is a positive sign of things to come for the financial services industry as a whole.
It is about two weeks before I deliver my Budget, and about two years since the global financial crisis took a grip on our economy.
In other words, it is the perfect time to reflect on the impact of the financial tsunami on Hong Kong, and - perhaps more important - think about where we go from here as a global financial centre.
In fact, TIME Magazine tackled this very subject in an article a week or so ago. In its February 1st edition, the magazine revisited its "Nylonkong" model. You may remember the term "Nylonkong" was coined by TIME reporters two years ago. It describes the connectivity between New York, London and Hong Kong in this era of globalisation. In its February 1st edition, the magazine looks at how these three interconnected cities have weathered the financial storm. The article suggests that London has lost ground and New York has lost its swagger while Hong Kong is benefiting from the rising strength of China. It says, and I quote: "Now Hong Kong has a front-row seat for one of the next waves of financial globalisation - the emergence of the developing world onto the stage of international finance." End quote.
And while we are talking about the emergence of the developing world, I am delighted that Jim O'Neal has joined this conference. As you may know, Jim invented the phrase, "BRIC" bringing together Brazil, Russia, India and China as the world's fastest growing developing economies.
Jim's continued support of, and confidence in our nation's economy is encouraging. What's good for China is certainly good for Hong Kong.
I shall talk more about the importance of the BRIC countries to Hong Kong a little later.
First though, what qualifies Hong Kong for a front-row seat in this new wave of financial globalisation, ahead of other financial centres in our region?
For one thing, we have proved our mettle as a robust and reliable financial centre by pulling through the worst of the so-called Great Recession in relatively good shape.
Another thing that has really set us on the fast track in the past 12 months is a significant dovetailing of our financial system with that of our nation.
At the same time, the Mainland's economy is expected to be a driving force globally in the months and years ahead. Indeed, many economists agree that China is spearheading the economic shift from the traditional heavyweight markets in the West, towards Asia.
Finally, the financial crisis has highlighted the interconnectivity between nations, which suits Hong Kong's small, externally oriented economy just fine.
Ladies and Gentlemen, the new wave of financial globalisation has brought a new wave of financial talent to Asia, and to Hong Kong. As countries in the West continue to grapple with the aftermath of the financial tsunami, Asia is rebuilding, refocusing and rebounding. These days, financial experts not only look to Hong Kong for future growth potential, they are also based right here. And, it is not simply for the great shopping and wonderful food. Hong Kong is a vantage point, actually the best available platform, for seeking out the best opportunities in China and throughout Asia. Goldman is one of the banks with a number of its top people based right here in Hong Kong. And I am sure they are not doing that just for tax reasons.
Our free and open investment environment with low taxes, the rule of law, independent judiciary and no restrictions on the flow of capital, make our city an ideal place to tap the opportunities in the Mainland of China and throughout the region.
During the economic turmoil, Hong Kong's financial markets remained stable and liquid. Our stock market remains the seventh largest in the world and third largest in Asia by market capitalisation. At the end of last year, the Hang Seng Index rebounded 52 per cent compared to end-2008. Also last year, we led the world in terms of equity funds raised through IPOs. Funds raised in 2009 exceeded HK$240 billion [US$31 billion].
Over the past year or so, we have also strengthened our role as our nation's global financial centre. Above all, we are the most experienced and trusted testing ground for the internationalisation of the Mainland currency, the Renminbi.
In just the past year, there have been a raft of new initiatives on this front. Among them is a Renminbi trade settlement pilot scheme that came into operation last July. This cross-boundary trade settlement scheme highlights the growing importance of the Renminbi internationally and of Hong Kong's role as an offshore centre for Renminbi.
Also last year, Hong Kong banks on the Mainland were allowed to issue Renminbi bonds in Hong Kong for the first time. This is another way to open up new fund-raising opportunities for multinational companies in Hong Kong.
And last September, the Central Government in Beijing issued sovereign bonds in Hong Kong totaling 6 billion Renminbi [or about US$880 million]. This was a massive vote of confidence in Hong Kong as our nation's global financial centre.
Since 2004, our banks have provided a growing range of Renminbi services. These include Renminbi deposits, currency exchange, remittances, credit cards and personal cheques. Last year, Renminbi deposits in Hong Kong banks increased some 4 per cent to more than 62 billion Renminbi [US$9 billion].
