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Speech by FS on "HK: A Global Financial Hub: Your Offshore Renminbi Centre" in Los Angeles (English only) (with photo)

     Following is the speech by the Financial Secretary, Mr John C Tsang, at a luncheon on "Hong Kong: A Global Financial Hub; Your Offshore Renminbi Centre" in Los Angeles today (November 7, Los Angeles time):

Distinguished Guests, Ladies and Gentlemen,

     Good afternoon.

     It is my great pleasure to join you all this afternoon.  I am deeply grateful to you all for taking time out of your busy schedules to join us today.

     It is very encouraging to see so many friends of Hong Kong here.

     I am also encouraged by some of the latest economic data coming out of the US.

     Thinking back over the recent economic turmoil, going back more than three years, I am reminded of a famous song by The Beatles.  In 1970, John, Paul, George, and Ringo, the foursome, sang about a Long and Winding Road.

     I believe this notion also sums up the trials, tribulations and frustrations of the global financial crisis so far.  Just when the path ahead of us seems to be clearing, another curve appears in the long road to recovery.

     Many believe that The Beatles only truly made the big time when they conquered the US market.  Likewise, our ambitions for Hong Kong to make it big as the premier offshore centre for Renminbi business lead me to your door here in LA.

     As the world's two largest economies, the relationship between our nations, the US and China, has implications for the rest of the world.  We are connected by new technology, by new ideas, by trade, finance and much more.

     As a city in China but outside the Mainland, we want more business people, investors, financial and legal talent from around the world to capitalise on Hong Kong's unique advantages.

     We are deeply connected to the Mainland by technology, trade and finance as well as a shared culture and common goals.  At the same time, Hong Kong has prospered as an open and free economy, in fact, the freest economy in the world since 1995 according to both the Heritage Foundation in the US and the Canada-based Fraser Institute.

     Given the theme of this luncheon, I would like to speak with you about our financial connectivity and the opportunities brought about by offshore Renminbi business in Hong Kong.

     This is a particularly exciting area for us.  Firstly, because Hong Kong is at the forefront of the Mainland's drive towards liberalising its currency.  Secondly, because Hong Kong is a well-established international business and financial centre in its own right.  And thirdly, because the opportunities brought about by Renminbi business are too important for Hong Kong and for businesses, investors, bankers and others around the world to miss out on.

     The Mainland's first foray into offshore Renminbi business was the launch of Renminbi banking in Hong Kong in 2004.  Since then we have all been on a steep learning curve.  We are learning to dovetail Hong Kong's financial system with that of the Mainland; we are learning more about the opportunities as well as the challenges of financial liberalisation; and we are learning to work on the same wavelength and at the same pace as our counterparts in the Mainland.  While most experts agree that full liberalisation of the Renminbi is still years or even decades away, the recent pace of development has quickened.

     Importantly, the National 12th Five Year Plan, which was adopted by the Central Government in Beijing earlier this year, clearly supports Hong Kong's development as China's global financial centre.  It also supports our city's role as the premier off-shore Renminbi business centre.  And it pledges to maintain Hong Kong's stability and prosperity under the principle of "One Country, Two Systems".  These areas are not mutually exclusive, but deeply connected.

     Under "One Country, Two Systems", Hong Kong maintains our own financial system with no restrictions on the flow of capital.  We also have our own common law legal system which is underpinned by an independent judiciary.  We have our own low and simple tax system; and our liberal immigration policies encourage talent from the US and elsewhere to come to Hong Kong and contribute to our community.

     These are all crucial ingredients for any global financial centre to thrive and grow.  And because our city enjoys both Hong Kong advantages and China advantages, it has become the ideal testing ground for the internationalisation of the Renminbi.

     I mentioned a little earlier that offshore Renminbi banking was launched in Hong Kong in 2004.  By 2009, total Renminbi deposits amounted to 60 billion Renminbi.  In the following two years, this figure has soared 10 times.  Today, Renminbi deposits in Hong Kong exceed 600 billion Renminbi and are expected to increase to over 1 trillion Renminbi by the end of this year.

     Our banks offer a broad range of Renminbi services to local and overseas customers.  These include checking accounts, remittances, credit cards, savings accounts and time deposits.

     Building on this experience, in 2007 Hong Kong became the first and only place outside the Mainland to have a Renminbi bond market.  This represented a new funding channel for foreign firms to finance their China operations.  Iconic US brands, including McDonalds and Caterpillar were among the first foreign firms to issue the so called "dim sum" bonds.

     Up to the end of September this year, there had been 95 Renminbi bond issuances with a total value of 159 billion Renminbi.

     As well as local and foreign firms, supra-national institutions, such as the Asian Development Bank and the World Bank, have issued Renminbi bonds.

     The Ministry of Finance in Beijing has issued sovereign bonds in Hong Kong on three separate occasions over the past three years.  During a visit to Hong Kong in August, Vice-Premier Mr Li Keqiang announced the launch of 20 billion Renminbi worth of sovereign bonds.  It was a huge boost to our bond market and a clear show of support in our development as the premier off-shore Renminbi centre.

     Another initiative announced by Mr Li during his visit to Hong Kong was for non-financial Mainland companies to issue Renminbi bonds in Hong Kong.  Since then, the Central Government has given approval for state-owned steel maker Baosteel to issue 6.5 billion Renminbi worth of Renminbi-denominated bonds.

     Other strategies announced by the Vice-Premier include:

     Allowing investments in the Mainland equity market through the RMB Qualified Foreign Institutional Investor scheme to a maximum of 20 billion Renminbi.

     And launching an exchange-traded fund with Hong Kong stocks underlying on the Mainland.

     All this represents new opportunities for the business community at home and abroad.

     My final point is about Renminbi trade settlement. In August, the Central Government expanded its Renminbi Trade Settlement Scheme to cover the entire Mainland. Companies around the globe can now settle their Mainland trade with partners throughout the country using Renminbi.

     Many foreign firms seek out the most efficient, reliable and experienced platform to settle their Mainland trade in Renminbi.  Currently, over 80 per cent of total Renminbi trade settlement is handled by Hong Kong banks.  In just the first eight months of this year, the amount was over 1.1 trillion Renminbi or some 10 per cent of total trade.

     By settling Mainland trade using Renminbi, US firms can enjoy greater efficiency in the business cycle.  They can also link up more easily with customers or suppliers in the Mainland who prefer the convenience of Renminbi trade settlement.

     Ladies and Gentlemen, it was The Beatles who also sang the famous line : "Money can't buy me love."

     This may be true, but I do believe that better understanding and stronger links between our financial systems can bring stability and opportunities to our economies and our communities.

     I encourage you to take advantage of Hong Kong's role as China's global financial centre to explore the possibilities and great potential of off-shore Renminbi business.

     Thank you very much.

Ends/Tuesday, November 8, 2011
Issued at HKT 11:50


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