1 Hong Kong and Shanghai as IFC 2020 Lions Club of Metropolitan Hong Kong Luncheon Meeting Julia Leung Under Secretary for Financial Services and the Treasury 24 September 2009

2 Chinese State Council’s decision State Council announced on 25 March 2009 a decision to speed up Shanghai as an IFC by 2020 in tandem with the national economic strength and international status of RMB “ 到 2020 年，將上海基本建成與中國經濟實 力和人民幣國際地位相適應的國際金融中 心 ”

3 Chinese State Council’s decision …cont’d National Development and Reform Commission also released the Pearl River Delta Reform Development Plan “ 珠三角地區改革發展規劃綱要 ” Improved ties between Mainland and Taiwan

4 Challenges and Opportunities Challenges Marginalisation of HK as IFC Policy bias that favours Shanghai Opportunities More relaxation means more businesses for all IS IT A ZERO SUM GAME?

5 Indicators of Hong Kong as an International Financial Centre UKUSAJapanHKSingaporeMainland China Bank assets as a % of GNP/GDP 5.4 times96%1.6 times6.4 times6.6 times2 times Market capitalisation of stocks as % of GNP/GDP 60%71%54%6 times1.3 times56% Intensity of financial activities with 100 as the base in the USA(Ranking) 90.6(2)100(1)32.7(3)13.2(6)9.9(9)n.a. Global Financial Centre Index (Competitiveness) Rating and Ranking

6 Hong Kong’s Strengths as an International Financial Centre Sound Supervision and Risk Management System 匯聚大量專業人士 Fair Business Environment characterised by the Common Law System and an Independent Judiciary The World’s Freest Economy Hong Kong Having the Mainland as our Hinterland Commercial Infrastructure Language and Culture; Quality of Life Rich Pool of Professionals Open Market with High Level of Foreign Investment and Free Flow of Capital

7 Hong Kong as China’s IFC China has a unique advantage, having two financial centres to support its rising economic strength HK plays strategic role as laboratory for Mainland’s pilots on capital account liberalisation and RMB internationalisation - raising funds for Mainland enterprises - managing Mainland’s growing private and institutional wealth (QDII funds) HK and Shanghai to complement each other in development as IFC Increasing financial integration with Pearl River Delta Region

8 Hong Kong – Equity Fund Raising Centre The world’s 7th and Asia’s 3rd largest stock market in terms of market capitalisation. As at end July 2009, the total equity funds raised through initial public offerings so far this year was about HK$27.5 billion, ranking 2nd in the world. During 2003 to 2008, a total of 405 enterprises raised HK$1014.2bn in IPO in HK, the amount being the 6th largest globally. Of these enterprises, 26.7%(108) were Mainland enterprises, accounting for 68.3% of the total equity funds raised. Mainland stocks account for 55% of HK exchange’s market capitalization with three of the world’s largest stocks listed.

9 Hong Kong – A Leading Asset Management Centre Combined fund management business amounted to US$1,235 billion (HK$9,631 billion) in 2007, representing a growth of 56.5% compared with Over 68% of the combined fund management business in Hong Kong is sourced from overseas The turnover of exchange-traded funds for 2008 hit a record high of HK$1,800 million, showing a 176% increase from that of the previous year, highest in Asia Asia ’ s largest concentration of hedge funds, (245), managing USD22bn in assets.

10 Hong Kong as RMB Settlement Centre Narrow banking since 2004 (deposit- taking, conversion, remittances and card business) RMB bond issuance since July 2007 (mainland banks and subsidiaries of HK banks) RMB trade settlement since July 2009