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Following is the speech delivered by the Financial Secretary, Mr John C Tsang, at the luncheon hosted by the Institute for New Economic Thinking, the Hong Kong Association of New York and the Hong Kong Economic and Trade Office in New York at the Harvard Club in New York today (October 9, New York time):
Distinguished Guests, Ladies and Gentlemen,
Good afternoon.
It is my great pleasure to be here at the prestigious Harvard Club of New York.
First of all, I would like to thank the Institute of New Economic Thinking (INET) for co-hosting this event with the Hong Kong Association for New York and our Economic and Trade Office.
I must confess that I have actually spent quite a bit of my youth here in this part of the world. I attended Junior High School 60 on 12th street and Stuyvesant High School which was at that time still an all boys school located on 15th Street. Those were some of my happiest days, totally worry-free and fun-filled. Little did I know at the time that all this would provide the ideal preparation for a future career in politics in Hong Kong!
It is always great to be back here in the Big Apple. In fact, this event is a "return fixture" in many ways too.
I am delighted that INET chose to stage its 2013 Conference in Hong Kong in April, and I am pleased to have this chance to meet you here on your home turf.
Most sports teams will tell you that away fixtures are generally more difficult than home games. Team New Zealand discovered this the hard way in the America Cup last month. Team USA staged a massive comeback to win this highly coveted title in front of cheering crowds in San Francisco Bay.
When travelling to different places, you may have to get used to unfamiliar conditions, the home crowd may be against you and sometimes different languages, different cuisines and cultural eccentricities can throw a team off its stride.
It can be a similar story actually for international business and finance. Companies setting up overseas are often subjected to different conditions from local firms. There may be different tax rates or restrictions on capital or labour. Different languages, laws or ways of doing business can all conspire against companies in their attempt to enter unfamiliar markets.
In an increasingly complex globalised world, Hong Kong works hard to maintain a level playing field for all companies, whether local or foreign. There are no special advantages for local enterprises, red tape is kept to the minimum and you may be surprised to learn that about 90 per cent of companies in Hong Kong don't pay any taxes at all.
A transparent business-friendly environment has helped establish Hong Kong as a preferred destination for foreign firms wishing to establish a base in Asia. Not only do overseas companies know what to expect in Hong Kong, they also have the same opportunities as the local companies to reach the worldˇ¦s largest and most promising emerging markets of our time.
In Hong Kong, you don't need to know how to speak Chinese, Indonesian, Thai or Vietnamese to connect with these high-potential markets. You don't need to spend valuable time and money travelling around Asia, adapting to different business cultures and seeking out contacts in far-flung places.
Over many years, Hong Kong has become a truly international city, with a high concentration of foreign firms, a deep and broad pool of local and overseas talent and a business environment that is open, that is clean and easy to understand. While Chinese is widely spoken, English is the predominant language of our business community.
In our interconnected world, our vision is for Hong Kong to evolve as a centre for knowledge and information; a centre for comprehensive and high quality services and logistics and a centre for opportunity for local and foreign companies in Asia.
For Hong Kong, creating opportunity means keeping costs, risks and red tape to a minimum while upholding international standards and strong global connectivity.
These are some of the reasons why Hong Kong works hard to maintain its ranking as the world's freest economy, a position we have held for almost two decades according to both the Heritage Foundation here in the US and the Fraser Institute of Canada.
At the same time, Hong Kong is also becoming more closely integrated with the Mainland of China, which continues to be our single biggest competitive advantage.
In recent years, various forces have converged to thrust Hong Kong into the front seat for China's ongoing financial reform. These forces include a commitment by the Central Government in Beijing to promote the Renminbi as an international currency.
Hong Kong's role as our nation's offshore Renminbi centre is clearly set out in the National 12th Five-Year Plan. The timing of financial liberalisation has coincided with rapid economic growth in Mainland China while traditional markets in Europe and here in the US have had to cope with painful recessions. The resulting shift of the centre of economic gravity towards Asia has prompted economists to ask when, not if, the Renminbi will become an international currency.
Unfortunately, I don't have a crystal ball with which to accurately predict the future and answer this question. However, I do have a few facts and figures that give a good idea of the gathering pace of Renminbi business in Hong Kong.
Consider this. At end-July, total Renminbi deposits in Hong Kong, including certificates of deposit, amounted to 857 billion Renminbi, up from just 56 billion Renminbi in 2008.
In the first eight months of this year, there were 77 Renminbi-denominated bond issuances in Hong Kong, well on course to exceed the 100 issuances for the whole of last year.
