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Following is the speech by the Financial Secretary, Mr John C Tsang, at HSBC luncheon in Washington, DC, today (October 7, Eastern Standard Time):
Ms (Helen) Wong , Mr (Kevin) Fromer, distinguished guests, ladies and gentlemen,
Good afternoon.
It's my great pleasure to be here with you in Washington, DC, the capital of the United States of America, and to have landed during what seems to be a collective pause in the city of the White House and the red carpet.
Yes, Pope Francis and President Xi Jinping have gone home. The Wizards and the Capitals have yet to play their season-opening games, while the Redskins are winding things down - a little early this autumn. And, in the game of politics, the major leaguers in next week's primary debates are busily fine-tuning their foreign-policy plans and tributes to Trump and Clinton.
So, yes, it seems I have you all to myself today. Or at least for the next few minutes. A chance for me to update you on Hong Kong's progress.
The Federal Reserve's decision last month to keep the lid on a rate rise was cheered in some quarters. Of course, the FOMC may - or may not - hit the rate reset button later this month. All that "will-they-or-won't-they" is good water-cooler shop talk. Beyond that, the uncertainty it feeds is bad for business, whether it's your business or the world's business.
As for Hong Kong, I guess that depends on the size of your mortgage. That aside, our robust economic fundamentals and our resilient financial system as well as our superb business environment would enable us to cope with whatever comes our way.
Hong Kong has strong economic fundamentals that are underpinned by a sustained current-account surplus, strong fiscal and foreign exchange reserves, and a huge international investment position: some three times our GDP in 2014.
In spite of the recent volatility and major fluctuations in the financial markets, our robust market infrastructure and regulatory regime ensured that the Hong Kong market was trading and operating in an orderly and smooth fashion. The currency and interest rate markets remain stable. The banking system has no liquidity issue. Ask Helen.
In short, we shall manage just fine this year and well into the future. I forecast the growth of the Hong Kong economy to be somewhere in the 2 to 3 per cent range for the full year of 2015. Over the medium term, I believe we shall be entering the era of "new normal", where more advanced economies like Hong Kong will maintain a fairly low level of growth. I expect Hong Kong's real GDP will be growing by about 3.5 per cent a year in the medium term from 2016 to 2019.
I am confident that Hong Kong will continue to thrive as our economy becomes more integrated with that of Mainland China, and by taking advantage of the growing economic strength in Asia as a whole.
While the pressure of growth deceleration in China seems to have built up of late, any risk of a hard landing in Mainland China remains pretty low. Indeed, IMF Managing Director Christine Lagarde emphasised that the Mainland has the necessary policy tools and financial buffers to manage its economic transition. I second that sentiment. I believe that Mainland authorities have ample policy room to address their current challenges.
Down the road, the continuing reform of the economy will pay dividends. For Mainland China, and for Hong Kong, too.
After all, Hong Kong is still the only place in the world where China advantages and global advantages come together. That's our "one country, two systems" ticket to the future.
Indeed, the twin engines of China and the world are helping Hong Kong's rise as a premier asset management centre. Last year, our combined fund-management business hit a record high of more than US$2.2 trillion.
The Mutual Recognition of Funds initiative between Mainland China and Hong Kong became operational in July, allowing Mainland and Hong Kong funds to be offered directly to retail investors in each other's markets.
In short, it's a breakthrough, and should broaden investment for both sides. In the long run, we expect more funds to be attracted to Hong Kong, sharpening Hong Kong's competitive edge as a premier international asset management centre.
It will also help promote the internationalisation of the Renminbi, reinforcing Hong Kong's position as the world's pre-eminent offshore Renminbi centre.
No doubts there. At the end of August, Renminbi deposits and certificates of deposit in Hong Kong, as just mentioned by Helen, totalled approximately 1 trillion yuan.
We offer a full range of Renminbi services, from trade settlement and investment, to financing and asset management. Rather lucrative services for our banks. Ask Helen.
Hong Kong is also the first place outside Mainland China to develop a Renminbi bond market. We call them "dim sum" bonds. Over the years, companies such as McDonald's, Caterpillar and Unilever have taken advantage of the opportunity, alongside the World Bank, the Asian Development Bank and other international financial institutions.
From 2007 to August 2015, Renminbi bond issuances in Hong Kong totalled some 658 billion yuan.
Hong Kong has been responsible for the lion's share of Renminbi trade settlement since its beginnings in 2009. Indeed, the amount handled by banks in Hong Kong last year came in at about 6.3 trillion yuan, a headline-grabbing increase of 63 per cent, year on year.
The Renminbi, according to the latest report, has just overtaken the Japanese yen to become the world's fourth most-used currency for payment. And Hong Kong manages about 70 per cent of that global Renminbi payment.
Rest assured, we are doing everything we can to maintain - and expand on - that enviable advantage.
Last year, Hong Kong continued to attract flows of business and investment. Our stock market ranked second, globally, in funds raised through initial public offerings, just behind the United States. At the end of August this year, more than 1,800 companies were listed, including Mainland and overseas companies. More will follow. The Hong Kong Exchanges and Clearing Limited has streamlined its listing process for overseas companies, accepting more overseas jurisdictions as places of incorporation.
Nearly 7,600 overseas and Mainland companies have set up in Hong Kong. They like the Hong Kong advantage, I guess, including, I think in particular, our low and uncomplicated tax regime. That, by the way, should soon become even more attractive for multinationals. In the next legislative session that will begin in a week or so, we plan to introduce a Bill allowing interest deductions for corporate treasury centres; it would also reduce profits tax for specified treasury activities by half.
Our independent judiciary and unwavering adherence to the rule of law is another regional advantage, as is our multicultural, multi-talented pool of services professionals.
No less reassuring is Hong Kong's free flow of information and capital - and the freedom to run a business without fear or favour. That, I should add, is no mission statement. It's an everyday reality in Hong Kong. And you don't have to take my word for it.
In January, the Washington-based Heritage Foundation named Hong Kong the world's freest economy - for the 21st year in a row. And, just last month, Hong Kong topped the Cato Institute and the Vancouver-based Fraser Institute's annual Economic Freedom of the World report. Hong Kong has done so, by the way, every year since the report came out, back in 1996.
Couple that with our deepening economic relations with Mainland China, and you can see the future in Hong Kong all the way from Washington.
Better still, I invite you to see it for yourself. A good time to do that is at the annual Asian Financial Forum (AFF). AFF 2016 will take place on January 18 to 19. The region's signature financial event, the Forum will bring you up to date on just about every aspect of the region's finance and business, and how it impacts on you, your capital and your business. Ask Helen.
My thanks to Helen and HSBC for hosting today's luncheon. My thanks, as well, to all of you: for joining me today - and for your continuing interest in Hong Kong.
Thank you.
Ends/Thursday, October 8, 2015
Issued at HKT 03:33
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