Hong Kong not on borrowed time, says Monetary Authority chief

Hong Kong may no longer be China’s sole international agent but the city can still keep growing as the country opens up and expands international use of the yuan, Monetary Authority chief executive Norman Chan Tak-lam told an economic summit on Monday morning.

“Some people believe Hong Kong is on borrowed time, that our golden time was in 1980s and 1990s when the city was acting as the sole gateway between China and the international world,” Chan said. “They believe the golden time has passed as Hong Kong will be marginalised as China opens up and international investors can directly access other mainland cities."

Chan said such commentators believed Hong Kong’s prospects were negative, but trade, logistics and yuan business statistics showed a different picture.

He said after China entered the World Trade Organisation, the country’s trade increased from US$510 billion in 2001 to US$4.2 trillion last year. During the same period, external trade in Hong Kong grew from US$300 billion to US$900 billion.

The logistics business now represented 25 per cent of the local economy, up from 20 per cent in the 1990s and 15 per cent in 1979, when China first started its economic reforms.

“These figures show that as China continues opening up, Hong Kong’s role did not diminish but it benefitted from China’s growing trade,” Chan said.

He also rejected arguments that Beijing wanted another mainland city, such as Shanghai with its free-trade zone, to replace Hong Kong, citing last month’s launch of the stock connect scheme linking the Hong Kong and Shanghai stock markets as evidence the two cities could grow together.

“Hong Kong and Shanghai are serving different customers,” he said. “The growth of Shanghai trade and financial businesses could also help Hong Kong growth as long as our companies can offer the services and products to capture the opportunities.

Chan said the mainland now had a deposit pool of 110 trillion yuan and demand for financial services would be huge.

He said Beijing had let other international financial centres do yuan business, which meant Hong Kong was no longer the sole centre.

“But Hong Kong still has the largest pool of offshore yuan funds and has the advantage being the first to develop the yuan business,” he said. “Hong Kong is no longer the sole agent for China, but we still have role to play as long as we can position ourselves to capture the growing opportunities in China.”