Towards a new phase
With the legislation work on safeguarding the national security in the HKSAR almost completed by the Standing Committee of the National People’s Congress (NPC), the loophole in national security in Hong Kong will soon be plugged, providing legal protection for the national security and Hong Kong’s social stability.
In the legislation process, the Standing Committee of the NPC had taken into account views from different parties and struck a suitable balance between safeguarding the national security and protecting individuals’ right and freedom. While the Central Government has the ultimate authority on the issue of national security, the HKSAR Government still has a stake in the legislation. This arrangement honours the high degree of autonomy of Hong Kong and the legal differences between the Mainland and Hong Kong, upholding the principle of “one country, two systems”.
The so-called sanctions inflicted by the US, using the national security legislation for the HKSAR as an excuse, have inevitably aroused the market’s concerns over their impact on Hong Kong, and added new uncertainties to the continuous conflicted relationship between China and the US. Nonetheless, the HKSAR Government has carried out comprehensive assessments on the situation and drawn up contingency response plans. As we can see from the development in international politics in recent years, our country has been facing a very complicated external environment and the national security has become a fundamental, substantial and imminent issue to be addressed. The HKSAR Government shall shoulder our obligation to deliver and move forward. .
The political team of the Government has been closely engaging with different sectors recently to elaborate on the legislation issue, as well as to tap the pulse. For the banking and wealth management sectors in the financial services industry, the banks and their clients generally agree with the need for the legislation in safeguarding the national security in Hong Kong, which will help restore social order and safety and create a stable and favourable social environment for businesses, investments and living.
On flow of capital, we understand from the trade that so far there has been no noticeable capital flight. As shown in figures, the Hong Kong dollar exchange rate has remained on the strong side of the convertibility zone of HK$7.75 to one US dollar, and reached the strong-side convertibility undertaking on many occasions since April this year. The Hong Kong Monetary Authority has injected a total of some HK$57 billion to the banking system in the same period. At the same time, the HIBOR rate also remains low. All these are signalling a net inflow of fund into Hong Kong, enhancing the liquidity of our market. We will continue to communicate closely with stakeholders in the industry and provide them with timely information on the latest development of the legislation work on the national security, so that industry players and their clients can have a comprehensive understanding of the issue.
The COVID-19 pandemic is still developing across the globe and many economies are struggling in deep recession. Together with other unfavourable factors such as the widespread unilateralism and populism, conflicts between major economies, as well as geopolitical tensions, the global market is going to face continuous risks and uncertainties. As an open and small economy, Hong Kong’s road to economic recovery would be hard.
Nonetheless, after the national security law comes into effect, I believe the social and political stability will soon be restored in Hong Kong, bringing us more development opportunities. On one hand, with a strengthened foundation for the “one country, two system” principle, Hong Kong could play a more active role in the continuous opening-up and reform of our country. The Central Government has also reiterated their solid support for Hong Kong’s development. On the other hand, the global political and economic pattern has been changing from US-dominated in the past to multipolar. With the shift in global economic gravity from West to East, Mainland and other emerging Asia economies will become another large and vibrant market to Hong Kong.
Some may worry the China-US trade conflict will affect foreign investment in the Mainland, and manufacturing plants may be relocated from China. In my view, even if there are adjustments in the global supply chain in the coming few years, China will maintain its vital role in the process. In fact, after several decades of development, global supply chain has become a system with interdependent and mutually affected elements. China has developed comparative advantages in many aspects, including a comprehensive industrial system, well-established infrastructure, workers of relative high quality, relatively low overall cost, as well as scale efficient production. All these advantages could not be replicated easily. Moreover, the current global distribution of industries and the structure of supply chain are basically market-oriented results, already reflecting the optimal allocation of resources. To change the status quo upon political causes could be very costly and is difficult to achieve. . As the Asian Pacific region will still be the major area benefited from the future adjustment, by leveraging our advantages, experience and connection relating to the supply chain, Hong Kong will certainly be able to reposition ourselves and continue to contribute our best.
As long as we could take advantage of our unique institutional strength of the “one country, two systems”, rightly position ourselves in the development, maintain and enhance our own competitiveness and grasp the opportunities to participate in our country’s development strategy, we could definitely serve our country’s needs with our strengths and promote the further economic development in Hong Kong. The People’s Bank of China together with other three regulatory organisations have earlier proposed various measures that could strengthen and enhance the role of Hong Kong as an international financial centre, as well as promote the connection between financial markets inside the Guangdong-Hong Kong-Macao Grater Bay Area. We expect that there would be breakthrough in some concrete policies, such as the cross-boundary wealth management connect scheme longed by the local financial services sector, which would further enhance the connection of capital between the Mainland and Hong Kong, and offer more opportunities for residents and financial institutions of both sides.
June 28, 2020