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Following is the speech by the Financial Secretary, Mr John C Tsang, at luncheon with Santiago business community hosted by Standard Chartered Bank in Santiago, Chile today (December 3, Santiago time):
Distinguished Guests, Ladies and Gentlemen,
Buenas tardes.
It is my great pleasure to be here again in beautiful Santiago.
Thank you for welcoming us to the Union Club.
I would also like to thank Standard Chartered Bank for organising this luncheon.
Standard Chartered's history in Hong Kong dates back more than 150 years. I am confident that we are in good hands.
Hong Kong is much changed since Standard Chartered opened its first branch in our city in 1859. From a sleepy Chinese coastal town, Hong Kong is today the fifteenth largest international banking centre in the world and 3rd in Asia, in terms of external transactions.
Standard Chartered is among 70 of the world's largest 100 banks that operate in Hong Kong.
We have also one of the largest stock markets in the world, and we rank as the world's freest economy according to the US-based Heritage Foundation. No doubt, this will resonate with our friends here in Chile, which ranks as the freest economy in Central and South America.
The question we are asking ourselves in Hong Kong today is this: what next?
Before I answer that question, allow me to give you some background on Hong Kong's role as a global financial centre in the Asian time zone.
The recent financial crisis has transformed the international economic landscape. The centre of economic gravity has shifted from West to East and from established markets in the US and Europe to emerging markets, notably in Asia and South America.
Having weathered the financial storm in relatively good shape, Hong Kong and Chile ¡V working together ¡V will be well placed to take advantage of this new economic order.
As well as the financial crisis, Chile has also had to deal with the emotional and economic fallout from the devastating earthquake in February. Your resilience and your determination to overcome these challenges have been an inspiration to us all.
A sound banking system with well-capitalised lending institutions is key to maintaining a stable and trusted financial system during uncertain times.
This is a lesson that has been well-learned by both our banking sectors.
Hong Kong not only enjoys a reputation as an international banking centre, our city is also China's most important centre for global finance.
Since the establishment of the Hong Kong Special Administrative Region more than a decade ago, we have continued to nurture all the key ingredients for a successful financial sector. This has been achieved under the "One Country, Two Systems" principle for our reunification with Mainland China in 1997.
We have a free flow of information, ideas and capital as well as a highly transparent regulatory regime. Our low and simple tax system means that companies pay no more than 16.5 per cent profits tax ¡V which, I note ¡V is similar to Chile's corporate tax rate of 17 per cent.
In Hong Kong, salaries tax is capped at 15 per cent. We have no withholding taxes, no VAT, no GST, no capital gains tax, no death duties and zero wine duty in Hong Kong. Only income sourced in Hong Kong is taxable in Hong Kong.
We also maintain our own common law legal system, which is separate from the Mainland's legal system, and underpinned by an independent judiciary.
What sets Hong Kong apart in Asia is the convergence of the unique "China advantages" and "global advantages". With low taxes and an open economy, Hong Kong is the preferred platform to carry out both China-related activities globally, and also global operations in the Greater China market.
These competitive advantages support our asset management business, offshore Renminbi functions and capital formation activities. They also attract and anchor capital and talent from around the world, including Chile.
So ¡V what is next for Hong Kong's financial services sector?
The answer is three-fold.
First, Hong Kong's emergence as a capital-raising platform
Hong Kong has a strong and growing reputation as the fund-raising centre in Asia. We have good and reliable access to fast-growing money markets in Hong Kong, in Mainland China and throughout our region.
A string of successful listings has enhanced our reputation for handling Initial Public Offerings or IPOs of all sizes.
Last July, the Agricultural Bank of China staged a dual listing in Hong Kong and Shanghai that raised a world record US$22 billion. And insurance company AIA Group raised more than US$20 billion in its Hong Kong IPO last month.
Total funds raised in Hong Kong through IPOs last year exceeded US$31 billion ¡V which was more than anywhere else in the world. So far this year, the figure already exceeded US$40 billion.
Although Hong Kong is a relatively small place with a population of seven million, we consistently rank alongside London and New York as an international financial centre.
The Hong Kong stock market is the seventh largest in the world and third largest in Asia by market capitalisation. Market cap stood at US$2.7 trillion at end-October.
Chilean firms listing in Hong Kong can take advantage of our market liquidity, attractive valuations and access to investors in Mainland China and throughout our region.
To better serve market needs, improve transparency and enhance corporate governance, our Stock Exchange recently updated the listing rules for minerals and exploration companies. This helped to put our regulatory framework with respect to these companies on a par with international standards.
I encourage Chile's resources sector to consider the potential of a Hong Kong listing. Remember that our nation is a major consumer of mining commodities while Chile is a major exporter. It is a promising combination.
Secondly, another future trend for Hong Kong's financial services sector relates to the Mainland currency, the Renminbi.
Liberalisation of the Renminbi is hugely topical, given China¡¦s growing prominence on the global financial stage.
Hong Kong, with its international connections and free flow of capital, has an important role to play in the Mainland's financial reform process.
Since 2004, Hong Kong banks have been offering a wide range of Renminbi services. Today, these services include Renminbi deposit-taking, currency exchange, remittances, credit and debit cards and cheque accounts.
New Renminbi products and services are being introduced regularly.
In 2007, Hong Kong became the only place outside the Mainland to have a Renminbi bond market.
In August this year, US fast food company, McDonalds Corporation, launched the first Renminbi corporate bond by a non-financial foreign company in Hong Kong.
And in June, the Central Government in Beijing gave the go ahead for companies around the world, including Chile, to settle trade with the Mainland using Renminbi in Hong Kong.
Chilean firms can take advantage of Hong Kong's financial infrastructure, experience and close ties with China to settle their the Mainland trade and build up their Renminbi portfolio.
Thirdly, Hong Kong is moving into its next phase as a leading asset management centre in Asia.
Following the global financial crisis, the Mainland China's robust economy has driven the overall economic recovery of Asia. This has created exciting investment opportunities in the region and opened doors on new markets.
More institutional investors are giving greater weight to Asia in their investment portfolios and choosing to establish footholds in Asia as the platform for their investment.
Last year, there were some 2 000 authorised unit trust and mutual funds in Hong Kong. Their Assets Under Management amounted to around US$1 trillion. That represents an increase of 45 per cent compared to 2008.
Hong Kong is equipped with world-class hard and soft infrastructure, including a strong asset management foundation. We also benefit from a huge demand for wealth and asset management services in the Mainland.
Ladies and Gentlemen, we welcome more Chilean investors to take advantage of new developments in our fund-raising, Renminbi business and asset management sectors. If you still have not been to our part of the world, this is a good time of the year to do so, and you could certainly feel the typical Hong Kong welcoming.
I hope that I have provided you with some "food for thought" on how Chile and Hong Kong can strengthen our financial links across the Pacific Ocean.
Hong Kong's commitment to free trade and open markets is as strong today as it was 150 years ago, at the dawn of our economic development.
With Chile's own free market credentials, robust economy and financial talent, I see great opportunities for even stronger ties between us.
Once again, thank you for this opportunity to join you all for lunch.
Ends/Saturday, December 4, 2010
Issued at HKT 09:05
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