Economy

HK as financial hub: promise, challenges

By Emma An (HK Edition)
Updated: 2010-06-25 05:25

This past May, Hong Kong saw local government leaders from the mainland arrive on the heels of one another, hunting for potential investors interested in their respective city projects. Although importing investment was the official theme, it is building respective financial centers that has dominated their agendas.

"Everywhere you go, you hear people talking about building their own financial centers, not what we would have anticipated years ago when few people could make out what a financial center really is," Wu Lianfeng, chairman and managing director of Hong Kong International Po Fung Finance Holdings Ltd, said in an exclusive interview with China Daily. Wu recalled how he found during his visits abroad people elsewhere envied China for having such an international financial center as Hong Kong.

"It is an asset we cannot afford to lose", said Wu, suggesting that Hong Kong should always remain a vanguard of the global financial industry. "Not just for Hong Kong's own sake, however," he added, "but all the more for China's overall economic advancement."

With wide business experience, Wu gave a list of reasons for why Hong Kong cannot forgo its role as an international financial center. "Already the world's third largest financial center," Wu said, "Hong Kong is poised for greater accomplishment."

The first reason lies with Hong Kong's financial freedom, a distinction that has become dearer given that the city is part and parcel of the largest developing country, whose industrialization and modernization is a most recent thing.

The second reason concerns "the freedom of knowing", said Wu, referring to the information freedom deeply rooted in this culture. "Information matters, and immediate information carries far more weight in the financial industry," Wu said, adding, "A delayed financial decision can cost us really dearly, even if that delay is just a matter of several seconds. We are making decisions not by imagination but by immediate information."

The independent and full-fledged legal system in Hong Kong, together with its effective market monitoring mechanism, makes it a formidable player.

"Being a recognized financial center is hardly enough of a reason for foreign investors to come," Wu said. Japan, with its protectionism-tinted legal system, has made investors from abroad grind their teeth now and then. An effective monitoring mechanism, on the other hand, is a guarantee of market order, according to Wu.

Yet, it goes beyond that function by warranting market resilience in the times of financial turbulence, a ready example found in the solidity of Hong Kong's financial industry amid the Asian financial crisis in 1997 that plunged most of the neighboring economies into deep water. Not a single bank was closed then in Hong Kong, nor in 2008, when the "financial tsunami" swept hundreds of US banks under, Wu explained.

Another advantage rests with the fantastic infrastructure Hong Kong has spent decades establishing and improving. "Hong Kong has nearly everything that a great financial hub is supposed to have," Wu said, with the "everything" representing a combination of convenient transportation, good medical services 95 percent backed by the government and the lowest tax rate of all developed economies.

"The pearl should always shine," said Wu, anticipating Hong Kong will play a more important role in the global financial industry.

However, there is one more thing Hong Kong has to do before it fits into that role, Wu added. It has to ally with the Pearl River Delta region to form an economic circle comparable to that of New York and Tokyo so that its limited land will not prevent Hong Kong from expanding further.

China Daily