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Following is the speech by the Chief Executive, Mr Donald Tsang, at the Asian Financial Forum 2012 on " Asia: Driving Sustainable Growth " at the Hong Kong Convention and Exhibition Centre today (January 16):
Distinguished guests, ladies and gentlemen,
I am very pleased to join you for the 5th Asian Financial Forum (AFF). A warm welcome to you all and a special welcome to our guests from overseas.
This event gets bigger and stronger each year. I am delighted that so many people are taking part in the AFF 2012, including an exceptional line-up of distinguished speakers.
Here in Hong Kong we are preparing to welcome the Chinese New Year next week. It will be a time for family gatherings and traditional celebrations. No doubt there will be endless discussions about what the coming Year of the Dragon will bring.
The Year of the Dragon in the Chinese calendar is said to be an auspicious time for strong leadership and bold decision-making. The mythical dragon is also an unpredictable creature with a quick temper.
So how will these characteristics resonate in the global economic arena in the year ahead?
Asia﷿s dragon economies have entered 2012 in relatively good shape. These economies include Hong Kong, Singapore, South Korea, Taiwan and Vietnam, with all of them catching up fast. Mainland China has emerged as the leading dragon in recent times.
The theme of this year﷿s Asian Financial Forum is 䩕Asia: Driving Sustainable Growth蒅. To achieve this, we must harness the potential of the whole region under a new and more connected model. This model is already taking shape. In the past year or so, we have seen deeper financial connectivity. A shining example is the gradual liberalisation of the Mainland currency, the renminbi. We have also seen deeper business connectivity and closer government-to-government links in Asia.
Just last week South Korea﷿s President Mr Lee Myung-bak visited Beijing to discuss trade and security issues.
These growing regional exchanges are positive signs for sustainable growth through engagement, understanding and collaboration.
But what does Asia have that other regions lack at present?
With the lingering eurozone debt crisis, ongoing concerns about the US recovery and political instability in parts of the Middle East and Africa, Asia is well placed to drive sustainable growth at least on two distinct levels.
First, a sound economic environment in Asia can help to cushion the effect of downside risks in other parts of the world.
Second, Asia can provide a springboard for sustainable global growth.
Here in Asia, inflationary pressure is relatively light, governments have achieved generally balanced budgets, banking systems are stable and borrowing is inexpensive.
These sound fundamentals provide a solid platform for growth and stability. But Asia is not out of the woods. We will closely monitor the developments in Europe and the US as these will inevitably impact on our region.
In the meantime, we are seeking ways to reduce our exposure to turbulence in the global environment.
One way to achieve this is to develop Asia﷿s domestic markets. This would ease the heavy dependence on exports to the West, and nurture new sources of growth.
Mainland China﷿s large and increasingly affluent population is becoming an important market, not only for our nation but also for our region. But to drive domestic demand, each individual economy requires its own policy mix.
Allow me to share with you some of our strategies here in Hong Kong.
First, we have stepped up infrastructure investment. Several large-scale projects are under way. These projects will increase the capacity for long-term growth at home and bolster domestic demand. In other words, we are taking this opportunity to become more competitive. Our annual capital works spending has almost tripled over the past five years to an estimated HK$58 billion in the current fiscal year. It is expected to remain at record high levels in the next few years as projects reach their construction peaks.
Second, to achieve balanced, stable and sustainable economic growth, we are promoting a more diversified business environment.
This includes nurturing six new industries where Hong Kong has a clear advantage in the region. These industries include medical services, education services, innovation technology, testing and certification, creative and cultural industries as well as green industries.
The development of these industries will help to broaden our economic base and continue our transformation towards a vibrant knowledge-based economy.
Another strategy is to attract a wider variety of foreign firms to Hong Kong. With traditional Western markets in the doldrums, overseas businesses have been looking East for fresh ideas and opportunities, for fund-raising potential and for market development.
Our latest figures show that a record of almost 7,000 overseas and Chinese Mainland companies have operations in Hong Kong. More than half of these companies have their regional headquarters and regional offices in our city.
They can take full advantage of our low and simple tax regime, free flows of capital, information and talent, and they can be assured of doing business on a level playing field. I should also mention that Hong Kong continues to be ranked as the world﷿s freest economy.
