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  • Dec 24, 2014
  • Updated: 4:36am
Occupy Central
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Political tensions could undermine Hong Kong as China's top financial centre: Joseph Yam

Amid tensions over electoral reform, former Monetary Authority chief warns of threat to Hong Kong as China's top financial centre

PUBLISHED : Monday, 23 June, 2014, 11:36pm
UPDATED : Tuesday, 24 June, 2014, 5:48pm

Hong Kong's former central banker Joseph Yam Chi-kwong has warned that the city could lose its status as China's top financial centre if political developments unnerve the country's leaders.

The Hang Seng index dropped 389 points yesterday, its biggest fall in three months, amid growing concerns about political instability.

And Chow Chung-kong, chairman of Hong Kong Exchanges and Clearing, weighed in by warning that the increasingly tense political atmosphere could shake the confidence of international investors.

In the preface of his new book, Gui On Si Ngai, Yam writes: "The politics of finance is already complex … It may well be that political developments in Hong Kong are eroding the willingness of the leadership to rely too much on Hong Kong as a venue for the conduct of international financial activities of the mainland. If so, this would be regrettable."

The book, in which Yam comments on global financial affairs and looks back at his time as chief executive of the Hong Kong Monetary Authority from 1993 to 2009, is published this week. Its title roughly translates as "In Prosperity, Think of Adversity".

The warnings come amid growing tensions over electoral reform. More than 720,000 ballots have been cast in the controversial Occupy Central "referendum", which has riled Beijing.

Rare disagreement as CY Leung takes issue with Global Times editorial on Occupy poll

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Yam, now an adviser to the People's Bank of China, also calls on local leaders to guard against the risk of Hong Kong being marginalised as a result of financial liberalisation on the mainland, and points out that Hong Kong is losing ground to Shanghai and Singapore. He says it is inevitable that the Hong Kong dollar will pale in significance in the long term, with the yuan bound to play a bigger role.

"It is unrealistic to expect that a significant proportion of the international financial activities between the [future] largest economy in the world, now with 1.3 billion people, and the rest of the world be conducted using the currency of merely seven million people," he writes.

Yam notes that the city's leaders face the imminent task of enhancing the "utility" of Hong Kong as a global financial centre for the mainland and creating a critical mass of financial activities that "is big enough to pre-empt Hong Kong, as the middle man, from being marginalised".

Referring to rising competition from Shanghai as it becomes a free-trade zone and from other regions running offshore yuan centres, he says: "Hong Kong interests are being pushed aside."

Meanwhile, Chow said the city needed to worry more about the political situation than competition from mainland cities.

"I hope there will be no Occupy Central. We would like to see people use legal ways to discuss the way forward for our political situation," he said.

"I would like to see a situation in which international investors would not lose confidence in Hong Kong due to political risk."



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These protesters won't be in the US, Canada, Australia if HK tanks. The malcontents, discontents, dissidents, nihilists, etc. are losers with little wealth, skills, and knowledge. I doubt if they could be gainfully employed in these developed countries. Their low level of English language skills, as copiously demonstrated in these pages, and an obsession with a single issue -- demonizing China and demand for populist government -- affirm my above assessment of these HKers.
But why are there so many flunkies? All of us HKers have failed them royally. We got rich quickly during the 70s and 80s by capitalizing on cheap Chinese labor. With our success in low cost manufacturing exports, we achieved critical capital formation and passed the UK in our standard of living. Our systems and practices developed gradually into cronyism, oligopolies with less and less business innovation. Extreme inequitable wealth is a resyult of entrepreneurial energy running downhill. The wealthy are often one trick ponies in real estate. Buying a few flats during crisis such as SARS is the easiest path to wealth.
We have one of the highest PPP GDP per capita in the world. Yet our skills are low compared with developed nations. Just listen to TV talking heads, readers in these pages and demonstrators, do you think we have "earned" our rights to live in Fat City?
I'm amused by the hubris of Hong Kongers - they think that their low tax scheme, and ease of moving money around will render them immune.
Meanwhile, the mainland is moving Shanghai in place. And if Hong Kongers think that the international community will be their saviour, look at, oh I don't know, Crimea and Ukraine. No one really wants to stir things up.
Instead of thinking how China would *never* let go of Hong Kong for the finance industry, they should think about what happens if the finance industry is gone. What do they have left?
And what does China have to offer bankers, financial "wizards" and other charlatans in return?
An opaque system of arbitrary decisions by a few guys in Beijing, problematic access to real time information and always needing VPNs? Sudden denial of market access of research and information providers because one family branch of the CCP Mafia didn't like how their financial dealings were reported?
Never trust someone who is photographed with hand on chin.
Those +/-8m people in Hong Kong live in a DEVELOPED MARKET. Nobody wants to go backward.
The odd bit is, the world is sending a message to China that further influence on Hong Kong means that China looses its only seat at the big boy table - yet they aren't listening.
It is more important to parrot the party line and continue to be 90% of millionaires in China (CCP members that is) than seek the solution and resolve this wisely.
I'm sure you will derive great pleasure from foolishly barking at flying birds. These kids are Hong Kong's future for better or for worse.
The reason why Hong Kong is the de facto financial centre of China is because we have the rule of law which ensures a fair and level playing field for all. This fairness is the main ingredient for Hong Kong's success; this is why Shanghai and Beijing cannot surpass Hong Kong until they have a proper legal system.
I would argue that the "tensions" are a manifestation of our success. We are defending ourselves against a "foreign power" trying to take away our success by taking away our rule of law.
>>> "fair and level playing field for all" + "fairness is the main ingredient for Hong Kong's success; "
See how EU countries now struggling with their economies. See how Britain has to mobilize her queen to welcome Li's money. See how US nearly dropped dead with her economic crisis. Under your theory, these chaos should never have happened, as they have a fair and level playing field for all.
See while these free economy countries are licking their wounds, China's economy is still strong, or at least up to now. HK has a proper legal system and it will never deteriorate?
In fact, most all the political risk to HK arises out of events or decisions being made in Beijing. In the unlikely event that HK falls into chaos and foreign money begins to diversify out of it, that really means that China, itself, is a much riskier place to invest.
Were the cadres in a fit of control-freak rage to drive a spike, figuratively, through the heart of HK, that fact, alone, would mean that prudent foreign investors would either shift to ventures having much faster returns or stop entertaining new projects in China, altogether. Sunken investment in the PRC will be allowed to live off China-profits and ride, unless and until pressure ratchets up against foreign invested enterprises, but new money from abroad won't be forthcoming.
What the Occupy Central people think is that the CCP won't take a possible "bet the farm" risk for so little actual political gain in HK. They're probably right.
On the other hand, the cadres are increasingly insecure, everywhere in China. If they weren't, then they wouldn't making so huge be such a huge investment in limiting what Mainlanders see and stifling every conceivable type of negative feedback.
It is obvious that you aren't familiar with the differences between the Chinese system, including the pilot free trade zone in Shanghai and Hong Kong. International investors are in no hurry to start investing all their hard earned money into a closed system that is in fact leveraged to the hilt at the moment and pay high taxes for their inconvenience. In China if you want to convert your RMB to another currency to wire it out of China there are limits and you require permission from the tax bureau to do it and it takes several days to process the application. In Hong Kong we can log-in to our account online and wire the money to any place in the world without seeking permission from the Inland Revenue department. Not to mention we don't lose 20% off the top to the local tax bureau.



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