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Following is the speech delivered by the Chief Executive, Mr C Y Leung, at a luncheon organised by the Hong Kong Association of Banks (HKAB) today (July 17):
Ben (Chairman of the HKAB, Mr Benjamin Hung), distinguished guests, ladies and gentlemen,
It's a great delight to be entertained by bankers in Hong Kong. I'm a bank customer, and I have a deposit which I roll over from time to time, and that represents the bulk of my liquid assets. I've been getting rather low return on my deposit, so it's great to share lunch with bankers in Hong Kong.
I actually started my association with banks quite early on. When I was a small boy, my mother would send me to the local branch of a bank, and across the counter you could actually settle your monthly electricity bill. And I have to say you train not just your staff well; you also train your customers well. So much so that when I was a 20-year-old and I had with me money from my parents, which was money to support me as a student in Bristol, England, as a Hong Kong student studying there at the age of 20, the first day when we started our course, me with my parents' money and my British fellow students with loan or grant cheques from their local authorities, we were greeted by pretty female bank staff who wanted us to deposit our cheques with them and open chequebook accounts, which didn't carry any interest, with these banks and would dress in corporate colours of these banks. No names, but bright yellow, bright blue and so on in those days - this was 1970-something. And as a Hong Kong person well trained by Hong Kong banks, I knew enough about banking services, so I went to my local branch, which had a blue corporate colour, and said, "This is my parents' money. I want to open a deposit account. I also want to open a chequebook account, and I want to place a standing order with you so that at the end of every week you transfer so much from my deposit account to my chequebook account." One carrying interest, the other didn't carry interest. The bank very kindly agreed. A year later they were smart enough to say, "Mr Leung, sorry, we have to stop this service." So that's your Hong Kong customer.
First of all, congratulations to the Association and its members on a job well done during what has been a challenging few years for the financial services industry.
Now, despite the global financial crisis, our banking sector is in good shape. It continues to be a driving force in deepening, expanding and, this is important, diversifying financial services in our city.
My Government regards the promotion of economic development as a top priority. Only through sustained and relatively high economic growth can we move to the next level of development in Hong Kong and become more resilient to external financial shocks or economic challenges. Only through sustained and relatively high economic growth can the Government, the businesses and the people of Hong Kong have the resources to effectively tackle pressing issues of poverty, an ageing society, housing shortage, pollution and other social problems.
Today, our financial services industry employs around 230,000 people, or 6 per cent of the total workforce. These 6 per cent of the workforce contribute 16 per cent of our total GDP. We have been ranked number one by the World Economic Forum's Financial Development Report for the past two years. The Hong Kong Stock Exchange is amongst the most active in the world in raising equity. We are a leading fund and wealth management centre in Asia and we have the largest pool of offshore Renminbi liquidity anywhere in the world.
Under a strong regulatory framework and transparent supervision, our banking sector is well capitalised, liquid and profitable. The interbank money market is well established, and we have a reliable real-time gross settlement interbank payment system. The size of private banking business is also on the rise.
In other words, we are in a strong position to take advantage of the shifting centre of global economic gravity from the West towards Asia.
Against this backdrop, I would like to highlight areas where Hong Kong has a great opportunity to sharpen its competitiveness as an international financial centre in Asia.
The accumulation of wealth and foreign exchange reserves in the Mainland of China and in Asia has generated strong demand for world-class financial services. Implementation of the National 12th Five-Year Plan is ushering in a new wave of development for the Mainland China economy.
Hong Kong is well-positioned to capitalise on these advantages and tap into the opportunities made possible by the growth of the Mainland economy and the Central Government's economic policy. Our strengths are clear. I do not need to repeat them to you. But let me just reaffirm my Government's position to proactively assist the business sectors, including the banking sector.
The Central Government fully supports Hong Kong's development as an international financial centre and an offshore Renminbi business centre. This is obvious in many of the written reports and official statements. It is also obvious during the many meetings that I have had with my team from Hong Kong in Beijing with senior government officials in charge of these areas. The Central Government has expressed support for Hong Kong to enhance its position as an international financial centre in the National 12th Five-year Plan and elsewhere. As China's global financial centre, we must also have a very high stake in, and a huge commitment to, promoting smooth financial market liberalisation in the Mainland.
In the space of less than a decade, Hong Kong has successfully launched a full spectrum of offshore Renminbi businesses, from banking, bond and equity financing to asset management. Within just a few years, we have emerged as the largest and most competitive offshore Renminbi business centre outside of the Mainland. As of May, two months ago, total Renminbi deposits and certificates of deposits in Hong Kong amounted to RMB865 billion.
