The considerable increase in business on the Mainland expected to result from China's prospective entry into the World Trade Organisation (WTO) will boost Hong Kong's economy, said Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority (HKMA).
Mr Yam was speaking at a conference, co-sponsored by the Cato Institute and the Hong Kong Centre for Economic Research, on "Globalisation, the WTO, and Capital Flows: Hong Kong's Legacy, China's Future" today (4 September).
In his speech, he addressed the implications for Hong Kong of China's accession to the WTO, laying particular stress on and the likely effects on Hong Kong's financial and banking sector and the question of monetary policy.
"Our estimates within the HKMA suggest that our re-export trade, involving the movement of goods to and from the Mainland through Hong Kong, will be considerably boosted, and should raise our annual GDP growth rate by somewhere between 0.5% to 1%," said Mr Yam.
According to Mr Yam, the stimulus to liberalisation, globalisation and better corporate governance will expand and deepen Hong Kong's well-established role as a fund of professional expertise, a centre of international experience, and a source and channel of investment.
He pointed out that Hong Kong's banking sector, with its strong reputation and long involvement in Mainland business, stands to benefit greatly from the liberalisation in this area, providing that it can position itself to make the best out of the opportunities.
"Given also that about 40% of the Mainland's trade is routed through Hong Kong, Hong Kong's banks will have an unrivalled advantage over other banks in capturing the increased demand for trade and related financing services. As the largest source of foreign direct investment in the Mainland, and as China's main financial conduit and funding centre, Hong Kong will stand to benefit considerably from the increased demand for banking services in China," said Mr Yam.
In the monetary sphere, Mr. Yam pointed out that the various predictions about the future development of the renminbi in the light of WTO membership, which include the possibility of a devaluation, would most likely have positive implications for Hong Kong's economy as a whole, and should create no difficulties for Hong Kong's entirely separate and soundly based currency.
"On the basis of economic fundamentals, there is no reason why the Hong Kong dollar should be impacted by changes in the renminbi exchange rate," said Mr Yam.
Mr Yam also cited a HKMA study that, contrary to popular intuition, a devaluation of the renminbi might actually provide a stimulus to the Hong Kong economy. This is because the positive impact on demand arising from the complementarities between the two economies - shown most strongly in Hong Kong's entrepot role - would outweigh the negative impact of any loss of competitiveness in those relatively few activities where the two economies remain in competition with each other.
He concluded that the view from Hong Kong should therefore not only focus on what "legacy" it might pass on to the Mainland, but should also look to the rich and varied opportunities for Hong Kong to be found in China's entry into the WTO.
For further enquiries, please contact:
Jasmin Fung, Manager (Press), at 2878 8246 or
Alice Lo, Manager (Press), at 2878 1843
Hong Kong Monetary Authority
4 September 2000
