|
Understanding Mainland Financial Reform Reform and liberalisation on the Mainland present a range of opportunities for Hong Kong's financial markets. We all are keen for Hong Kong to take full advantage of the business opportunities offered by the continuing reform and liberalisation on the Mainland of China. Very soon this rapid process of reform will receive a significant boost as China enters the World Trade Organisation. Many of the details of the process will also be formalised and enshrined in a definite timetable. This augurs well for Hong Kong, in particular for our further development as an international financial centre. I am sure the forward-looking members of our financial community are quite capable of positioning themselves without the need for any involvement of government generally, or of the regulators in particular. Nevertheless, we in the HKMA have developed a comprehensive analytical framework that may enable opportunities to be identified systematically and assessed realistically, and I would like to share it with those interested. In this context, it is useful to consider financial
sector business as consisting of four characteristics, namely,
the Currency denomination, the Location for conducting
the business, the Intermediation channel in which that business
can be classified, and the Customers served. These four characteristics
can further be broken down as follows:
Simple arithmetic tells us that there are 48 (2 by 2 by 3 by 4) combinations of these four characteristics, representing 48 areas of business. It should not be difficult to examine these areas exhaustively and see what business opportunities are there for Hong Kong. For example, we can ask ourselves what roles Hong Kong can play, if any, in RMB banking business on the Mainland targeted at resident individuals (the shaded parts in the table show how this works). Or, by picking other combinations of characteristics from the four columns, we can ask the same question in respect of, for example, foreign currency equity business in the Mainland targeted at non-residents, or the marketing of foreign currency debt issued overseas to Mainland residents. The exercise itself is intellectually challenging. Further, in examining these areas, we should be realistic, and mindful of the policy changes on the horizon, and I would suggest distinguishing and planning in accordance with the following likely stages of development:
If you go through this exercise exhaustively, as we have done, you will realise that quite a number of business opportunities will be opened up along with, and soon after, the accession to WTO. A great deal more opportunities still will be staring us in the eye if there is full convertibility of the RMB. Although this will come only slowly, and perhaps gradually rather than abruptly, given the serious risks to systemic stability with globalisation, there is I think scope to be imaginative in our approach. I can see the possibility of structuring arrangements that involve well-controlled exceptions to the policy on convertibility to an extent likely to be acceptable to the authorities. I am sure proposals of this nature will be looked upon by the Mainland authorities objectively and sympathetically, because they, like monetary authorities in any other jurisdiction, have an interest in promoting the efficient financial intermediation that is so important for economic growth and development. If the risks of introducing policy exceptions, not necessarily just in respect of currency convertibility, are clearly identified, measured and managed, the chances of successfully opening up potential areas of business opportunities ahead of time are there. I do not need to be specific about the
potential business areas that we have come up with as a result of
conducting this exercise, for the simple reason that our business
acumen within the HKMA is unlikely to surpass that of practitioners
in our financial markets. Nevertheless, I hope that this somewhat
tedious but comprehensive analytical tool will prove to be useful
to them in their search for business opportunities in the financial
field, as reform and liberalisation continue in the Mainland.
Joseph Yam
Related Speeches: Click here for previous articles in this column.
|
