Hong Kong’s de facto central bank warned yesterday that the city must not “sit on its laurels” if it wants to remain a global financial center after plans for China’s first free-trade zone (FTZ) were revealed.
Draft proposals for the free-trade zone in Shanghai showed that the zone goes beyond greater liberalization of trade to take in investment and financial services — including free currency convertibility.
“It is no good for Hong Kong to sit on its laurels and just hope or pray that other financial centers do not or cannot catch up,” Hong Kong Monetary Authority chief executive Norman Chan (陳德霖) told a financial summit.
“There is no room for complacency,” he added.
When asked if he feared Shanghai could surpass Hong Kong as a financial hub, Chan defended its powerhouse status.
“Hong Kong is already a world-class financial center and has a leading edge in the offshore renminbi [yuan] business,” he said. “It is important that we continue to upgrade our platform in facilitating renminbi businesses and we will be able to maintain a competitive edge over time.”
As pro-democracy campaigners in Hong Kong push for universal suffrage by 2017 and anti-Beijing sentiment increases, Chan said the city’s economy was “well positioned” to withstand political tensions.
“We have taken sufficient measures to enhance the risk management of the banking system, our banks are well positioned and well prepared to withstand future shocks, from whatever source,” he said.
Chan underlined the crucial importance of financial market infrastructure to a city’s economic success.
The draft FTZ plan for Shanghai, revealed exclusively by AFP on Thursday, said the new zone would support the establishment of foreign and joint venture banks and welcome privately funded financial institutions.
At present, China’s banking sector is overwhelmingly dominated by state-run institutions.
Hong Kong analysts say the territory — which promotes itself as the business gateway to the world’s second-largest economy, but is facing challenges such as high labor and rental costs — must now rise to the challenge.
“In one to three years time, if Hong Kong cannot revamp itself, it will lose its competitiveness to the trade zone,” ANZ Banking Group chief China economist Liu Ligang (劉利剛) said.
“Some of the businesses in Hong Kong could be shifted to the free-trade zone if people don’t need to use Hong Kong banks anymore,” Liu added. “Hong Kong’s renminbi assets could also flow to the trade zone.”
Sung Yun-wing (宋恩榮), director of the Hong Kong Shanghai Development Institute, said the Shanghai FTZ will serve as a “wake-up call”.
“Hong Kong has to face international global competition, whether from Shanghai or New York and London,” he said.