Speech of the Hon KP Chan on housing, insurance and RMB policies on the motion of thanks for the Policy Address at the Legislative Council meeting on October 27, 2010 (Synopsis)
MR PRESIDENT, this year’s Policy Address is heading at the right direction to refocus on livelihood issues like housing and helping the poor. However, public opinion and market reactions are not encouraging. They criticize that policy initiatives are inadequate and imminent problems are not addressed.
• Although a series of key measures on housing are put forward in the Policy Address, they do not seem to be capable of arresting property prices. It is a cause for concern that investors are buying fanatically not only in the primary market but also the secondary market. I ask the Government to reexamine its housing policy with a view to introducing more rigorous measures to calm down speculative sentiments.
• The Policy Address says that the average take-up of private housing for the past 10 years is about 18,000 units a year. Therefore, an average annual supply of some 20,000 units in the next 10 years would be sufficient to meet the demand. However, this average take-up figure was distorted by dwindled demand in two financial crises and SARS epidemic. In fact, the annual supply of over 27,000 units a year before the reunification of 1997 was still fallen short of demand. On the other hand, investors’ interest from the Mainland is increasing nowadays. I ask the Government to put forward five-year plans on land supply so as to ensure that the supply of residential units is meeting demand. Misleading signals in the market would also be avoided.
• In my view the proposed “My Home Purchase Plan” is on the right track. However, it is too late and too few that the first batch of 1,000 flats will only be available by 2014. I reiterate my support to resume the “Home Ownership Scheme” to help the working class who could not afford private housing to improve their living standard.
• The Chief Executive says that the Government is proposing to establish an “insurance policyholders’ protection fund” and is consulting the public by the end of this year. The insurance industry welcomes this policy agenda but wishes to see an accelerated pace. In case financial crisis recurs in the next two years and some insurance companies do go bust before establishment of the proposed protection fund, the Government would be subject to enormous political pressure.
• On the other hand, the protection fund would be financed by levy on the premium and it would not have sufficient reserve at the outset. I wish that the Government would make an advance to the fund for setting up the reserve and starting operation at the earliest.
• The Government is consulting the public on an independent Insurance Authority, but the consultation document does not provide sufficient details on the future regulatory framework. While views of the insurance industry may be diverse, there is common anxiety. I ask the Government to conduct a fresh round of consultation with the industry.
• The industry is skeptical of overregulation that might threaten the status of Hong Kong as an international financial centre and the sustainable development of insurance market.
• The industry also objects to the regulation of bank-assurance by HKMA because inconsistence in supervision is a cause for concern. All selling channels of insurance products should be under the sole regulation of the independent Insurance Authority. This would help avoid any misunderstanding of the public.
• I am grateful that the Government is actively seeking more investment means on the Mainland for funds in Chinese renminbi (RMB) raised by enterprises in Hong Kong. With unrelenting development of RMB financial products, local RMB balances would increase phenomenally. A formal arrangement for financial institutions to repatriate these RMB funds to the Mainland for investment and earn better yields than offshore would make local RMB products like insurance policies more attractive.
• I also support efforts of the Government to encourage more enterprises to issue RMB bonds in Hong Kong. When such issues are substantial and unrelenting in amount, they would help reinforce Hong Kong’s role as an offshore centre for RMB transactions.