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Following is the speech delivered by the Chief Executive, Mr C Y Leung, at the Asian Financial Forum (AFF) at Hong Kong Convention and Exhibition Centre this morning (January 13):
Jack (Chairman of the Hong Kong Trade Development Council, Mr Jack So), distinguished guests, friends, government colleagues, ladies and gentlemen,
On behalf of the Hong Kong Special Administrative Region Government, I am delighted to welcome you all to the Asian Financial Forum 2014, and a special welcome to Hong Kong to our many friends from around the world.
Also, my appreciation to Jack and his team at the Hong Kong Trade Development Council on co-organising this year's Asian Financial Forum with the HKSAR Government, the seventh so far. Once again, we have a premier line-up of speakers and thought-leaders from across Asia, America, Europe and beyond. We look forward to your insights on global financial trends and opportunities.
Now, at the beginning of a new year, the AFF provides an ideal occasion to take stock of the past 12 months and discuss the prospects for 2014 and beyond.
Allow me to start with a broad overview of the global economic situation. I will then share with you some of my Government's strategies for Hong Kong's development as an international business and financial centre in Asia.
On the surface, 2013 marked a positive turning point in the global economic recovery. Last year, the US economy grew at a slow but steady pace and the job and housing markets showed signs of improvement. The Euro Zone emerged from a prolonged recession in 2013. Stock markets on both sides of the Atlantic did well last year, especially the US. Here in Asia, emerging economies continued to attract global investment and benefit from the shifting focus from West to East.
However, digging a little deeper, a review of 2013 also reveals significant red flags for the year ahead. Although Europe is out of recession, the recovery is uneven across the continent. Persistent high unemployment and government debt combined with slow or no growth is a considerable concern for several major EU economies. Over in the US, the Federal Reserve has begun unwinding its massive asset purchase programme, a move which continues to weigh on international market sentiment. The US Congress demonstrated enormous resolve in December to avert another fiscal showdown, yet the fiscal consolidation in the US remains a drag on the economy. Here in Asia, Mainland China's economic growth for 2013 is estimated at 7.6 per cent, according to the International Monetary Fund (IMF)'s projection in October last year, and this is the slowest expansion in 14 years. And Japan's recent growth momentum has shown recent signs of weakening.
Against this complex backdrop, the theme of AFF 2014, is "Asia: Powering World Growth".
Last October, the IMF projected that developing Asia as a whole would expand by 6.5 per cent this year, much faster than the mild 2 per cent forecast for advanced economies.
What does all this mean for Hong Kong's position as an international financial centre in Asia and as China's global financial hub?
First and foremost, Hong Kong is an ideal connector of people and markets from East and West.
The best illustration of Hong Kong's connector role in global finance can be seen in the internationalisation of the Chinese currency, the Renminbi.
This year, in fact this month, marks the 10th Anniversary of offshore Renminbi business. Back in January 2004, Hong Kong banks started offering the first ever personal Renminbi banking services outside the Mainland of China.
Today, Hong Kong is the largest offshore Renminbi financing centre in the world. More important for Hong Kong, for the Mainland of China and for international finance, the Renminbi has become one of the top 10 most traded currencies internationally.
With the largest pool of Renminbi liquidity outside the Mainland of China and a wide range of offshore Renminbi investment products, Hong Kong serves as a highly effective market-to-market connector for offshore Renminbi business.
According to SWIFT, the Society for Worldwide Interbank Financial Telecommunication, four out of every five yuan traded offshore are traded in Hong Kong.
Our RMB Real Time Gross Settlement (RTGS) system handles an average daily turnover of around RMB 400 billion - 400 billion on an average day. The operating hours of the RMB RTGS system have been extended to 15 hours, giving financial institutions in the European time zone an extended window to settle offshore Renminbi payments through the Hong Kong infrastructure.
Among several new initiatives last year, the Treasury Markets Association of Hong Kong launched the CNH Hong Kong Interbank Offered Rate fixing to support the further growth of the offshore Renminbi interest rate market. CNH HIBOR fixing provides a reliable benchmark for pricing loan facilities. The fixing also facilitates the development of a variety of RMB interest rate products, assisting market participants to hedge the interest rate risk of their RMB businesses.
