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Following is the speech by the Financial Secretary, Mr John C Tsang, at a luncheon with São Paulo business community hosted by HSBC in São Paulo, Brazil today (December 8, São Paulo time):
Distinguished Guests, Ladies and Gentlemen,
Good afternoon.
It is my great pleasure to be here in the stunning city of São Paulo.
I would also like to thank HSBC for organising this luncheon and bringing our two financial communities together today.
Although HSBC has its headquarters in London and branches around the globe, the bank has deep roots in Hong Kong that date back to 1865.
Over the years, HSBC has kept pace with Hong Kong's remarkable trajectory. Today, it is one of the world's leading banks and among 70 of the world's largest 100 banks with operations in Hong Kong.
These banks, and others, have helped to establish Hong Kong as the world's fifteenth largest international banking centre and third largest in Asia by value of external transactions.
Although this is quite an achievement for a small city such as ours, it may not come as a complete surprise here. After all, just last week the president of Brazil's Central Bank (Henrique de Campos Meirelles) attended an investment Summit in Hong Kong. The Summit was aimed at promoting Brazil's financial sector in Asia. It attracted more than 300 financial market players from around Asia, including Mainland China.
This underscores the enthusiasm for closer financial links between Hong Kong and Brazil and between Asia and South America.
I would like to take this opportunity to talk about Hong Kong's role as a global financial centre in the Asian time zone, and how we can forge closer links between our two financial services sectors.
The recent financial crisis has shifted the economic centre of gravity from West to East, and from established markets in the US and Europe to emerging markets, notably in Asia and South America.
Both Hong Kong and Brazil have come through the economic turbulence in relatively good shape. I believe that working together, we will be able to take advantage of this new economic order.
A sound banking system with well-capitalised lending institutions is essential to maintaining a stable and trusted financial system during uncertain times – a lesson well learned by both our banking sectors.
Since our reunification with Mainland China in 1997, Hong Kong has continued to nurture all the key ingredients for a successful financial sector under the "One Country, Two Systems" principle.
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 percent profits tax. Salaries tax is capped at 15 percent. There is no VAT, no GST, no capital gains tax and no death duties. Only income sourced in Hong Kong is taxable in Hong Kong.
With low taxes, a free and open economy, and an independent common law legal system, Hong Kong has become the preferred platform for Chinese companies to go global, and for international firms to enter the China market.
I should also mention that we have been ranked as the world's freest economy for each of the past 16 years by the US-based Heritage Foundation.
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 Brazil.
Under "One Country, Two Systems", Hong Kong and its companies enjoy both "China advantages" and "global advantages".
This is an important element of our growing reputation as a fund-raising centre in Asia.
Hong Kong has good and reliable access to fast-growing money markets in Hong Kong, in Mainland China and throughout our region.
Total funds raised in Hong Kong through IPOs last year exceeded US$31 billion, which made Hong Kong the number one place for IPO fund raising. So far this year, the figure has already topped US$40 billion.
Hong Kong's 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. About two-thirds of listed firms are Mainland Chinese enterprises.
Brazilian 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.
Two weeks ago, Brazilian mining giant Vale SA was given regulatory approval to offer shares on the Hong Kong stock market. The company listed on our stock market this morning Hong Kong time (about midnight in São Paulo). This paves the way for the company's possible Hong Kong listing by the end of this year.
Vale is already listed here in São Paulo, as well as in the United States and Europe. And because Hong Kong is 10 hours ahead of São Paulo, listing in our city would mean 24-hour trading for Vale shares.
Vale will also be the first company to issue Hong Kong depository receipts, since new rules were introduced two years ago.
I encourage more Brazil's resource companies to consider a Hong Kong listing. Don't forget that our nation is a major consumer of mining commodities while Brazil is a major exporter. Hong Kong is the ideal intermediary between two perfectly complementary giant players.
Another future trend for Hong Kong's financial services sector relates to the Mainland currency, the Renminbi.
Hong Kong, with its international connections and free flow of capital, has an important role to play in the Mainland's financial reform process.
In June this year, the Central Government in Beijing gave the go ahead for companies around the world, including Brazil, to settle trade with the Mainland using Renminbi.
In Hong Kong we have a great deal of experience in streamlining the two financial systems in Hong Kong and in Mainland China.
This experience is put to good use in establishing Hong Kong as the offshore centre for Renminbi business, including Renminbi trade settlement.
Although these are still early days for Renminbi trade settlement, Hong Kong already handles some 75 percent of cross-border trade settlement in Renminbi.
Since 2004, HSBC together with most retail banks in Hong Kong have been offering a wide range of Renminbi services. Today, these services include Renminbi deposit-taking, currency exchange, remittances, credit and debit cards and checking accounts.
New Renminbi products and services are being introduced regularly.
In 2007, Hong Kong became the first and only place outside the Mainland to have a Renminbi bond market. These Hong Kong-issued Renminbi bonds have since earned the nickname of "dim sum" bonds, after a famous style of Cantonese cuisine that we love to eat in Hong Kong.
Since February this year, any company in the world can tap the "dim sum" bond market to help finance their Mainland operations. Perhaps this would go down well with Brazilian firms wishing to boost their Renminbi capital flows. McDonald's has done it, and it seems that Caterpillar may follow suit.
I hope Brazilian firms will take full advantage of these new Renminbi developments and Hong Kong's financial infrastructure to settle their Mainland trade and build up their Renminbi portfolios.
Ladies and Gentlemen, the Hong Kong Government will continue to work with the Mainland authorities to maintain our strong position as China's global financial centre.
This partnership is good for our city, good for our nation and good for our trading partners here in São Paulo and around the world.
I hope that you will be able to find time to come and visit us in Hong Kong soon.
I can assure you that the future is bright in Asia and the "dim sum" in Hong Kong tastes great.
Thank you very much.
Ends/Thursday, December 9, 2010
Issued at HKT 08:59
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