Also in May this year, the volume of Renminbi cleared under the real-time gross settlement system exceeded that of the Hong Kong Dollar for the first time. The trend is clear. As at end-May, 208 banks participate in Hong Kong's Renminbi clearing platform. This includes 184 branches and subsidiaries of foreign banks and Mainland banks with a presence overseas.
All the time, overseas banks here in Hong Kong are fine-tuning their Renminbi expertise, offering a broader range of Renminbi services to their clients and building up their knowledge and contact list for doing business in the Mainland of China.
In a broader perspective, this contributes to Hong Kong's role as the Chief Information Officer and Chief Financial Officer for China. When businesses want to raise capital for their Mainland operations, settle trade with Mainland Chinese partners using Renminbi or invest in new Renminbi-denominated products, they come to Hong Kong for the best information and the most reliable services that you offer.
At the same time, Hong Kong is a valuable partner for the Mainland of China in its drive to "Go Global". Companies and investors across the boundary come to us for the best banking and professional services that, again, you offer that they need to do business with countries around the world. Throughout history, Hong Kong has nurtured strong connections with the Mainland and with our international partners. Today, these links serve as an effective two-way channel for Hong Kong to be a "super-connector" between institutions, enterprises, regulators and the market.
Making the best use of CEPA is another important factor for our financial services development. It is also high on the agenda of our Government. As at May this year, five Hong Kong banks have received approval to set up a total of 44 sub-branches in Guangdong. This is achieved under the "cross-location sub-branches" measure provided under Supplement VI of CEPA. Looking ahead, we shall work for wider market access in future Supplements to CEPA.
The recent expansion of the RQFII pilot scheme is another illustration of how banks and financial institutions in Hong Kong can leverage on Renminbi liberalisation. They can launch more innovative and diversified Renminbi investment products in Hong Kong and enhance the cross-boundary use and circulation of Renminbi funds. Up to the end of last month, a total of 31 companies had been granted RQFII qualification. This includes the first local bank, with a combined approved RQFII investment quota of over RMB100 billion.
Along with the development of the offshore Renminbi business, financial intermediation activities in Hong Kong are becoming increasingly active. The price discovery and market mechanism are becoming more efficient after the Treasury Markets Association of Hong Kong announced the CNH HIBOR fixing last month. By providing a reliable benchmark for pricing loan facilities, we can support the further growth of the offshore Renminbi loan market. The CNH HIBOR fixing will also encourage development of the offshore Renminbi interest rate swap market and assist investors in hedging the interest rate risk of their Renminbi business.
To enhance our competitive position as an international financial hub, I established the Financial Services Development Council (FSDC) in January this year.
The Council is a high-level and cross-sectoral advisory body to engage you and other industry members. The Council has been asked by me to provide concrete proposals as to what your government needs to do to promote Hong Kong's financial markets and map out key strategic directions to go forward.
Just last week, the Council held a seminar to exchange views on the opportunities for financial institutions in relation to the development potential for you of Qianhai. The seminar, with two Mainland government officials responsible for Qianhai policies among the speakers, attracted over 500 participants. I hope this strong spirit of engagement and participation will continue in other initiatives championed by this Council, including those driven by the five committees set up under it to look into proposals to promote the further development of the Hong Kong financial services industry.
Also last week, LegCo passed legislation to provide tax neutrality for Islamic bonds. This is an important step towards developing Hong Kong as a platform for Islamic finance. And today, a bill on trust law amendments is expected to be passed by LegCo.
These two bills will enhance our competitiveness as a truly international asset management centre and promote trust services in Hong Kong.
We have also introduced a bill into the legislature to put in place a proper regulatory framework for over-the-counter derivatives transactions, in line with the global regulatory developments.
The global financial crisis has demonstrated all too clearly that no single market is immune to the effects of external shocks or crises. As a global financial centre, we must continue to engage with the international community in developing regulatory standards. Such participation will help us identify opportunities to deepen economic and financial co-operation with other economies.
With this in mind, Hong Kong has been participating in the business and initiatives of a number of international and regional co-operative platforms, such as the Financial Stability Board, the Basel Committee on Banking Supervision, the Financial Action Task Force, and APEC.
Ladies and gentlemen, serving as China's global financial centre at a time of such profound change and progress represents a historic responsibility and a huge opportunity for our city.
We have much to gain from our position as a premier offshore Renminbi centre. We also have much to offer as an ideal testing ground and launch station for China's financial liberalisation and opening up to the world.
Most important, we have the right experience, the right environment and the right people here in Hong Kong. We also have our fair share of challenges. We count on the Hong Kong Association of Banks, its members and all stakeholders for your ideas and continued support of Hong Kong's financial services development.
Thank you very much.
Ends/Wednesday, July 17, 2013
Issued at HKT 17:39
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