A fourth strategy is to enhance our accessibility and potential as a capital-raising platform. As foreign firms seek new ways to raise capital, they are turning to Asia and to Hong Kong. Last year, the first companies from Italy, the US, Switzerland and Kazakhstan listed in Hong Kong. Indications are that Hong Kong has maintained its ranking as the world﷿s largest market for IPOs (Initial Public Offerings) in 2011. Total IPO funds raised in Hong Kong last year exceeded US$36 billion. This would be the third year in a row that Hong Kong has led the world in IPO funds raised.
These are some of the ways we have been promoting sustainable growth in Hong Kong.
Looking at the broader picture, Asia has become increasingly proactive in developing its domestic and overseas markets. The region has become more confident and adventurous in expanding its horizons and engaging with foreign markets more as partners than as competitors.
Hong Kong is a small place with few natural resources. We have no choice but to reach out and develop new markets around the world.
Today, India is Hong Kong﷿s fifth largest export market. Also, our merchandise exports to India and Russia have almost quadrupled over the past five years.
Our 䩕going global蒅 initiatives are in line with our nation﷿s opening up and development. The National 12th Five-Year Plan fully supports Hong Kong﷿s position as the premier international gateway to Mainland China for trade and finance.
We recently signed a new Supplement to our unique free trade pact with the Mainland, what we call the Closer Economic Partnership Arrangement, or CEPA. Under CEPA local companies as well as foreign firms incorporated in Hong Kong can enjoy unprecedented access to markets in Mainland China. The newly expanded CEPA covers 47 services areas and includes over 300 liberalisation measures.
Expanding our role as a gateway to Mainland China will strengthen our own economic prospects and provide new opportunities for our international partners.
Ladies and gentlemen, as this is a financial forum, allow me to conclude with a few words about the development of our financial services sector.
Last month, the World Economic Forum (WEF) released its fourth Financial Development Report. The Report ranks Hong Kong top among 60 economies in the world. Naturally, we are proud to be number one, but there is a wider significance. It is the first time that an Asian financial centre has achieved top spot in the Report. This achievement is a vivid reflection of the shift in financial power from West to East.
Perhaps the most significant positive financial development of 2011 was the meteoric rise of offshore renminbi business. Hong Kong will continue to play a leading role in the liberalisation of the Mainland currency.
Here is a snapshot of the highlights last year.
In 2011, there were 87 renminbi bond issuances in Hong Kong with a total value of over RMB105 billion (US$16.6 billion). That is three times the value of such issuances in 2010. New initiatives from the Central Government to expand offshore renminbi business will add further impetus to this bond market.
Total renminbi deposits in Hong Kong doubled within a year to 630 billion renminbi.
It was also a landmark year for renminbi trade settlement. After a slow start of the scheme in 2009, total renminbi trade settlement handled by banks in Hong Kong exceeded 1.6 trillion renminbi last year. That represents 83 per cent of renminbi trade settlement globally.
Hong Kong has developed into a global hub for offshore renminbi business. Our platform provides not only one-stop offshore renminbi services to customers in Hong Kong but also banks and financial institutions all over the world. In this regard, I am delighted that a joint private-sector-led Forum, with the Hong Kong Monetary Authority and the UK Treasury acting as facilitators, will soon be launched to foster closer cooperation between Hong Kong and London on the development of offshore RMB business. The Forum will focus on exploring ways to enhance linkages between Hong Kong and London, especially regarding clearing and settlement systems, market liquidity and the development of renminbi financial products.
Ladies and gentlemen, a wise man once said, and I quote: 䩕It is difficult to make predictions, especially about the future.蒅
Fortunately we have some of the leading financial minds from Asia, Europe and around the world to help us decipher the clues and determine what the Year of the Dragon may have in store for our economies.
I have mentioned some of the ways that Hong Kong is helping to connect Asia﷿s dragon economies to each other through trade, finance, innovation and ideas. I have also talked about our city﷿s role in the growth of Mainland China ﷿ Asia﷿s leading dragon.
Asia﷿s true strength lies in its wondrous diversity and the tenacity of its people. By combining the individual strengths of our economies I am confident that Asia can drive sustainable growth.
I wish you all a very enjoyable and successful Asian Financial Forum and a prosperous Year of the Dragon.
Thank you very much.
Ends/Monday, January 16, 2012
Issued at HKT 10:41
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