Naturally, Hong Kong does not have an exclusive right to be China's global financial centre. We have worked hard to get to where we are today, and the international market recognises that strength of our positon. We shall have to stay on our toes to maintain our competitive edge.
Last year, Shanghai was given the all clear by the State Council to open up its financial sector and develop into an international financial centre by 2020. We look forward to co-operating with Shanghai to achieve the best outcome for both our cities and ultimately for our nation.
It is a bit like two football strikers competing for the first team place at the World Cup. Both push each other to work harder, improve skills and make the most of their strengths to win that place in the starting line-up. But the best way for the team to win the World Cup is to have both players as prolific goal scorers in the squad.
In a country of some 1.3 billion people and forex reserves exceeding US$2.4 trillion, there is plenty of room for more than one international financial centre.
Hong Kong and Shanghai serve different financial markets, we have different skill sets, and we are at different stages of development. We look forward to co-operating with Shanghai to exploit our relative strengths, share our experiences and maximise the synergy between us in becoming the twin engines of growth for our nation.
Hong Kong has built its reputation by providing a familiar free-market environment with a freely convertible currency, transparent regulatory regime, and zero tolerance of corruption, and a deep pool of local and international financial talents.
We have maintained our position as the world's freest economy for 16 years in a row now, according to both the US-based Heritage Foundation and the Fraser Institute in Canada. We have a free flow of information and ideas; a free and unfettered media and a free flow of capital.
To become more closely integrated with the Mainland, not only in financial services but in all economics aspects, we are expanding our unique free trade pact with the Mainland, what we call the Closer Economic Partnership Arrangement, or CEPA.
CEPA came into effect in 2004 and is designed to break down barriers to trade, investment and services between Hong Kong and the Mainland. It makes us a more effective service provider and efficient platform for international firms to gain access to the vast and relatively less-developed markets in the Mainland. CEPA covers 42 services areas including banking, insurance, accountancy and legal services.
Perhaps most important, the free trade pact applies equally in a nationality-neutral way to local companies and overseas firms incorporated in Hong Kong. It is a key element in our closer integration within our nation, and as a gateway into and out of the Mainland for local, national and international firms.
To speed up the implementation of CEPA, new measures are being introduced between Hong Kong and Guangdong province on an early and pilot basis. This is part of a new Framework announced by the Central Government last year to establish the Pearl River Delta Region as one of the most competitive regions in the world by 2020.
The Framework supports closer co-operation between Hong Kong, Macao and Guangdong Province with Hong Kong as the financial hub for the region.
Ladies and Gentlemen, although our connectivity with the Mainland is our largest single competitive advantage, we are also well connected to other countries and regions. And, we are diversifying our financial sector by developing new products and opening the door wider to even more overseas investors.
This brings me back to the BRIC countries that I mentioned earlier. We see huge opportunities in Hong Kong for emerging economies to leverage on our position as a capital-raising centre.
One of the great things about my job is that I get to see different parts of the world to promote business opportunities in Hong Kong. I had the pleasure of visiting India in 2007 and Russia last year. I also hope to visit Brazil soon. We aim to take full advantage of our front-row seat for the emergence of the developing world onto the stage of international finance.
Just last month, the first Russian company listed on our stock market. I hope more will follow, and I look forward to visiting Russia again this year to promote Hong Kong's advantages and potential for foreign firms listing here.
Another exciting initiative has been to establish Hong Kong as a platform for Islamic finance. So far, we have launched Islamic bonds or sukuks, as well as Islamic funds, Islamic indexes and Islamic banking windows. The response has been encouraging.
Competition among international financial centres for a share of the Islamic finance business is intense, particularly in the wake of the global financial crisis. We are confident that Hong Kong has what it takes to fully develop this area. We already have a transparent regulatory regime, well-capitalised markets and international experience - key ingredients for Islamic finance. We look forward to launching more Shariah-compliant products, and opening up opportunities for Islamic finance in the Mainland of China and throughout Asia.
Ladies and Gentlemen, Hong Kong is both China's global financial centre and an international financial centre in our own right. We are competitive and we are collaborative. And, in an imaginary World Cup of international finance, I am confident that Hong Kong would be a great player to have on any team.
Have a great Conference and a wonderful stay in Hong Kong. Shop a lot.
Thank you.
Ends/Tuesday, February 9, 2010
Issued at HKT 13:42
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