Over the last decade or so, Hong Kong has established its position firmly as an international financial centre. Indeed, the encouraging performance of Hong Kong's financial services in recent years has gained considerable international recognition.
The City of London recently published a report about the competitiveness of 46 financial centres worldwide. The report confirms London and New York to be the two leading global financial centres. To our delight, it puts Hong Kong in the third place.
The report recognises that Hong Kong performs well in all the key areas, especially in regulation - which is rated to be a major component in considering the competitiveness of a market. The report concludes that Hong Kong is a real contender to become a genuinely global financial centre.
It is also interesting to note that while another report published by the City of London in 2005 concluded that there was no clear leader among the financial centres in Asia, their latest analysis suggests that Hong Kong leads the way from Singapore and Tokyo, and is well ahead of other Asian financial centres.
Hong Kong's development as an international financial centre is premised on a number of fundamental strengths. To name a few, these include the rule of law, free flow of capital and information, simple and low tax regime, world-class infrastructure and a well established regulatory system.
We have a lot of professionals with international exposure and good knowledge about China. We have around 3,000 chartered financial analysts which is the fourth largest number of chartered financial analysts in the world.
On top of these, Hong Kong is one of the most open economies and our system is well recognised to be fair, mature, efficient and transparent. Indeed, we have been ranked by the Heritage Foundation as the world's freest economy for the 13th consecutive year.
Asia's asset-management centre
Hong Kong's unique strengths, as I have just mentioned, have much appeal for international investors. In 2005, Hong Kong's fund-management business amounted to US$580 billion, of which more than 60% was sourced from overseas investors. The significant inflow of foreign funds reflects the high attractiveness of our financial markets.
In addition, Hong Kong has accumulated considerable experiences in asset management over the years. At present, around 80 international fund-management groups from the US, the UK, Japan, Singapore, Switzerland, France and other parts of the world have set up operations in Hong Kong, casting a vote of confidence in our asset management industry. In particular, our expertise in managing investments in Asia is widely recognised. It is worthy of note that in 2005, almost 80% of the assets managed in Hong Kong were invested in Asia.
With Hong Kong's prime location at the heart of Asia and the doorstep of Mainland, we are also well placed to tap into the huge amount of savings in the region. The fact that Hong Kong has become an attractive destination for investment capital is further proven when the United Nations World Investment Report 2006 published last year has once again ranked Hong Kong as the second most preferred destination for foreign investment in Asia (after the Mainland), for the 5th consecutive year.
The report also reflects Hong Kong's unique position as the two-way platform for overseas investors accessing the Mainland and rest of the region - and for Mainland companies to expand in the international markets. Indeed, the rapid economic growth in the Mainland has resulted in greater accumulation of personal savings, thereby creating a huge demand for investment and wealth-management services. This has presented immense opportunities for the further development of Hong Kong's asset-management business.
Government's efforts
The global asset-management industry has tremendous prospect for further growth. And Hong Kong certainly has the potential to take a larger share of this market. In face of the increasingly globalised financial markets and keen competition among other international financial centres, the Hong Kong Government is mindful that we should continue to enhance the competitiveness of our financial markets to maintain our position as a vibrant and ever-growing international financial centre.
In this connection, we have abolished estate duty and exempted offshore funds from profit tax last year to provide a conducive environment for the further development of our asset-management industry. These tax concessions create a win-win situation for Hong Kong's asset-management business as well as for foreign investors who are looking for effective investment means and professional asset-management services.
In addition to tax concessions, we have also embarked on a series of promotional activities abroad as well as in the Mainland to promote Hong Kong as an asset-management centre. In September last year, I led a delegation comprising more than 100 prominent industry leaders to Hunan to promote our financial services.
In January, I visited Dubai, Abu Dhabi and Riyadh to brief the Middle East investment community on Hong Kong's investment opportunities. I am glad that in a little more than two months after my visit, Prince Alwaleed bin Tatal of Saudi Arabia came to Hong Kong earlier this month to see for himself the business opportunities here.
Vote of confidence
During his visit, the Prince cast a vote of confidence in Hong Kong and China. He alluded to the Saudi investors' keen interest in China, and that Hong Kong, with its mature financial system and rule of law, is the gateway to investment in China. This is an encouraging recognition of Hong Kong's role as China's international financial centre.
While the Government would continue to attract investors around the world to come to Hong Kong, we urge our fund managers to capitalise on Hong Kong's existing strengths and competitive edge and facilitate more investors to use Hong Kong as their platform for investment.
Tomorrow, I will be heading for New York to join the Secretary of the Treasury of the United States, Henry Paulson, to speak at a luncheon hosted by the Committee of 100 scheduled later this week to promote Hong Kong's development as an international financial centre. I assure you that we will continue our efforts in publicising the competitiveness of Hong Kong's financial services in the future.
We see a bright future for Hong Kong as an international financial centre and leading asset-management centre. The Hong Kong Government will continue to work hand in hand with market practitioners and our financial regulators to strengthen Hong Kong's competitiveness.
Secretary for Financial Services & the Treasury Frederick Ma gave this address at the Fund Forum Asia 2007, one of Europe's largest annual investment-management events. Hong Kong was chosen to host the event in Asia for the first time.
