Chief Executive CY Leung gave these remarks at the Opening Session of the Asian Financial Forum 2016 in Hong Kong.
It is generally expected that global economic growth in 2016 will remain modest, uneven at best. This is, apparently, the “new norm” in our post-global financial crisis world.
Challenges remain considerable
Recovery among the major advanced economies is still generally sluggish. The US Federal Reserve took the first step to normalise interest rates in December.
But uncertainties regarding the pace of normalisation continue to blunt the global economy.
Meanwhile, the European Central Bank has further eased monetary policy, accentuating the divergence among major central banks. Elevated geopolitical tensions continue to trouble the global economy. And the jittery stock, currency and commodity markets so far in 2016 only add to the uncertainties.
Hong Kong, one of the great trading economies, is hardly immune.
Nonetheless, we have been able to weather external shocks in a variety of sizes and guises, reaffirming Hong Kong’s longstanding strengths: our relentless spirit of entrepreneurship and endlessly adaptable workforce. These have helped us attain moderate economic growth with full employment over the past few years.
In short, you can count on Hong Kong
As an international financial centre, a regional business hub, and the super-connector to the Mainland of China, we have much to offer.
And we are not alone. Asia is expected to remain a critical player in creating global economic growth. That’s thanks to the sound fundamentals and resilient domestic buffers that buttress many Asian economies.
The Mainland of China, of course, is central to this paradigm. Indeed, its GDP has quadrupled over the last decade, hitting US$10 trillion in 2014. Its economy is the world’s second largest, and the biggest trader in goods.
China’s initiatives provide ample opportunities for all of us
Its Silk Road Economic Belt and 21st Century Maritime Silk Road initiative covers more than 60 economies spanning Asia, Africa, the Middle East and Europe.
The Belt & Road’s goals are strikingly ambitious, with the promise of greater policy co-ordination, strengthened infrastructure connectivity, unimpeded trade and investment, deepening financial integration and building people-to-people bond along the Belt & Road’s twin corridors.
Central to the plan is infrastructural growth – a massive expansion of transport and logistical networks across the Belt & Road economies. This physical connectivity will boost economic development throughout Eurasia, strengthening co-operation at all levels, enhancing the competitiveness of the entire region.
Development on this scale demands equally outsized financial resources – and from both the public and private sectors. The Asian Infrastructure Investment Bank, AIIB, which officially opened for business just two days ago on January the 16th, as well as the Silk Road Fund, will help satisfy those needs. Among the founding members of the AIIB, 60% are Asian countries and 14 are G20 members.
All members of the BRICS economies are also among the founding members. The Bank is expected to foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors.
Hong Kong will be part of the strategy. We have the experience, the expertise and the connections to serve as the Belt & Road’s fundraising and financial-management hub. Our financial offerings range from public offerings and loan syndication to private equity funds and the raising of capital through Islamic finance. You are also most welcome to join us, to make the best use of the platform provided by Hong Kong to finance Belt & Road projects.
The Mainland of China’s resolve to reach out is hardly limited to the Belt & Road.
Indeed, in the November communique on its 13th Five-Year Plan, which will run from 2016 to 2020, China highlighted “opening wider to the world” as one of its five key development directions.
Given that China is this year’s G20 Chair, it’s opportune time to take the lead. So it is no surprise that “inclusive and interconnected development” has been put forward as one of the key agenda items in the 2016 G20 Summit.
I wholeheartedly agree with the G20’s vision – that helping emerging countries achieve economic development is both a moral responsibility and an effective way of ensuring global economic and social progress.
Hong Kong, a steadfast supporter of economic and financial co-operation, is well equipped to contribute to this growth model.
We have long enjoyed extensive government-to-government, business-to-business and people-to-people ties. Under the “one country, two systems” arrangement, Hong Kong participates in major international trade networks. And, in this, we are enabled by 21st century communications and logistics infrastructure and a well-earned reputation as the world’s freest economy. We are also known as a welcoming and open society. We welcome competition as much as we welcome co-operation. The Hong Kong Government does not compete with business, local or foreign. We are here only to facilitate.
Hong Kong can help satisfy rising demands for infrastructure investment, as well as the expected increase in the flow of trade, funds and people. We can offer world-class and international legal, accounting and professional services.
We can provide infrastructural project management, environmental and risk assessment consultancy. We can deliver transport and tourism-related services as well.
And let’s not forget why there is an Asian Financial Forum. Why we’re here today. I’m talking about Hong Kong’s crown jewel: financial services, which account for about one-sixth of our GDP. We see more potential going forward, hence the setting up of the Financial Services Development Council soon after I took office, and the emphasis there is on “development”.
Our highly efficient capital markets and related infrastructure are adept at managing global investment, as well as large-scale infrastructure project financing.
And Hong Kong has the expertise and experience to accommodate the demand for wealth and risk management, as well as corporate treasury services, from investors, enterprises and financial institutions around the world.
Consider, too, that the renminbi will be more widely accepted by international markets, particularly as Belt & Road projects get going. Hong Kong’s role as the world’s major offshore renminbi hub began in 2004. Since then, we have contributed to the increased use of renminbi in trade settlement, financing and investment worldwide.
Hong Kong is now the world’s largest offshore renminbi business centre
Indeed, banks in Hong Kong handle some 70% – seven-zero per cent – of global renminbi payment. In the first 11 months of 2015, renminbi trade settlement managed by banks here totalled RMB6,166 billion – up 10%, year-on-year.
Renminbi’s importance in the global economy will only continue to increase, given the International Monetary Fund’s decision, in December, to add the renminbi to its Special Drawing Rights basket. Hong Kong will no doubt have a lion share of the expanding renminbi business.
Whatever the currency, money likes Hong Kong, and the feeling is mutual. So rest assured that we will continue to strengthen our financial market infrastructure, boost our talent pool and diversify our renminbi products. We will, as announced in my Policy Address, strive to capture the wealth of the Belt & Road and meet the demand for risk management services, professional insurance and reinsurance services, and corporate treasury.
I am convinced that Asia is indeed ready to shape the new paradigm for global growth. This conviction is rooted in the region’s tradition of open trade and close collaboration, and the economic success it has enjoyed over the decades.
I am equally certain that Hong Kong will play a substantial role in helping Asia realise its promise, while enabling a world of business to take advantage of the golden opportunities this presents.