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Financial Secretary John Tsang
Hong Kong is Asia's regional banking centre. At last count, more than 200 banking institutions are operating here, most of them, probably all of them profitably, including 71 of the top 100 banks. And, in the latest Global Financial Centres Index, out last month, Hong Kong remained third, behind only New York and London, among nearly 100 global financial centres.
There are plenty of bankable reasons why Hong Kong has long been one of the world's leading financial capitals. Certainly, maintaining that fine balance between financial stability and market development is critical.
Stability naturally leads us to regulation. The risks behind unpredictability make regulatory requirements a necessary fact of banking life.
The outlook for the United States is relatively promising compare to other centers. But that said, the timing and pace of the imminent interest rate normalisation is generating concern, particularly over the ability of emerging economies to manage the resulting capital flow swings. Perhaps another round of taper tantrum?
The Mainland is on a steady growth path, but downward pressure remains in the near term amid a weak global economy. Deflationary risks look set to continue to haunt the Eurozone and Japan because there remains much uncertainty about whether these regions will be able to build up enough growth momentum soon given the many structural issues that are persisting. Sagging oil prices, heightened geopolitical tensions and terrorist attacks add to the fog that blankets a clear economic outlook. The fog now what we call "sits looking over harbor and city". If only - as in Carl Sandburg's classic "Fog" - it would move on.
Unfortunately, our increasingly globalised financial world has only expanded that fog, making prudent regulation even more necessary. Of course, regulation without market development measures won't work, either. But, Hong Kong Government's unswerving commitment is what banking - what banks and bankers - can anchor their confidence in.
It is with this in mind, with the economic fog in place, that I delivered my eighth Budget less than seven weeks ago. In it are a variety of considered initiatives designed to broaden and to deepen markets. Let me mention a few of them here for your information.
Hong Kong is the world's largest offshore renminbi centre, and we shall continue to build on this, to strengthen our business ties with the Mainland as well as with the financial world at large.
We have already developed a highly efficient renminbi Real Time Gross Settlement system. This links the Mainland, Hong Kong and major financial centres, helping banks from all over the world make renminbi payments in real time. We shall seek to increase our investment quota for the RQFII scheme, and work towards early implementation of the arrangement for mutual recognition of funds between Hong Kong and the Mainland.
The recent strong performance of Hong Kong stock market also is in the spotlight. Last week, the Hong Kong Hang Seng Index surged by some 2,000 points, with the market turnover rising to an all-time high of some $300 billion last Thursday.
Following the smooth implementation of the Shanghai-Hong Kong Stock Connect, last November, both the southbound as well as the northbound trading turnovers broke their respective single-day records last week. We are now looking at enhancing the scheme and working to launch the Shenzhen-Hong Kong Stock Connect. I look forward to the healthy development of this unique access between the Mainland and Hong Kong.
To attract corporate treasury activities in Hong Kong, we are now drawing up amendments to the Inland Revenue Ordinance. This will allow interest deductions under profits tax for corporate treasury centres in Hong Kong. It will also introduce a half-rate regime for qualifying corporate treasury activities. This will mean enormous business potential for the financial industry, for banks in particular, to provide corporations with high-value financial services.
As a wealth and asset management centre, Hong Kong also offers unlimited promises. Our combined fund management business stands at a record high $16 trillion. The Hong Kong Government is determined to work with the market, to capitalise on these opportunities.
The stamp duty waiver for ETFs (exchange-traded funds) took effect two months ago. And we have just introduced a Bill into LegCo to allow private equity funds to enjoy the profits tax exemption now available to offshore funds. We are also working to introduce an open-ended fund company structure.
To fully capitalise on the opportunities, however, the sector needs more - more of people like yourselves. More gifted human capital to count on. To build on. That's the reasoning behind also my $100 million, three-year pilot training scheme that has been instituted. The new programme will complement the enhanced competency framework for private wealth management practitioners, rolled out just last June. It will enjoy the support of our (Hong Kong) Monetary Authority and the industry in general, in promoting wealth management services that meet customer needs.
If the economic road ahead remains, in places, shrouded in fog, we might take heart in this, from former US Treasury Secretary Tim Geithner. He said that, and I quote, "Most consequential choices involve shades of gray,” and that was an interesting movie, by the way, “and some fog is often useful in getting things done."
Mr Geithner, who now heads Warburg Pincus, when he is not predicting the weather, is, of course, right. With proper management, sound strategies and prudent planning, risk can yield plenty of opportunities. It has worked well for us in Hong Kong - and Hong Kong banking.
Financial Secretary John Tsang gave these remarks at the the Asian Banker Leadership Achievement Awards Dinner 2015.
