Maintaining and enhancing Hong Kong's position as an international financial centre  (2013/06/19)

President, the financial industry has a long history in Hong Kong and it has been developing rapidly since the 1960s and the 1970s. Hong Kong has the advantage in geographical location and time zone, it has a fair and stable business environment, a simple and low tax regime, a sound legal system, ample data in the financial market and professionals with expertise. All these factors contribute to Hong Kong's becoming a global financial centre.

According to the global financial centre index released in March 2013, Hong Kong ranked third after London and New York. Although Shanghai can benefit from state policies and has speeded up its pace in financial infrastructure, there are still concerns among international investors about the business environment on the Mainland. This is because China has yet to build a reliable and independent legal system. Therefore, the sound system in Hong Kong is both our asset and foundation.

In the face of competition from the neighbouring places, we need not worry too much. It is most important for us to know our position, and while we strive to keep our competitive edge, we should learn more about our competitors and make an objective comparison. London is a centre for international trade and clearance and it is the most important international credit market and foreign exchange market. New York is an exporter of capital in US dollar and an international trading and clearing centre for the US dollar. Tokyo is an exporter of capital in Japanese yen. Shanghai and Shenzhen have become financial centres in China and they specialize in certain special financial services. With the increase in the scale of the Chinese economy, there is a natural increase in the demand for financial services. In future, a number of financial centres may develop on the Mainland. Cities like Beijing, Guangzhou and Tianjin may become regional financial centres. All these financial centres will try their best to capitalize on their advantages; they will take specific actions to give full play to their advantages and expand their scale.

With the co-ordination of the Central Government and under the policy direction of "one country, two systems", Hong Kong will continue to benefit for being the financial testing ground in China. It will continue to enhance co-operation with the key cities on the Mainland and complement each other. Such interactive relationship is not possible in any other places in the world. In respect of the conversion of Renminbi (RMB) for cross-border trade settlement, with the support of the Central Authorities, Hong Kong is still the offshore RMB market with the strongest circulation of RMB and the most diversified RMB products. In 2012, 13% of the total trade volume was settled in RMB and 90% of the transactions were carried out in Hong Kong.

A special zone will be set up in Qianhai, Guangdong and it will offer more business opportunities to the financial industry. Banks in Hong Kong can directly lend money to Mainland enterprises and capital raised overseas can be directly invested on the Mainland. Hong Kong will then have closer ties with the entire Pearl River Delta Region and its status as an international financial centre will be enhanced. Even if cities like Shanghai may overtake us in certain areas, under the existing system, provided that Hong Kong will not do anything to undermine its position, our status as an international financial centre will not be replaced.

According to Office Space Across the World 2013 published by Cushman & Wakefield, rentals for premium commercial buildings in the Central District of Hong Kong in 2012 saw a drastic fall by 24%, but the rentals were still the second most expensive in the world. The average rental per square foot is more than double of that in Singapore. The high rentals and operation costs will make Hong Kong less attractive to foreign capital, especially to those multinational groups which want to set up their Asian headquarters in Hong Kong. I hope the Government will pay more attention to the practical needs of these companies and introduce more incentives.

President, if Hong Kong is to maintain its status as a financial centre, apart from having a business environment which is congenial to multinational companies, political stability is also of vital importance. Any social upheaval will have a negative impact on the financial industry and the tourism industry. In 2010 when the "Red Shirts" incident broke out in Thailand, the organizers at first claimed that it was a peaceful and rational sit-in protest. However, the 69-day occupation of the commercial district in Bangkok not only paralysed the economy, but also eventually led to a bloody riot, resulted in more than 1 000 people killed or injured. The tourism industry of Thailand has hit rock bottom not just for that year but for the following two years.

The Central District is the heart of Hong Kong, a place that promotes the economic lifeline of Hong Kong. If the Central District is paralysed, it is like the heart stops beating. Both investors and tourists will have great concerns and this will deal a direct blow to our economy and tourism industry. Therefore, I hope that the organizers of the Occupy Central movement can weigh the pros and cons and will not take any action which will damage the interest of Hong Kong and affect our next generation.

President, I so submit.