Transcript Background

The Challenges to Hong Kong as
an International Financial Center
1.Introduction
Our purpose?
Financial Center of Hong Kong and Shanghai.
Find out which one is better.
Find out the advantages.
What Makes an International
Financial Center (IFC)?
•1) Cross-border and;
•2) Cross-currency financial transactions.
2.Background
Background
• Background of Hong Kong.
• Background of Shanghai.
Background of Hong Kong
• last century 80s to 90s.
• A successful international financial centre.
Background of Hong Kong
• Economic freedom
– Positive non-interventionism.
– Free enterprise system.
• Freedom of foreign exchange
– Hong Kong dollar is freely convertible into
other foreign currencies.
– Enterprises enjoy flexibility movement of
capital and repatriation of profit.
• Sound legal system
Background of Hong Kong
• Favorable tax regime
– Tax rates are substantially lower than other
countries.
• Effective infrastructure
– International airport, railway,
telecommunication.
• Freedom of information
• Time zone advantage
– Fill the time gaps between North America and
European’s time zones.
Background of Shanghai
• Shanghai has well development in recent
years.
• As a challenger of Hong Kong.
Background of Shanghai
• The past 10 years, recorded double-digit
annual economic growth.
• Finance and foreign trade has increase.
• Attract many transnational corporations.
– Setting local control offices and production
facilities.
• Pudong New Area.
– The largest Special Economic Zone in China.
Background of Shanghai
• China’s leading international financial,
trade and economic center.
• China’s premier stock market.
• Only foreign exchange center.
3.Financial center between Hong
Kong and Shanghai
3.1 Professional and Experts
Pools of Talent
Hong Kong : Entrepreneurs, professionals,
management and commercial talent in
various, sectors.
Shanghai : Industrialists, industrial
engineers and a relatively well-educate,
skilled workforce.
Securities and Futures
Commission (SFC)
• Compare of 13 economic systems in Asia.
• Australia, Mainland China, Hong Kong,
India, Indonesia, Japan, Korea, Malaysia,
New Zealand, the Philippines, Singapore,
Taiwan and Thailand.
Availability of Skilled Personnel and Access
to Suppliers of Professional Services
Rankings of the 13 Selected Economies in Items Related to
Availability of Skilled Personnel and Access to Suppliers of
Professional Services(2006)
FS BD FH EH IE CS LR IT All
Mainland
China
(Shanghai)
9
12
7
6
13 13
4
13 11
Hong Kong
1
1
1
2
1
1
2
1
1
Hong Kong
• Chartered Financial Analysts (CFAs).
• Certified Public Accountants (CPAs).
• Solicitors and Barristers.
3.2 Foreign Exchange Control
Policies
Foreign Exchange
Control Policies
• Hong Kong : Able to exchange 14 types of
foreign currency.
(Australian Dollar, US Dollar, Euro, Canadian Dollar and
Japanese Yen )
Hong Kong
Item
2004
Item
2004
Australian Dollar
5.73
Philippine Peso
0.14
Canadian Dollar
6.00
Pound Sterling
14.27
106.21
Republic of Korea
Won
0.0068
Euro
9.69
Singapore Dollar
4.61
Japanese Yen
0.072
Swiss Franc
6.28
Malaysian Ringgit
2.04
Thai Baht
0.193
New Taiwan Dollar
0. .233
US Dollar
7.788
Chinese Renminbi
(per HKD100)
Hong Kong BASIC LAW
Section 1:
Public Finance, Monetary Affairs, Trade,
Industry and Commerce.
• Article 112
• Article 113
人民币汇率中间价
日期
美元
欧元
2006-12-18
782.55
1024.68
2006-12-15
781.85
2006-12-14
日元
港币
英镑
6.6323
100.666
1529.31
1027.53
6.6236
100.602
1532.74
781.97
1032.71
6.6545
100.627
1537.8
2006-12-13
782.54
1038.4
6.693
100.679
1541.95
2006-12-12
783.24
1037.68
6.7041
100.756
1534.56
Shanghai
• Rigorous.
