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SCMP Reporter

THE theme of this year's Financial Review is Hong Kong as an international financial centre - an important topic since it goes to the heart of the structural changes which have taken place in the territory's economy over the last 15 years.

  This period has seen the transformation of Hong Kong as a manufacturing centre to one where it designs, organises and markets manufactured goods produced in southern China, and provides the associated financial services.

  Hong Kong is now one of the world's leading financial centres.

  Opinions differ as to its precise ranking, but it certainly has one of the largest concentrations of banks in the world, with 79 out of the world's top 100 banks represented here.

   The external assets of the banking sector are the fourth largest in the world behind Japan, the United States and Britain.

   Foreign exchange market turnover in Hong Kong was the sixth largest in the world last year and its gold market was the fourth largest.

  To this should be added a stock market with over 450 listed companies, with a market capitalisation in Asia second only to Japan, and a growing market for both domestic and international bond issues.

  How has such a small territory reached such a strong position?   Apart from its geographic advantage as the gateway to China and in filling the time gap between the close of New York and the opening of London, other factors have been Hong Kong's excellent transport and telecommunication facilities; its well-established legal system; the widespread use of English; effective supervision; and the liberal policies pursued by the Hong Kong Government.

  These liberal policies include the complete absence of exchange controls and barriers to entry of foreign companies.

  There is good reason to believe that this success will continue in the future.

   The economic changes in China seem to be irreversible.

   While the overheating of the Chinese economy has made the immediate outlook more uncertain, Chinese authorities have taken steps to introduce the necessary restraints and reforms of their financial system.

   These will need to be carried through with determination, but, if successful, they will foster China's long-term growth and, in turn, benefit Hong Kong.

   This will increase the opportunities for Hong Kong financial institutions to expand still further their presence inside China.

  But while the prospects look good, Hong Kong's position as an international financial centre cannot be taken for granted, particularly with political change on the horizon.

   It will be necessary to work to ensure that the provision in the Joint Declaration that ''the Hong Kong Special Administrative Region shall retain the status of an international financial centre'' is achieved.

   A large part of this responsibility will fall on the newly established Hong Kong Monetary Authority.

   The role of the Monetary Authority is to carry on the central banking functions in Hong Kong with professionalism and continuity with a view to safeguarding the stability of the Hong Kong dollar and of the financial system as a whole.

   While important and difficult challenges no doubt lie ahead, I am confident that we have the means within the Monetary Authority to ensure that these objectives can be met.



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