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Financial Secretary John Tsang
For 2016, economies around the world will continue to face substantial headwinds and downward pressure. Sluggish global demand will remain a key constraint to Asia's economic development in the short term.
But no doubt - the shifting of the global economic centre of gravity to the East will continue. In its recent report released in early April, while the IMF (International Monetary Fund) has lowered its forecast of global growth in 2016 to 3.2%, it also indicated that emerging and developing Asia will contribute about 60% of the world's GDP growth this year. And that trend will continue, with growth expected to average 6.3% a year in the next five years, markedly higher than the 3.7% predicted for the world over the same period.
I can see that domestic demand will be playing a more major role in the continued development in Asian economies. Last year, Asia's population came in at about 3.7 billion people, home to about half the world's population. The region's purchasing power is huge, given the expanding middle class as well as a growing appetite for high-end goods and services.
Urbanisation, still at an early stage in many Asian economies, will propel investment through infrastructure construction and home building, while the services sector's expansion will accelerate.
In addition, there is a strong foundation for a regional division of labour given the vast differences in comparative advantages within Asia.
Southeast Asian economies are agriculture-rich, while central Asia and some ASEAN countries are abundant in minerals. Wages and skill levels differ markedly in the region, from advanced economies, such as Japan and Korea to low-income countries like Cambodia and Bangladesh.
South Asia's huge young population could, potentially, become a rich source of labour, complementing Asian economies that are, or will soon be, confronting population ageing.
Together, they can help one another, forming an efficient, region-wide supply-chain. There is ample room for Asian economies to co-operate, to boost productivity growth for the entire region.
To unlock this enormous potential, however, Asian economies must boost productivity and continue to move up the value chain. They must also forge closer economic collaboration to increase trade flow and capitalise on the promises of an expanded and integrated Asian market.
The Chinese Mainland, of course, remains a prominent growth engine for the regional as well as the global economy. The Central People's Government's 13th Five-Year Plan, made public only last month, targets innovation-driven economic growth of at least 6.5% a year between 2016 and 2020. For the first quarter of 2016, the Mainland's economy has expanded 6.7%.
The Five-year Plan also pledges to boost the liberalisation of the country's financial sector, allowing more foreign investors to tap opportunities in the Mainland, while encouraging Mainland companies to continue "going global". Their foreign direct investment will promote growth, in Asia and also throughout the world.
Competitive edge
Looking to Hong Kong, I believe that with our enviable location at the heart of Asia, and our extensive economic and cultural connections with the Asian economies, we are indeed well positioned to profit from Asia's long-term ascendancy.
Our many compelling advantages, from our favourable business environment underpinned by the rule of law, the open market and level-playing field for business, to our simple and low tax regime, serve the business world well.
This is why, year after year, the Heritage Foundation, the Cato Institute as well as the Fraser Institute name Hong Kong the world's freest economy. We are also the world's second-most competitive economy, according to the International Institute for Management Development. In its annual world competitiveness rating, the Institute placed Hong Kong first, overall, in both government and business efficiency.
And Hong Kong's status as a global financial and business hub owes much to our pool of talented professionals. Much, as well, to our transparent regulatory regimes, which are well aligned with international practices.
Last year, funds for IPOs raised in Hong Kong totalled US$34 billion, topping the world. And our fund-management business accounted US$2.3 trillion in 2014. Good reasons why Hong Kong has become Asia's premier asset management as well as fund raising centre.
In 2014, Hong Kong ranked second globally, in both FDI inflow and outflow. That reflects our role as an investment conduit between the Mainland and overseas economies.
The flow, of course, is two-way, with Mainland enterprises taking good advantages of Hong Kong for their global investments. This is why Hong Kong is home to some 8,000 Mainland as well as overseas companies.
Some observers, including a few international credit rating agencies, argue that since much of our financial achievements are tied to the Mainland's economic development, Hong Kong will soon have to face the sobering consequences of the Mainland's economic slowdown.
I don't see it that way. As the Mainland's economy continues to transform from investment-led growth to consumption-led growth, and as it continues to take forward its financial reforms and the internationalisation of the renminbi, it is not difficult to conclude that even stronger demand for quality services, in the financial services sector and beyond, will be created. And Hong Kong is ready to satisfy that rising demand.
We are the world's largest offshore renminbi business centre. The demand for renminbi trade settlement and related financial services will continue to grow, and continue to reward Hong Kong - the businesses in Hong Kong.
And there is more. The grand and visionary Belt & Road Initiative will present many more exciting opportunities to Hong Kong. With our world-class financial infrastructure, and our competitive edge in financial and professional services, we are well-positioned to serve as a fund-raising and financial management centre for the infrastructure-driven initiative.
I have asked the Hong Kong Monetary Authority to set up a designated office to pool together the efforts of investors, banks and the financial services sector. The office will enable them to offer comprehensive financial services for the infrastructure projects that will drive the Belt & Road Initiative.
Hong Kong, of course, is a dynamic presence beyond the Mainland. And from our track record, I have no doubt that we shall continue to be sensitive to new opportunities, and respond to the fast-changing needs of our clients and our customers from all over the world.
Indeed, we shall continue to expand our trading and commercial networks throughout the region. We are, for example, negotiating a free-trade agreement with ASEAN, hoping to conclude these negotiations this year.
Hong Kong has what it takes and Hong Kong has what Asia needs, to play a pivotal role in facilitating trade and financial services in this 21st century. Or, to echo the discussion today, we have the skills, we have the strengths and the determination to "tame tigers and dance with dragons".
Financial Secretary John Tsang made these remarks at the FT-Nikkei Asia300 Forum.