China's currency liberalisation is not just a national or regional trend; it is a truly global trend. Hong Kong is the main conduit for the flow of Renminbi capital and, perhaps more importantly, the flow of information on developing and expanding Renminbi business around the world.
To help enhance co-operation between Hong Kong and other overseas markets on the development of Renminbi business, we have established a number of private-sector platforms for collaborating with other places such as London, Paris, Australia and more recently with Malaysia.
The latest figures from January to November 2013 show that Hong Kong accounts for over RMB 3 trillion worth of offshore Renminbi trade settlement. The value of Renminbi deposits and certificates of deposits in Hong Kong exceeded RMB 1 trillion as at the end of December 2013. Since 2007, more than 330 Renminbi bonds have been issued in Hong Kong, with a total outstanding amount of RMB 309 billion.
All this has been achieved in the past decade - and much of it in the past three years - with full support from the Central Government. Now, try to imagine the scale of offshore Renminbi business globally in another 10 years.
No doubt, offshore Renminbi business is important to Hong Kong's financial development, but we must not neglect other opportunities.
This time last year, my Government set up a new Financial Services Development Council (FSDC). Leading financial experts answered the call to join the FSDC and identify new opportunities and ensure the industry's sustainable development.
Last November, and this was about two months ago, the FSDC presented its first batch of six research reports. They included a variety of constructive and concrete proposals for the strategic development of Hong Kong's financial services industry. Specific areas of the FSDC's work include financial development research, identifying new business areas and opportunities related to the Mainland of China as well as the promotion and nurturing financial talent.
Some of the FSDC's proposals have already been put into action. I look forward to more ideas coming out of this high-level cross-sectoral platform.
Important legislative amendments concluded last year will also help to sharpen the competitiveness of our financial services sector.
These include amending our tax laws to promote Hong Kong's development as a platform for Islamic finance. Under the tax amendment, Islamic bonds, or sukuk, can enjoy equal treatment to conventional bonds in terms of tax and stamp duty. We look forward to promoting Islamic finance, not just to cater for Muslim investors but also to attract growing numbers of international investors who see the benefits and opportunities of Islamic finance.
Reforms to Hong Kong's trust law also came into effect last month. Modernising our trust law will help to develop the trust services industry in Hong Kong and make Hong Kong stand out as a very attractive and competitive asset management centre. Among other things, the reform facilitates trust administration, abolishes the restriction on the time limits of trusts and gives better protection to beneficiaries.
The Government will continue to collaborate with the industry in promoting the competitiveness of our financial services. Looking ahead, in March this year our new upgraded Companies Ordinance will come into operation. The new Ordinance aims to facilitate business, enhance corporate governance and ensure better regulation, and will strengthen Hong Kong's status as an international business and financial centre.
Ladies and gentlemen, for Asia to power world growth, Hong Kong has a clear part to play in connecting the world's second largest economy, the Mainland of China, to the rest of the world. Over the past year, I and my Government have worked hard to foster stronger G2G ¡ª government-to-government ¡ª links with our counterparts in provinces across China and with the Central Government. This high-level cross-boundary co-operation will ensure that Hong Kong continues contributing to and benefiting from the economic and financial reforms in the Mainland.
In terms of broader regional impact, China has assumed Chairmanship of Asia-Pacific Economic Cooperation, or APEC, for 2014. Hong Kong has been given the honour of organising the APEC Finance Ministers' Meeting which will take place here in September. We look forward to bringing together the 21 APEC member economies to discuss the key issues for the financial development of the Asia Pacific region.
International connectivity is undoubtedly a key to achieving a full-fledged global recovery. Hong Kong will continue to make good use of its extraordinary advantage as a Special Administrative Region of China. Being part of China, we offer the advantage of "One Country", and with our own legal, financial and economic systems separate to those of the Mainland, we offer also the advantage of "Two Systems".
I am delighted that we are hosting such a distinguished gathering of financial experts at the Asian Financial Forum 2014. Your insights will help to set the tone for Asia in the year ahead.
It just remains for me to wish you all a very fruitful and enjoyable Asian Financial Forum and a prosperous 2014. And as the Chinese New Year is now around the corner, I wish you also a prosperous New Year of the Horse.
Thank you very much.
Ends/Monday, January 13, 2014
Issued at HKT 11:27
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