*********************************************************
Following is the speech by the Chief Executive, Mr Donald Tsang, at the APEC CEO Summit 2010 on "Dynamism of Asia Pacific and global economy: How can it contribute to global growth and prosperity" in Yokohama today (November 12):
Distinguished Guests, Ladies and Gentlemen,
Thank you for this opportunity to discuss a topic that goes to the very heart of APEC's existence.
Given the varying stages of recovery from the global financial crisis, the theme of this dialogue is a timely one.
APEC's economic diversity is its great strength and sustains its dynamism as a regional bloc.
From day one of APEC, the key to unlocking the collective potential has been to dismantle barriers to trade and investment and to strengthen our co-operation. Only then can we fully contribute to global growth and prosperity.
Over the past 10 years, APEC region has accounted on average for 60% of global GDP.
In terms of real GDP, Mainland China's economy is 2.7 times larger than it was a decade ago. Vietnam's economy is about two times larger; Korea has expanded by more than 50%, Thailand by about 50% and Chile by 40%.
Hong Kong has been playing its part as a free and open economy. The US-based Heritage Foundation has ranked Hong Kong as the world's freest economy for each of the past 16 years. We are the premier international gateway to the Mainland of China market.
Currently the Asia-Pacific Region accounts for over 43% of total world trade. The overriding trend is for member economies to become closer trading partners.
For investment APEC - excluding the U.S. and Japan - accounted for almost US$300 billion of inward foreign direct investment last year. That represents some 27% of total global investment and is almost double the figure in 1999, which was US$162 billion.
These and other achievements, reflect APEC's determination to promote free and open trade and investment.
They should also provide an incentive for us to do more and to do better - more regional integration, better structural reforms and sharing of best practices and more market liberalisation. More important, we should work harder to fully realise the Bogor goals set out in 1994 for industrialised member economies to achieve free and open trade and investment by 2010.
Looking forward, we in Asia can and will play a more prominent role in the global economy.
Often overlooked, the Asian economy is now as big as the US. The US has a US$ 14.4 trillion economy. China's economy is just over US$ 5 trillion, having just overtaken Japan's, while the ASEAN region is US$ 1.7 trillion and India US$ 1.3 trillion. Adding in South Korea and others, the Asia's economy is well over US$ 14 trillion. As Asia switches to domestic-led growth, its economy will grow in size and become less dependent on the advanced economies.
The IMF has forecast GDP growth in Asia to reach 7.1% this year - much higher than its world average growth forecast of 4.8%.
While Asia's recovery from economic hard times of the past has been generally export-driven, this time it has been supported by resilient domestic demand.
The jury is still out on the exact cause and effects of the global financial crisis. But I think it is fair to say that the Asian financial crisis which took place in 1997 and 1998 made us wake up to the importance of fiscal prudence and sound supervision of financial institutions. Together with efforts to forge closer integration and cooperation in Asia, it helped the region weather the storm in relatively good shape. The strengths of different economies and diversification have also opened up new supply chains and new markets across the region.
So how can one catch this wave of Asian growth? Perhaps what Hong Kong is doing is of some relevance.
Hong Kong has been actively riding on the Asian growth. China is already our most important market. The unique free trade pact we signed with the Mainland in 2003, what we call the Closer Economic Partnership Arrangement, or CEPA for short, and our ever-growing business and transport connections with Guangdong Province, have unleashed new business opportunities for enterprises in the fast growing Mainland market, and indeed for any foreign companies incorporated in Hong Kong.
But we have not lost sight of the other emerging economies. For instance, India and Russia are our new and rapidly growing markets. Our exports to these two markets have grown by a phenomenal 48% and 122% in the first nine months of this year. This is remarkable by any measure. India is now our fifth largest export destination. In the past three months I have visited these two countries and was deeply impressed by the tremendous trade opportunities they have to offer.
Trade apart, Hong Kong is building on its role as a primary fund raising platform for Mainland companies to become a premier listing and fund raising centre in Asia for international and regional companies. We have revised our listing rules. While making them more rigorous, they allow more overseas companies to list in Hong Kong.
Please don't think I am overly optimistic about the recovery. On the contrary, I am pretty much concerned about the impact of the US' second round of quantitative easing on Asian economies. We may be out of the eye of the storm but we certainly still remain in the danger zone.
The global financial crisis has exposed some raw nerves of globalisation and the vulnerability of our systems in the 21st century.
We need to strike a healthy balance between economic growth and prudent fiscal management.
We should also be wary of the extremely low interest rate and the strong capital inflows into emerging markets. This has increased the risk of asset bubbles, which would impact on our financial stability as well as regional and global economic growth.
While as policymakers we must be fully prepared and take all prompt actions to avoid systemic risks that might disrupt our recovery, international investors should also tighten their seat belts and get prepared for the unprecedented market turbulence in currency markets, bond markets, stock markets and the property market.
We are in an exceptionally abnormal macro environment where asset prices are increasingly getting out of line with fundamentals. Personally, I have not seen it in my own working lifetime.
The outbreak of the sovereign debt crisis in Europe, just half a year ago, is a timely reminder that many hidden and unknown risks are still with us. These risks have not gone away. As you know, there are some difficulties emerging between the debt instruments issued in Ireland and Germany, and that's impacting on similar instruments being issued in Italy and other so-called PIIGS countries. They have actually risen further with the global liquidity flush. So, corporate leaders, beware. The worst of the 2008 global financial crisis impacting directly on financial institutions may be over, but the next wave will hit at the corporate level through massive volatilities in the currency and securities markets. We are not out of the wood yet. Personally I believe, far from it.
Policymakers across the region are working hard to contain the build-up of asset bubbles and enhance the resilience of our financial systems.
In Hong Kong, the property market is a particular concern. In the past few months, we have taken measures to increase housing supply, curb property speculation, prevent excessive leverage and enhance market transparency.
But we will not stop here. We will not hesitate to introduce further anti-speculative measures when there is a need to do so. And because of their market sensitive and urgent nature, there will be no prior notice.
This is also why Hong Kong has been working so hard to attract more listings in our stock market and to widen the scope of our Renminbi business to absorb the increased liquidity.
We welcome the work being done at international level at G20 and the Financial Stability Board to strengthen the global financial system. This collaborative approach will increase our resilience to financial shocks.
Ladies and gentlemen, one feature of the financial crisis has been the shift of the global economic centre of gravity away from traditional markets in the West towards Asia.
Some mature economies in the West have been pegged down. Other regions, especially emerging economies, have been able to make up ground relatively quickly. Global economy has not noticeably shrunk so far.
I see an opportunity here for APEC to take advantage of this equalising effect. The most effective instruments for this purpose remain in my view more open markets and freer trade.
Indeed, instead of APEC members each moving towards the same goals at different speeds, we have a good chance to catch the same wave by freeing up our market and trade systems.
This would help to fast-track APEC strategies for balanced, inclusive and sustainable growth.
And I for one can only imagine the benefits it would bring for APEC's dynamism and for our region’s contribution to global growth and prosperity.
Thank you very much.
Ends/Friday, November 12, 2010
Issued at HKT 17:50
NNNN
Windows Media format
Real Media format