Hong Kong must move with the times by making itself an efficient :: Economics

Hong Kong must move with the times by making itself an efficient platform for Mainland financial intermediation. A number of journalists with specialised interests in financial developments in Hong Kong asked for my interpretation of the "move with the times" speech delivered by the Governor of the People's Bank of China, Zhou Xiaochuan at the Annual Dinner of the Hong Kong Association of Banks on 30 September 2005. The "move with the times" comment was made by Governor Zhou in relation to maintaining the status of Hong Kong as an international financial centre. We should of course all move with the times and be alert to changes taking place around us if we do not wish to be left behind. This comment has a universal application and is particularly important when times are changing rapidly. Those with the ability to anticipate changes and prepare for them stand a much higher chance of success. Those that carry on doing the same things in the same old way will simply be left behind. This is the reality. I obviously do not wish to quote others out of context or to put words in others' mouths, just as I do not wish anybody to do the same to me. But Governor Zhou delivered an important speech on a matter of great importance to Hong Kong - so important that it merited special reference in Article 109 of the Basic Law - the maintenance of the status of Hong Kong as an international financial centre. And the HKMA does have certain indirect responsibilities for this subject, derived from the Financial Secretary's authority in the Exchange Fund Ordinance to use the Exchange Fund, with a view to maintaining Hong Kong as an international financial centre, to maintain the stability and the integrity of the monetary and financial systems of Hong Kong. So, for what it is worth, I will make an exception to my usual practice and offer my (undoubtedly subjective and possibly biased) interpretation. Since I don't speak from a position of authority, my comments will concentrate more on how times are changing and less on how we in Hong Kong should move with them. Governor Zhou made it abundantly clear that, in terms of the financial environment in which Hong Kong operates, times are changing and changing fast. He made six important points. First, the savings rate on the Mainland is high by international standards and increasing, in contrast to a zero savings rate in the United States. I take this to mean that there is an exceedingly large amount (relative to GDP) of domestic savings on the Mainland to be mobilised and channelled into