Tag Archives: Hong Kong

Hong Kong Tops Economic Freedom Index

Hong Kong has once again topped the Fraser Institute’s Economic Freedom Index, which measures the degree to which the policies and institutions of countries are supportive of economic freedom.

According to the report, Hong Kong scored highly across all of the five categories which are used to calculate index scores, including size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit, labor, and business.

Hong Kong has topped the Fraser Institute’s 141-country ranking every year for the past three decades. This year, Singapore, New Zealand, Switzerland, and Australia were placed after Hong Kong in the top five.

The United States experienced one of the largest drops in economic freedom, according to the report, falling to 10th place overall from sixth in 2010. Much of this decline is attributed to higher spending and borrowing on the part of the US government, and lower scores for legal structure and property rights.

“The link between economic freedom and prosperity is undeniable: the countries that score highly in terms of economic freedom also offer their people the best quality of life,” said Fred McMahon, vice-president of international policy research at the Fraser Institute, a Canadian public policy think tank.

Commenting on this year’s index results, Hong Kong Chief Executive Donald Tsang remarked that economic freedom was “part of Hong Kong’s DNA”.

“In such testing times, it is important for an externally oriented economy such as Hong Kong to remain true to our philosophy. That means strong fiscal discipline, low taxes, open markets, free flow of information, goods and capital, clean government and a level playing field for business,” Tsang said in a speech September 20.

“The fact that we have held true to these beliefs for decades is no doubt one reason why Hong Kong has consistently ranked so highly in the league tables of economic freedom. As the old saying goes: ‘If it ain’t broke, don’t fix it.'”

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Hong Kong – Adaption to the Chinese Renminbi (RMB) currency

During a speech on the development of the renminbi market in Hong Kong at the China Economic Development Forum, the Secretary for Financial Services and the Treasury, Professor K C Chan, said that RMB internationalization represented the ‘most exciting topic’ in the development of Hong Kong’s financial markets.

He pointed out that RMB internationalization “represents a policy choice in the gradual process of the opening of the capital account. There is no question of whether the capital account will be liberalized. It will. The only question is when.”

He confirmed, however, that: “Even in the current stage of development, if the capital account is closed or mostly closed, there are still many benefits associated with RMB internationalization. As RMB is becoming accepted as an investment asset, in addition to a currency for trade settlement, it leads to a diversification of currency risks for investors as well as Mainland borrowers.”

“The current approach to RMB internationalization is through the encouragement of an offshore market,” he continued. “Although the trade settlement in RMB can be done through correspondent banking arrangement between domestic banks and foreign traders, we won’t have the benefits of having an offshore market that allows foreign traders and investors to trade and invest in RMB. An offshore market will allow market forces to work to build up the demand for RMB as a currency for trade settlement as well as a currency for investment.”

“Hong Kong is the most natural and the most competitive offshore RMB market in our country,” he concluded. “We have been a testing ground for new products and new ideas for China and now we are a testing ground for financial market reform for the country. There is much cooperation between the regulators on the Mainland and Hong Kong, and we can ring-fence the market with the capital flows being regulated to safeguard the financial security of the nation.”

Chan added that he expects there will be further development and more offering of investment products, including RMB-denominated bonds, in Hong Kong, which will contribute to “a much more interesting and diversified investment product market in Hong Kong. These will contribute to the growth of the offshore RMB market.”

To date, there have been 38 RMB bond issues, with a total issuance of over RMB 80bn. The offshore RMB bond market has taken off with the issue of so called “dim sum bonds” issued by a large range of issuers and available to institutional investors. The issuers range from Chinese corporations to bond corporations of foreign agencies.

Chan said that a base case forecast puts the issuance of offshore RMB bonds at RMB 60bn in 2011, as against RMB42bn last year, which would bring the total outstanding “dim sum bonds” to over RMB 100bn.

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Isle of Man companies can list on the Stock Exchange of Hong Kong

The Isle of Man government announced on October 18 2010 that it had been notified by the Stock Exchange of Hong Kong that the territory has been accepted as an ‘approved jurisdiction’ for the purposes of the listing of its companies on that exchange.

In gaining approval, the Isle of Man joins a select group of countries which have been accepted by the Hong Kong Listing Committee. In the case of the Isle of Man, companies incorporated under the two main bodies of company legislation in the Isle of Man – the Companies Acts 1931-2004 and the Companies Act 2006 – can be listed on the Exchange.

Welcoming the Exchange’s decision, the Isle of Man government said: “This important recognition has been achieved on the basis that the Isle of Man has been able to demonstrate equivalence in its standards of investor and shareholder protection to those available under Hong Kong company law, a further prerequisite being that the Isle of Man is a full signatory to the IOSCO Multilateral Memorandum of Understanding.”

Juan Watterson Political Member of the Department of Economic Development responsible for financial services, added: “This paves the way for the Isle of Man to attract foreign issuers to list on the HKSE. In recent years, the island has become the leading jurisdiction for listing foreign companies on the UK’s AIM market; a number of our commercial law firms already have considerable international expertise working with Asian lawyers including equity and debt issues by Isle of Man companies on other Asian exchanges and in some cases have representative offices in Asia. We are constantly looking for ways to improve and build on the Island’s international reputation as a high quality International Business Centre, and this listing approval is a further example of this commitment”.

For his part, Minister for Economic Development, Allan Bell, said: “The Hong Kong Stock Exchange is assuming greater importance among the leading capital markets. Given the Isle of Man’s proven credentials in Asia and unique status, for example, in facilitating manufacturers in greater China to import goods into the European Union, we see this endorsement by the Hong Kong Stock Exchange as further strengthening the role that we are able to play in enabling international trade.

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