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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Credit Suisse Asian Investment Conference 2016 today (April 8):
Jack (So), ladies and gentlemen, distinguished guests,
Good afternoon.
I am delighted to have this opportunity to speak to you all on this, the last day of the Asian Investment Conference. My thanks to Credit Suisse for organising this important and useful forum. Done once, it is a considerable accomplishment. Done 19 times in a row, I call it a habit. So I am truly grateful to you good people for again bringing a wealth of distinguished opinion leaders and influential investors to Hong Kong, Asia's premier international financial centre.
Jack wanted me to speak on the topic of "A Vision for the Future of Hong Kong". So what came to my mind right away was the vision of Luke training with his Master, and those famous words of Yoda, and I quote for you, "Difficult to see. Always in motion is the future." Unquote. That, by the way, if you remember, was from Episode V: The Empire Strikes Back, that was showing back in 1980, that shows my age.
While in that movie, Yoda, the legendary Jedi, in Hong Kong we call them the Sifu, with the near almighty Force, had trouble with the future, I believe, in reality, many of us here today can now see quite clearly the dark side of the current economic galaxy.
After all the panels and keynotes over the past few days, I assume there is broad consensus in this room that global economic growth is expected to remain modest and uneven in 2016, with significant downside risks looming.
Of particular threat, it seems to me, is the increasingly complicated monetary environment, given the uncertain pace of the US interest rate hikes and divergent monetary policies among major central banks.
These, together with associated uncertainties, could keep the global financial markets volatile, slowing the already-weak global macro-environment. Geopolitical tensions in various parts of the world are also causes for concern, and so is one "odd" businessman in North America with a trademark hair style and serious ambition. We also have someone in Asia with a trademark hair style and serious ambition who is causing us some concern as well.
All that, and more, is likely to constrain Hong Kong's economic performance, certainly in the near term. We also need to stay alert to the sustained slowdown in our exports as well as the numbers of our inbound tourists; that could have repercussions on the overall economy and our job market. The uncertain global economic outlook, coupled with asset market fluctuations, may hamper local consumption and investor sentiment as well.
In light of this daunting macro-economic environment, I forecast the Hong Kong economy to grow by 1 to 2 per cent this year. That is a drop from last year's 2.4 per cent and the 3.4 per cent that we have been able to achieve over the past decade.
To help us get through the anticipated difficult times ahead, I have in my 2016-17 Budget that was announced at the end of February, allocated nearly HK$39 billion for tax and short-term relief measures. The package of measures, together with other spending initiatives in the Budget which should provide fiscal stimulus effect of boosting our GDP by 1.1 per cent, should help enhance local consumption and support local businesses, in particular our small and medium-sized enterprises.
No doubt, the world's economies will all face substantial headwinds in 2016 amid the unsteady and uncertain global economic outlook. Hong Kong would not be an exception. However, I firmly believe that the future of Hong Kong's economy is in no way as negative as some international rating agencies have recently suggested. And I am certain all of you can see the reasons.
In its Staff Report released in January this year, the IMF concluded that Hong Kong's sound economic fundamentals, robust financial regulatory regime, resilient financial and banking sectors, as well as our strong fiscal position, will continue to enable the economy to embrace the challenges ahead.
All these strengths that we have, together with the Linked Exchange Rate System that we have maintained since 1983, give Hong Kong strong buffers to deal with near-term challenges, while laying the foundation for steady growth and healthy job creation in the medium term.
Looking ahead, Asia, and in particular China, will continue to be the main engine of growth for the world economy. Based on the data from the IMF, the Mainland economy contributed 43 per cent of world trade growth and 35 per cent of global economic growth in 2014. The Asian economies, with many of them being emerging markets with huge potential, will continue to be a key source of growth and stability for the global economy in the 21st century.
Since the 2008 financial tsunami, the global economy has undergone sweeping changes. The Asian markets are now playing a much more important and influential role as the global economic centre of gravity shifts towards the East.
At the same time, breakthroughs in innovative technologies, in the form of information and communication technology, AI (artificial intelligence), biotech, and robotics, have brought about paradigm shifts in different economic and social spheres, changing our daily lives as well as our business modalities.
These two new forces together have changed the global economic landscape, gradually carving out a "new global economic order" that offer us a new direction as well as a new modality of growth, bringing at the same time new opportunities for both traditional industries as well as emerging industries.
Under this "new economic order", Hong Kong will continue to take full advantage of our location at the heart of Asia, our well-oiled financial infrastructure and well-recognised regulatory regime, and continue to play a vital role in the global financial market, alongside the other major centres of finance.
Our extensive business, cultural as well as social ties to the Mainland and the enormous Asian market, give us a unique edge in directing capital between Asia and the rest of the world.
Hong Kong's strength in IPO fund-raising, banking services and Renminbi business is not such a well kept secret any more. Last year, we ranked first, globally, in equity funds raised through IPOs (initial public offerings). Over 70 of the top 100 global banks are here and operating well in Hong Kong. And our banking system handles some three-quarters of the cross-border Renminbi transactions.
According to the United Nations World Investment Report 2015, Hong Kong, for the first time, came second in global foreign direct investment, with record amounts of inflows and outflows, at US$103 billion and US$143 billion respectively.
Our asset-management sector will continue to benefit from economic growth and wealth creation in Asia, as well as the Mainland's increasing financial market liberalisation. At the end of 2014, assets under management here reached a record US$2.3 trillion, a year-on-year growth of 10.5 per cent. Funds from overseas investors continued to increase and recorded growth of 9 per cent in 2014, accounting for over 70 per cent of the fund management business.
