| There
has been a fundamental change
in Hong Kong’s economic landscape
since the 1997 handover. We
have seen a closer economic
cooperation between Hong Kong
and Mainland. During the past
14 years, Hong Kong has experienced
a number of difficult incidents
including the Asian financial
crisis and SARS. Hong Kong’s
property sector had a major
setback during the Asian financial
crisis that started in 1997.
The burst of the asset bubble
has turned a lot of property
owners into ‘negative asset
class’. This implies the market
value of the property is less
than the mortgage. The owner
cannot repay his/her mortgage
even if he/she sells the property.
Hong Kong economy went into
recession after the Asian Financial
Crisis. In 2003 Hong Kong economy
got another hit – SARS. The
property prices lost about 60%
compared to their peak prices
in 1997. The economy went through
a period of more than five years
deflation. The unemployment
rate hit the record high of
8.6%. Hong Kong people’s confidence
on the future of Hong Kong’s
economy hit the bottom low in
2005.
To
facilitate the flow of people
and goods between Hong Kong
and Mainland China, the Central
Government launched the CEPA
and Individual Travel Scheme
after the SARS incident. The
CEPA agreement enhances the
trade between Hong Kong and
Mainland. In particular, it
facilitates Hong Hong’s servicing
sector entering in the Mainland’s
market. This is a win-win situation
that Mainland market needs the
support of a more sophisticated
servicing sector. In addition,
more competition can also eventually
improve the quality of the servicing
sector of Mainland. The implementation
of the CEPA agreement seems
to be a success that enhances
a closer economic cooperation
between Hong Kong and Mainland.
At the same time, the Individual
Travel Scheme has also been
introduced by the Central Government.
This allows Mainland tourists
to come to Hong Kong on a day-trip
to shop. We have seen the influx
of Mainland tourists. Hong Kong’s
retail market has picked up
right after the launch of this
scheme.
In
2008, the US has experienced
the subprime crisis and the
US economy went into trouble
that affected the global economy
including China. The US dollar
has always been and is still
the major reserve currency.
The value of the US dollar has
a direct and major impact on
China’s economy. One implication
is that we cannot only rely
on the US dollar for trade settlement
and as well as the major reserve
currency. One alternative is
to internationalize RMB. The
first step is to promote trade
settlement in RMB. Hong Kong
has been selected to be one
of the first cities for this
experiment. The internationalization
of RMB is going to be a long
journey. Hong Kong is the international
financial centre of China with
a good risk management practice
and legal system that could
provide a firewall for China
in this long and risky experiment.
Hong Kong is an ideal choice
to be an off-shore centre for
RMB. Hong Kong is also proud
to be able to contribute to
China’s economic development.
Mr.
CH Tung has been very instrumental
and successful in the implementation
of ‘one country – two systems’
in Hong Kong. During the past
decade, we have seen more cooperation
between Hong Kong and Mainland.
In my view these are win-win
situation for both Hong Kong
and Mainland. I will foresee
a more fruitful and successful
interpretation of ‘one country
– two systems’ in Hong Kong
for the future years to come.
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