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Following is the speech by the Chief Executive, Mr Donald Tsang, on "Seeking Stability in an Unstable World" at the Asia-Pacific Economic Cooperation CEO Summit in Honolulu this morning (November 11, Honolulu time):
Distinguished guests, ladies and gentlemen,
Good morning.
It is my great pleasure to be here. Thank you for the opportunity to speak with you at this dialogue. No doubt we are all seeking a little more financial stability in an unstable world.
I had the honour of speaking at this CEO Summit in Singapore in 2009. At the time, Hong Kong was recovering reasonably well from the effects of the global financial tsunami. Two years on and we are still not out entirely of the woods. The global outlook remains uncertain.
Hong Kong, of course, is not alone. As economies around the world stumble to some degree or another, I am reminded of the old expression, "No one can do everything, but everyone can do something".
So, allow me to talk about some of the things Hong Kong is doing to maintain financial and economic stability. First, an overview of the current situation.
In recent months, downside risks to the global economy have increased substantially. The sovereign debt crisis in the Euro Zone remains a threat to economic growth and financial stability in Europe and beyond. I am pleased to see a recent upturn in the US economy, although the road back to full health is likely to be a long and winding one.
In September, the International Monetary Fund trimmed its projected global economic growth forecast to 4 percent for both 2011 and 2012. That is down from 5.1 percent growth last year. Global financial markets have experienced sharp fluctuations lately, and they remain jittery.
Banks have seen their stock prices plunge and credit ratings downgraded. Investors are switching to a "risk-off" mode and shifting to safer assets, pushing stock markets worldwide lower.
Asia has been bucking the global trend by maintaining relatively strong, vibrant economies. Growth figures have been comparatively strong in our region. Yet, the adverse developments in other parts of the world will inevitably take a toll.
Hong Kong's economy expanded by 5.1 percent in the second quarter of this year, following 7.5 percent growth in the first quarter. Our unemployment rate is 3.2 percent, the lowest in over a decade.
Our GDP growth forecast for this year of 5 percent should be attainable.
As a small externally-orientated economy and international financial centre, Hong Kong's best protection against the current instability is to keep our own house in order. We must also remain vigilant to the highly volatile market conditions worldwide. The best way to achieve this is to build on our strengths and shore up our more vulnerable areas.
The global financial crisis has revealed certain weaknesses associated with the credit rating industry. To enhance supervision of credit rating agencies, or CRAs, we have amended our laws to introduce a new regulatory regime for CRAs operating in Hong Kong.
Under the new regime, both corporate CRAs and their individual rating analysts have to be licensed by our Securities and Futures Commission. They are also subject to a CRA Code of Conduct. The changes have been in place since June.
In regards to short selling, we already have a robust regulatory regime, including banning naked short-selling and the uptick rule. We are working on a new short position reporting regime to be implemented next year. This will assist regulators in monitoring the overall market situation and help maintain market stability.
Hong Kong is implementing G20 commitments on regulating the over-the-counter (OTC) derivatives market. We are working with our financial regulators to develop a legal framework for implementing the mandatory clearing, reporting and trading requirements in Hong Kong.
On mandatory clearing, we see the need for greater international co-ordination to address the challenges related to access and recognition of Central Counterparties (CCPs). Otherwise, it would be impossible for some market participants to conduct transactions with an overseas counterparty. This could result in a withdrawal of liquidity from the region and seriously impair the global effort in pushing forward reforms to the OTC derivatives market.
Hong Kong will continue to participate in international discussions through the Financial Stability Board and the International Organization of Securities Commissions.
On banking, we have submitted to our legislature the necessary legislative amendments required to implement the latest Basel Accords in a timely manner.
We expect the new regulatory requirements under Basel 2.5 and Basel III to make our banking system more stable and robust, thereby contributing to the competitiveness of our financial markets and our economy.
For the insurance sector, we have proposed setting up an Independent Insurance Authority. We have completed the public consultation exercise and will continue to engage the local insurance industry and other stakeholders on details of the proposal.
We are also working on a proposal to establish a Policyholders' Protection Fund as a safety net for policyholders. This will also enhance public confidence in our insurance industry and its competitiveness.
We will establish a Financial Dispute Resolution Centre next year, and plans are afoot to set up an Investor Education Council to enhance investor protection.
I have mentioned some of the things we are doing to address the more vulnerable areas in our financial system. Maintaining stability is also about building on our strengths and grasping new opportunities.
Once again this year, Hong Kong was ranked second globally in the World Bank's "Ease of Doing Business Report", after Singapore.
We are undertaking a major law reform project to rewrite our Companies Ordinance. This will further streamline and modernise regulation while helping to cut compliance costs and enhance corporate governance.
As well as providing a business-friendly environment, it is important to seek out new development opportunities. One of Hong Kong's most important roles as China's global financial centre is to promote off-shore business using the Mainland currency, the Renminbi.
Developing Hong Kong as the premier off-shore centre for Renminbi business is explicitly outlined in the National 12th Five Year Plan which was adopted by the Central Government in Beijing earlier this year.
We are making good progress.
Since the launch of Renminbi banking in Hong Kong in 2004, the scope of business and the pool of Renminbi liquidity have expanded rapidly. We have embraced the introduction of Renminbi bonds since 2007 and Renminbi trade settlement since 2009. Banks in Hong Kong can now offer a range of Renminbi services to personal and corporate customers.
By the end of September this year, total Renminbi deposits had reached 622 billion Renminbi or US$97 billion. Also, Renminbi trade settlement handled by Hong Kong banks is estimated to exceed 1.5 trillion Renminbi this year.
Since August, the Central Government of China has announced and implemented a range of initiatives that will help build Hong Kong's strength as the nation's off-shore centre for Renminbi business.
We look forward to playing a full and pivotal role in the gradual liberalisation of the Mainland currency. Not only will this firm up Hong Kong's financial services sector in times of global uncertainty, it will – I believe – provide stability and opportunity to the global financial system.
Ladies and gentlemen, seeking stability in an unstable world is a collective task and obligation.
Thank you for this opportunity to share with you some of the ways Hong Kong is shoring up its financial services sector. We will continue to play to our strengths and iron out our weaknesses.
This, I believe, will add a little extra stability not only to Hong Kong but also to our partners in the APEC family and around the world, with whom we are ever more deeply connected.
Thank you.
Ends/Saturday, November 12, 2011
Issued at HKT 06:19
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