And that's only the beginning. The Government and our regulators continue to remove limitations in our legal structure, continue to broaden the product base and facilitate a more enabling tax environment. Our goal is to sharpen Hong Kong's competitive edge as a premier international asset-management centre.
We have allowed private equity funds to enjoy profits-tax exemptions available to offshore funds. A new legal framework introducing an open-ended fund company structure is also in the works.
This, more and more, will help attract funds to Hong Kong, broadening the variety and scope of the business, while facilitating investor portfolio allocation.
We welcome more multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong. To that end, we are working closely with our legislature to allow interest deductions in profits tax for intra-group financing business of corporations; we are looking, too, to reduce the profits tax of qualifying corporate treasury centres by 50 per cent.
As China's global financial centre, we shall continue to work with the Mainland authorities to explore ways to open up new channels for the two-way, cross-boundary flow of Renminbi funds, in order to tap the massive opportunities arising from the internationalisation of the Renminbi.
The launch of the Shanghai-Hong Kong Stock Connect in late 2014 and the introduction of the Mainland-Hong Kong Mutual Recognition of Funds Arrangement last year, have raised the mutual access between the Mainland and Hong Kong capital markets to another high level.
And then there is the grand and visionary Belt-Road initiative, spearheaded by President Xi in 2013. This initiative, which aims to promote economic, political and cultural connectivity as well as co-operation among the 60-plus countries spanning Asia, Africa and Europe, will provide new impetus for Asia's longer-term development.
Through the Belt-Road initiative, we expect to see even stronger economic and trade activities, deepening financial integration, as well as soaring investment in infrastructure, such as railways, highways, ports and power plants, in the entire region.
Hong Kong's financial services sector can contribute to, as well as benefit from, the financing of these infrastructure projects. Indeed, I have asked the Hong Kong Monetary Authority to establish an office, kind of a facilitating platform, to help finance Belt-Road infrastructure projects and co-ordinate the interests of investors, banks and the financial services sector, in putting together financing packages for the Belt-Road infrastructure projects.
And the Hong Kong Government's third sukuk will be issued, at an appropriate time, to meet the financing needs of the Islamic markets. There are, to be sure, a good many of them along the Belt-Road.
The enthusiastic response to the establishment of the Asian Infrastructure Investment Bank, the AIIB, underlines the widespread interest in and enormous potential of the Belt and Road. The AIIB, which just commenced operation only in January this year, will in time become the key financial institution supporting infrastructural development along the Belt and Road.
Hong Kong will continue to discuss with the AIIB and the relevant authorities regarding Hong Kong's participation in AIIB's work, and on how our expertise in capital market financing, our expertise in asset management and dispute resolution can contribute to the work of the AIIB. So far, responses from the authorities have been encouraging.
Under the new economic order, the future also rests with innovation and technology. In the world of financial services, the application and development of Fintech will definitely be the focus of this ongoing digital revolution. Some studies have predicted that global investment in Fintech will surge from US$12 billion in 2014 to more than US$46 billion in 2020.
And I believe that you will agree that Hong Kong has what it takes to make Fintech successful here. I have announced a host of measures in my recent Budgets to nurture the development of Fintech in Hong Kong. These include the creation of a dedicated team, under Invest Hong Kong, to help start-ups, investors and R&D institutions establish a presence in the city. They also include programmes to nurture the next generation of Fintech talent, the enhancement of communications with the Fintech community, as well as the development of cutting-edge technologies for financial services, from cyber security to "Blockchain."
Hong Kong now counts a dozen of private innovation labs, incubators and accelerator programmes, including the renowned Accenture, Nest as well as the Fintech innovation lab launched by the Commonwealth Bank of Australia earlier this year. These projects are supplementing nicely the many programmes offered by government-funded organisations, such as Cyberport in Hong Kong.
The Cyberport, by the way, will roll out targeted measures to support Fintech start-ups, including a dedicated space of 3,000 square metres, support to 150 start-ups over the next five years and Fintech training camps at overseas institutions for our university students.
All in all, we shall encourage the growth of talent in finance, entrepreneurship and technology, promoting Hong Kong as a Fintech hub, consolidating the competitiveness of our financial services industry and offering consumers new options in managing their money. Their future.
So ladies and gentlemen, Hong Kong, of course, has long punched well above its weight in the global economy, thanks to our resourceful, endlessly adaptable, human capital. Thanks, too, to our highly internationalised and transparent system girded by the rule of law and an independent judiciary. Our simple and low-tax regime as well as the level playing field have also attracted hundreds of overseas companies to set up their businesses here in Hong Kong every year.
Contrary to some of the somewhat misguided opinion out there, the close linkage between the economies of Hong Kong and the Mainland would continue to keep help realise the massive potential. It isn't "China risk", it is indeed "China opportunity".
As we continue to consolidate Hong Kong's competitive advantages and maintain the strength in our systems, we are in a good position to benefit from the structural rebalancing in the Mainland's economy from investment to consumption, as the increase in demand in services will create new business opportunities for a service-oriented economy like Hong Kong.
I am confident that Hong Kong is on the right track in moving forward, and in sustaining Hong Kong's long-term prosperity. Even without lightsabers in your hands, I am certain the Force is with you, right here in Hong Kong, in Asia.
I wish you all the best of business in 2016, and I look forward to seeing you again here next year at another Asian Investment Conference.
Thank you very much.
Ends/Friday, April 8, 2016
Issued at HKT 16:26
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MP4 format