• No flexibility to deal with the demand of
the corporation.
• Can not exchange the foreign currency
those that are popular in the trade of the
world.
3.3 Access to International
Financial Market
Access to International
Financial Market
• Research by Heritage Foundation.
Present and Past Scores Between HK & CHINA
• The freest economic in the world.
HK scored 1.28
CHINA scored 3.34
scores
( comprises 10 factors )
4
3.5
3
2.5
2
1.5
1
1994 1996
•
Business ready access to IFM.
1998 2000 2002 2004
CHINA(include Shanghai)
years
Sources: The Heritage Foundation
HONG KONG
2006 2008
Access to International
Financial Market
•
Other study  conducted for the Corporation of London.
•
Four related items:
Access to capital markets, foreign and domestic, is easy (AC).
Direct investment flows abroad as a percentage of GDP (DA).
Direct investment flows inward as a percentage of GDP (DI).
Financial market sophistication is high in the economy (FM).
•
Free flow  goods, services, capital and information.
Ranking of Hong Kong and China (including Shanghai) in Items
Related to Access to International Financial Markets
2006
2004
AC
DA
DI
FM Over AC
all
HK
1
1
1
2
1
CHINA
(includin
g
Shanghai)
13
11
5
13
12
Sources: IMD, WEF and SFC Research
DA
DI
FM Over
all
1
1
2
2
1
13
9
4
13
11
Access to International
Financial Market
• Attracted many multi-national companies.
• Regional Headquarters (RHQs).
• Regional Offices (ROs).
Number of Overseas companies with RHQs and ROs
in Hong Kong 2001-2006
2001
2002
2003
2004
2005
2006
RHQs
944
948
966
1098
1167
1228
ROs
2293
2171
2241
2511
2631
2617
Sources: Hong Kong Census and Statistics Department
3.4 Banking System and
Financial Market
Banking System and
Financial Market
• Banking system
HK
 GDP growth double, an average annual rate of 4.9%.
 Per capita GDP in more than doubled , an average
annual growth rate of about 3.7%.
 Freely convertible, free flow of capital and no
exchange control.
Banking System and
Financial Market
SH
 China lift foreign exchange control.
 Make renminbi freely convertible under the capital
account.
 Requires a solid economic foundation.
 Lowering of Chinese banks' excessively high bad debt
ratio.
 Standardization of the securities market.
 Successful reform of state-owned enterprises.
Banking System and
Financial Market
• Financial market
 Highly-educated workforce.
 Ease of entry for professional staff from
overseas.
Banking System and
Financial Market
1. The Banking Sector
134 licensed banks, 121 were foreign-owned banks.
World's top 100 banks, 75 operations in HK.
2. Exchange market
Continue 24 hours a day around the world.
World’s 6th largest centre for foreign exchange trading.
3. Stock market
One of the world's largest in terms of market
capitalization.
3.5 Legislation and taxation
Legislation and Taxation
• Legislation
A) An enterprise investing with part of its nonmonetary assets, or
B) An enterprise investing by transferring all of
its assets as a whole. Independently accounted
must:
• Have its own bank account.
• To prepare its own accounting books and
financial statements.
• To ascertain its own profit and loss position.
Legislation and Taxation
• Taxation
HK has lower tax rate than SH.
Enterprise invests externally with part of its
non-monetary operating assets.
The transaction must be split into two
economic activities at the time of execution.
4. Conclusion
Conclusion That…
Conclusion :
The gap will be narrowed between SH and HK.
Solution :
A) To be a channel for foreign funds entering China.
B)
Upgrade the communication technologic.
C)
Improve the quality of the professional services.
D) Maintain the low taxation and free trade area.
End
Section 3
Group No: 6
YAU Yin Ting 047001
YEUNG Yau Fat 047003
CHAN Cho Ming 047004
LEE Cham Fung 047006
CHONG Chun Fung 047013
Q & A Section