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Occupy Central
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ECONOMY

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

Cyberattacks against Occupy Central poll traced to mainland firms’ computers in Hong Kong

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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This article is now closed to comments

ppihk
Does the government really think Occupy Central is any threat to HK? In most mature democracies, this would be considered kindergarten level politics. If government officials can't deal with these baby political steps that the HK people are timidly taking, but officials feel the need to create an environment of fear, then they do not belong in public service.
edwin_hc_lee@yahoo.ca
Protests like these have never done any good or made any changes.
This is what happen when someone tries copy the west.
I would not be surprised if this "Democrazy and Freedom" destroys HK.
ppihk
Gandhi???
whymak
Mr. Yam makes a good case for HKers about to cut their noses to spite their faces with Occupy Central.
Republic of Ireland's experience from poverty to riches and to bust again may serve as a good object lesson for a small nation living under the shadow of a gargantuan entity, the EU.
Ireland was very poor with a 17.5% unemployment rate in 1980. Many emigrated. In anticipation of the Maastricht Treaty that was finally ratified in 1995, foreign direct investments came in steady torrents driving down unemployment from 16% in 1993 to 4% in 2001. Real estate investments and financial services brought good times to Ireland making it the richest nation in the EU.
With financial meltdown in the West in 2008, Ireland boom turned to bust with unemployment now standing at 14.5%. With so many banking and real estate failures, the Cinderella story ends in a busted pumpkin. I know because I have Irish investments.
So while you think Ireland-EU, you should be wary about HK-China. Hateful HKers wishing a China collapse don't know what's in store for them. They will be hard put to sell their flats for half market value today should they want to emigrate elsewhere.
Maybe they don't care because they are flunkies having low self-esteem and status, little money and not much of a career. I could empathize with them but not when they want to bury this city and its institutions by using their imaginary people power as the destructive equalizer.
ppihk
You are so GD extreme. HK people don't want China to collapse, they just want a real representative. What's wrong with you?
whymak
clc2:
Stop spewing nonsense! I will pick on one of the terms you used, negative feedback. I am 100% sure you're illiterate in engineering.
whymak
In 1998, Mr. Yam was the principal architect who saved our Currency Board from the macroeconomic marauders of the US. Other subsequent measures to stabilize HK$ and improvements in payment systems were then implemented.
Many critics in the West were angry about HK stock market intervention as violation of free market dogmas, among them Fed Chairman Greenspan, who by now has a change of heart and praises the intervention. Even George Soros, our adversary, concurred.
I tip my hat to Mr. Yam for what he has done for us. I know for a fact that he has been open to all serious ideas relevant to HKMA and HK financial sector. We watched him keep his cool when grilled by 潑婦 Emily Lau's, the chairwoman of Legco finance committee, nonsensical questions. It's a travesty to allow an economic and finance illiterate wasting precious management resources -- valuable time of SAR's top executives.
SCMP readers voicing their opinions are only interested in venting their hate venom. Few realized the hard times experienced by us from 1998 to 2004 was the result of Asian financial crisis triggered by speculators, although developing Indonesia, Thailand and Malaysia must also be blamed for their corruption and incompetence. In case you have short memory, think of the 6 years of deflation that followed. Our recovery was due mainly to China's hyper growth and to our pegged currency converging on appropriate interest rates manipulated by US Fed.
Sugelanren
Chow said "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,"
What legal ways are you referring to?
Its the absence of Legal ways which is causing the problem.
johnyuan
Yam should qualify the political tensions which he intones could undermine Hong Kong as China’s top financial center. No place in the world especially even China is devoid of political tension – it is normal and healthy. But it is the prolonged political tension that will destroy stability that will render unwanted results.
.
Yam nevertheless should urge Hong Kong to come to some concensus over conflicts to avoid a prolonged political tension. It is reasonable for financial interest as well for all other concern. Believe me.
whymak
Read my post above on Mr. Yam.

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