And in the first seven months of this year, almost two trillion Renminbi worth of offshore Renminbi trade settlement was handled by banks in Hong Kong compared to two trillion Renminbi for the whole of 2012.
The number of insurance policies settled in Renminbi has increased from zero to over 140 000 in just the past three years.
More than 200 banks now participate in the Renminbi clearing platform in Hong Kong.
New developments this year include the Central Government's expansion in March of the Renminbi Qualified Foreign Institutional Investor scheme (RQFII) and the launch in June of the CNH Hong Kong Interbank Offered Rate fixing. Both initiatives will help increase the range and quantity of offshore Renminbi business in Hong Kong and in markets around the world via Hong Kong.
We look forward to spearheading Mainland China's financial liberalisation and promoting the development of offshore Renminbi business here in New York and in financial centres around the world.
So why Hong Kong? The answer is actually quite straightforward and simple.
Hong Kong is not only a truly international financial centre, ranked behind only London and New York in the Global Financial Centres Index, we also have our own financial system separate to that of Mainland China. This is possible under the principle of "One Country, Two Systems" for our city's development as a Special Administrative Region of China.
In Hong Kong, there are no restrictions on the flow of capital. We thrive on free flows of information, free flows of ideas as well as talent. We have effective rule of law and our common law legal system is underpinned by an independent judiciary.
Over many years, Chinese and overseas financial institutions have been drawn to the business-friendly conditions that we have in Hong Kong. Today, these firms are able to use their know-how and experience to seize the opportunities from our nationˇ¦s ongoing financial and economic reforms.
Naturally, Hong Kong is not the only place to benefit from the economic rise of Mainland China and Asia's emergence on the world stage. Competition obviously is becoming more intense all the time. Also, the days when cutting corners or fudging the facts could provide a competitive edge are long gone. Today, and for the foreseeable future, the key is to balance competition with collaboration, and fortify our basic strengths and advantages.
Hong Kong and Singapore are often perceived as fierce competitors in a do-or-die battle for international trade and finance. While we do compete with Singapore from time to time, we are also each other's fifth largest trading partners, so we need to co-operate with each other too. In fact, we recently started negotiating a Free Trade Agreement between Hong Kong and the Association of Southeast Asian Nations (ASEAN), which includes Singapore.
The Mainland city of Shanghai is another timely example. A small area of Shanghai was recently designated as a free trade zone. The exact impact of this groundbreaking initiative is yet to be established. But we also know that generating greater cross-border flows of Renminbi, whether in Hong Kong, Shanghai, London, New York or Kuala Lumpur, will create opportunities to grow the Renminbi pie bigger, and that will benefit all parties as a result.
Over more than three decades, Hong Kong has contributed to and benefited from Mainland China's opening up and reform process. A key part of this win-win formula involves an unprecedented free trade pact called CEPA. When it was launched in 2003, CEPA was the first such accord to be negotiated by the Mainland China. It continues to be the most preferential trade agreement signed by the Central Government, and is an important vehicle for breaking down barriers to our cross-boundary goods and services trade.
In August this year, I signed the 10th Supplement to CEPA which included more than 70 new preferential measures to assist Hong Kong firms to enter the Mainland China markets. And because we have a level playing field for business, foreign companies - including US companies incorporated in Hong Kong - can enjoy the full benefits of CEPA too.
Not long ago, Thomas Friedman, a well known economic commentator, described his notion of globalisation by proclaiming that "The World is Flat". Hong Kong has responded to the challenges of globalisation by ensuring an ever-more level playing field; a level playing field for business, for finance and for regional and international collaboration. We have found this to be the best way to create healthy and necessary competition; to nurture innovative thinking and to generate new opportunities for our sustainable development.
Ladies and Gentlemen, here, in the "city that never sleeps", I am often reminded of a quote by one of this nationˇ¦s Founding Fathers. According to the archives, Benjamin Franklin once told a young tradesman to: "remember that time is money".
With this in mind, I thank you all for taking time out of your busy schedules to be here today. May I also mention a couple of dates for your financial diaries. The 7th Asian Financial Forum will be held in Hong Kong on January 13 and 14, 2014. This Forum has become a major event for our region, and it would be great to see you there in January. We also look forward to hosting the APEC Finance Ministers Meeting in the Hong Kong Convention and Exhibition Centre on September 8 to 12 next year, with China as host nation of the 2014 APEC Summit.
Please do mark your diaries for these important events. I also hope that INET will come and visit Hong Kong again soon.
Thank you very much.
Ends/Thursday, October 10, 2013
Issued at HKT 08:28
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