Hong Kong to reach free trade agreement with Asean this year, says city’s finance chief

PUBLISHED : Friday, 22 January, 2016, 3:47pm
UPDATED : Friday, 22 January, 2016, 3:47pm

Hong Kong is likely to reach a free trade agreement with the Association of Southeast Asian Nations (ASEAN) by this year, said Financial Secretary John Tsang.

“The 10 nations covered by a free-trade pact represent a population of some 600 million of rising middle class status. We view the pact with strategic importance,” Tsang said.

“We started the negotiations last year. We believe with two or three more meetings, we should be able to resolve most outstanding issues.”

Tsang also said Hong Kong has discussed its plans to become a member of the Asian Infrastructure Investment Bank, and the response from the central government in Beijing has been positive.

Allaying fears of capital outflow that has hammered the local currency in recent days, Tsang said: “As the US rate policy normalises, the Hong Kong-US interest rate differential will see further widening. We have previously seen US$13 billion of inflows. As rates normalise, it will result in outflows, this is normal and should not be a cause for concern.”

Tsang’s comments came at an economic forum held by the Chinese General Chamber of Commerce on Friday. At the same forum, Yue Yi, vice-chairman and chief executive of Bank of China (Hong Kong) said banks’ businesses were constrained by high financing costs when the yuan appreciated for years in a one-way currency movement. The new two-way volatility. according to him, is helping Hong Kong banks to break “past limitations for the lending business”.

The change is creating a new market for interest rate derivatives, forex derivatives and swap products that are taking the yuan business for banks into a new stage, Yue said.

Tsang noted Hong Kong’s economy will be challenged by sluggish global demands and lower tourist numbers in 2016. But Hong Kong will see “huge opportunities” under China’s gradual opening of its capital account and see support from the city’s infrastructure investments, which, he said, are happening at “full speed”.