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Following is the speech delivered by the Financial Secretary, Mr John C Tsang, at a reception hosted by the Hong Kong Economic and Trade Office in Washington DC, this evening (October 6, Eastern Standard Time):
Ladies and gentlemen,
Good evening.
It's wonderful to be here with you in the capital of the United States of America, Washington, DC.
This is where the parade for Pope Francis took place last month on his first visit to the United States, and this is the place where President Xi Jinping received the traditional 21-gun salute. I have arrived somewhat late for these momentous occasions.
No less disappointing, I missed the Stevie Wonder concert here last Saturday night. Mr Wonder, as I like to call him, embodies the polar continuum of politics in two of his finest tunes: "You Haven't Done Nothing" and "You are the Sunshine of My Life."
I had, of course, hoped to hear the latter at his Verizon Center concert. In fact, other than Marvin Gaye, Stevie remains my all-time favourite musician.
In any case, I am pleased to be here tonight, to have this opportunity to tell you what we are doing to keep Hong Kong ticking in the global economy.
I should explain that word, "ticking". It reminds me of those vintage Timex watch commercials and that classic line: "It takes a licking and keeps on ticking." It was the tagline for TV commercials that showed Timex watches braving tests that ran from being strapped to jackhammers and washing machines to riding a porpoise and surviving, intact and, yes, ticking, after an 87-foot dive off the daunting cliffs of Acapulco.
I don't mean to suggest that the economy of Hong Kong is tanking. Or even in a deep dive. Far from it. But, like other economies, we are not fond of uncertainty. I'm talking about the kind of uncertainty we have had with the Fed and its impending ！ maybe, maybe not ！ interest rate hike.
My major concern is that uncertainty can increase the risks in an already weak global economy.
As for Hong Kong, I'm confident that our robust economic fundamentals and our resilient financial system as well as our superb business environment would enable us to cope with whatever comes our way.
Hong Kong has strong economic fundamentals that are underpinned by a sustained current-account surplus, strong fiscal and foreign exchange reserves, and a huge international investment position: some three times our GDP in 2014.
In spite of the recent volatilities and major fluctuations in the financial markets, our robust market infrastructure and regulatory regime ensured that the Hong Kong market was trading and operating in an orderly and smooth fashion. The currency and interest rate markets remain stable. The banking system has no liquidity issue.
But, I heard someone asked, what about China? As President Xi said when he visited the United States last month, while China's economy is currently facing downward pressure, it would stay on a steady course and operate within a proper range.
China's economy grew by 7 per cent in the first half of the year. This has not come by easily given the complex and volatile situation in the world economy today. The overall growth target of about 7 per cent for China in 2015 is broadly similar to forecasts made by the IMF, as well as the majority of private-sector analysts.
Down the road, the Mainland's continuing economic reform will yield new growth potential. And that can only benefit Hong Kong's long-term development.
As for this year, I predict GDP growth in Hong Kong will be somewhere between 2 to 3 per cent. Over the medium term, I believe we shall be entering the era of the "new normal", where more advanced economies like Hong Kong will maintain a fairly low level of growth. I expect Hong Kong's real GDP will be growing by about 3.5 per cent a year in the medium term from 2016 to 2019.
After all, we remain the only place in the world where global advantages meet China advantages.
Let's start with the world. A major international financial centre, Hong Kong attracts a world of business and and a world of investment. Last year, Hong Kong's stock market ranked second, globally, in funds raised through initial public offerings, just behind the United States. At the end of August this year, more than 1 800 companies were listed, including Mainland as well as overseas companies.
More will follow. The Hong Kong Exchanges and Clearing Limited has streamlined its listing process for overseas companies, accepting more overseas jurisdictions as places of incorporation.
Nearly 7 600 overseas and Mainland companies have set up in Hong Kong. They like, I guess, the Hong Kong advantage, including, I think in particular, our low and uncomplicated tax regime. That, by the way, should soon become even more attractive for multinationals. In the next legislative session that will begin in a week's time, we plan to introduce a Bill allowing interest deductions for corporate treasury centres; it would also reduce profits tax for specified treasury activities by half.
Our independent judiciary and unwavering adherence to the rule of law is another regional advantage, as is our multicultural, multi-talented pool of services professionals.
No less reassuring is Hong Kong's free flow of information and free flow of capital ！ and the freedom to run a business without fear or favour. And you don't have to take my word for it.
In January, the Washington-based Heritage Foundation named Hong Kong the world's freest economy ！ for the 21st year in a row. And, just last month, Hong Kong topped the Cato Institute and the Vancouver-based Fraser Institute's annual Economic Freedom of the World report. Hong Kong has done so, by the way, every year since the report came out back in 1996.
Our China advantage covers a lot of ground, too, including our singular ！ and expanding ！ range of financial offerings. The Mutual Recognition of Funds initiative between Mainland China and Hong Kong, for example, became operational in July this year. It allows Mainland and Hong Kong funds to be offered directly to retail investors in each other's markets.
In short, it's a breakthrough, broadening investment for both sides. And we expect more funds to be attracted to Hong Kong, sharpening Hong Kong's competitive edge as a premier international asset management centre.
It will also help promote the internationalisation of the Renminbi, reinforcing Hong Kong's position as the world's pre-eminent offshore Renminbi centre. At the end of August, Renminbi deposits and certificates of deposit in Hong Kong totalled approximately 1 trillion yuan.
Hong Kong has been responsible for the vast majority of Renminbi trade settlement since its beginnings in 2009. Last year, the amount handled by banks in Hong Kong reached some 6.3 trillion yuan, a year-on-year increase of 63 per cent. We are not talking pocket money here.
The Renminbi, according to the latest report that came out yesterday, has just overtaken the Japanese yen to become the world's fourth most-used currency for payment. And Hong Kong manages about 70 per cent of that global Renminbi payment.
No less promising is the Silk Road Economic Belt and the 21st Century Maritime Silk Road, recently launched by President Xi. The Belt-Road initiative was created to expand transcontinental connectivity, to promote economic, political and cultural co-operation from Asia to Africa and Europe.
As China's major international financial centre, and one of the world's financial capitals, Hong Kong has the experience, the expertise and the connections to serve as the fundraising and financial management hub for the Belt-Road initiative.
And in so many ways. To take just one example: as trade and other economic activities along the Belt-Road expand, so, too, will the demand for Renminbi trade settlement. And, as I have outlined, Hong Kong's Renminbi trade settlement system is well placed to respond to that demand.
For those of you who would like to know more about Belt-Road financing, about the Renminbi, its global expansion and Hong Kong's role in it, you can just come and chat with Clement and he will provide all the answers, but the annual Asian Financial Forum (AFF), in Hong Kong, is also where you want to be.
At the 2015 financial summit, in January this year, some 2 600 financial, business and government leaders took part. The 2016 AFF will take place on January 18 and 19 in Hong Kong. I hope to see you there.
My thanks to our Washington Economic and Trade Office for organising this evening's gathering, for giving me this welcome opportunity to talk about my favourite subject. Stevie Wonder, of course.
Thank you.
Ends/Wednesday, October 7, 2015
Issued at HKT 07:08
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