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Following is the speech by the Financial Secretary, Mr John C Tsang, at a luncheon of the National Committee on United States-China Relations in New York today (October 7, Eastern Standard Time):
Mr (Stephen) Orlins, ladies and gentlemen,
Good afternoon.
It is my great pleasure to be here, to speak with people who are knowledgeable about China and Hong Kong, and who think about this subject as much as I do.
In fact, it is almost 50 years since the National Committee was founded to provide a forum for bringing about a fresh exchange of ideas, much needed face-to-face interactions and essential constructive dialogue in fostering the US-China relations, which you will agree is probably the single most important bilateral relationship in the world today.
In 1966, the year the National Committee was founded, I was a first-year student at Stuyvesant High School here in New York. Back then, the school was still located on 15th Street, a couple of blocks away from Washington Irving High School, and I can tell you that any dialogue that I had back then on any relation had little to do with Washington or Beijing.
That has changed. Indeed, my interest, and Hong Kong's interest, rose immeasurably with Mainland China's economic reforms and opening-up policy, beginning in the late 1970s. Today, the Mainland is the world's second-largest economy, as well as the world's largest holder of foreign exchange reserves.
Mainland China has been actively pursuing, as a matter of national policy, market-oriented reforms, including the liberalisation of the use of Renminbi for cross-border transactions. As an international financial centre, and the logical platform and principal market for China's business transactions, Hong Kong is playing a significant role in these reforms. And for good reasons.
Our simple tax system, independent judiciary, talented professionals and sophisticated financial markets, among many other strengths, give us advantages that no one else can bring to China. We are both the testing ground as well as the firewall for the liberalisation of China's financial markets, protecting the Mainland financial market against exposure to volatility in the international arena.
Indeed, Hong Kong is the only place in the world where global advantages and China advantages converge. This singularity is what makes Hong Kong China's window, and China's gateway, to the world's financial markets and investors.
So it should not come as any great surprise to anyone that Hong Kong is the world's premier offshore trading hub for Renminbi business. The opportunity emerged just 10 years ago when Hong Kong started providing Renminbi-denominated banking services to our customers. Since then, our Renminbi business has evolved from banking for personal accounts to cross-border trade settlement, cross-border direct investment and portfolio investment. In 2011, the Renminbi Qualified Foreign Institutional Investor scheme, the so-called RQFII scheme, was introduced. That opened the door to portfolio investment in Mainland China using offshore Renminbi.
Through cross-border trade, direct investment and portfolio investment, Hong Kong is linking the offshore and onshore Renminbi markets, driving the circulation of Renminbi in the international markets.
At the end of July, Hong Kong's Renminbi liquidity pool amounted to more than 1.1 trillion yuan. That is 3.5 times more than the level at the end of 2010. Last year, banks in Hong Kong handled Renminbi trade settlement totalling 3.8 trillion yuan - 10 times that in 2010. Today, companies from around the world, including the US, can settle their trade with Chinese enterprises using Renminbi.
Our strong liquidity pool allows us to accommodate a wide range of Renminbi investment products, from debt securities to exchange-traded funds and bonds. To date, different US banks, firms and other institutions have issued Renminbi denominated bonds in Hong Kong to raise funds for the expansion of their China operations, including McDonald's and Caterpillar.
And we are trying to make it even easier for you to do your Renminbi business with us. Beginning on October 1, we have extended the operating hours of our RMB Real Time Gross Settlement system. It is now open 20 and a half hours a day.
I must mention also the Shanghai-Hong Kong Stock Connect, which is expected to be launched any time now. Under the programme, investors from Hong Kong and around the world will be able to buy some 570 Shanghai-listed shares, directly, for the first time, while Mainland investors will be able to purchase more than 260 Hong Kong-listed shares. The programme should bring unprecedented opportunities to the financial world. Indeed, in a recent New York Times article on the Shanghai-Hong Kong Stock Connect, a senior Western banker in Asia called it the single most important development in China's intention to internationalise this market.
Ladies and gentlemen, what I have outlined is just the beginning of a full-length feature. And, yes, I see many sequels to come, though certainly not in the "Mission: Impossible" or "Infernal Affairs" genres. Time, as they say, will tell. But it is certainly a market opportunity flush with promise. Come join us in Hong Kong and explore the opportunities with us. You will find it worthwhile.
Finally, I should update everyone here about the recent protests in Hong Kong. I know that you are greatly concerned with the "Occupy Central" movement, and I am truly deeply touched with your understanding. The crowd, according to my latest report, has thinned out considerably, and the Government is actively engaging representatives of the student bodies. The city has returned to normality, more or less, and markets have continued to trade without any hitches. So far, some people have been injured but nobody seriously harmed. Both the protesters and the Police have been highly restrained, and that is an accurate portrayal and genuine display of the civility and decency of our society, and long, I hope, that will last.
Thank you.
Ends/Wednesday, October 8, 2014
Issued at HKT 10:50
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