Actively Participate in the National 12th Five-Year Plan

Speech of the Hon K P Chan, JP at the Legislative Council on 20 January 2010, Motion Debate on “Actively Participating in the National 12th Five-Year Plan

MR PRESIDNET: The Central People’s Government is preparing the 12th Five-year Outline Plan for National Economic and Social Developments. The 12-5 Plan, as it is commonly called, will map out the growth path of China for the next five-year period starting 2011. In the aftermath of the financial tsunami, China is determined to gain a foothold in the international financial arena. Therefore, the 12-5 Plan is particularly significant to Hong Kong.

I am sure everybody in Hong Kong understands the significance of economic convergence of the Mainland and the territory. Therefore, I would rather focus on the significance of the 12-5 Plan to our financial sector today. Following the financial tsunami, the State is determined to accelerate the internationalization of the Chinese renminbi as a means to getting out of the impasse in international financial markets arising from US dollar dominance. The Central Government is also resolved to build Shanghai into an international financial centre by 2020. Undoubtedly, financial reforms are strategically important to the State economy and the Central Government is working on a comprehensive action plan.

In light of rapid changes in the global financial setting, Hong Kong should put forward substantive ideas on playing an active role to the Central Government without delay for inclusion in the 12-5 Plan. In fact, the Chief Executive has pointed out the plausible direction in his Policy Address last October with the view to uplifting competitiveness of our financial sector. These suggestions include: enhancing the role of Hong Kong in regionalization and internationalization of the renminbi as a pilot site, and developing diversified currency business in renminbi in the territory, etc.

If Hong Kong were to maintain its status of international financial centre, it would be essential for the territory to move in tandem with strategic development of the State. Otherwise, we are running the risk of marginalization. As the first and utmost step, the territory should strive for the important mission of the pilot site for national financial reforms in the State’s action plan.

As a crucial member of the financial sector of Hong Kong, the insurance industry is looking forward to the 12-5 Plan with enthusiasm. The industry has been hard hit by the financial tsunami. Moreover, the local market is too small and much matured. The insurance industry is seeking a new path of sustained development and welcomes the Chief Executive’s support for diversifying into business denominated in renminbi.

Although there is strong demand for insurance services denominated in renminbi in Hong Kong, insurers are inherently handicapped in business development. The two particular hurdles are inability to open bank accounts in renminbi and lack of means of hedging renminbi exposures. Consequently, insurers are unable to capture such promising business not because of incapability. If Hong Kong were nominated as the pilot site for internationalization of renminbi, our insurance industry would be able to cross these hurdles and launch insurances denominated in the national currency. In turn, market status and competitiveness of our insurance industry would be upgraded to benefit both the State and the territory.

On the other hand, the local insurance industry has been striving for access to the Mainland market but entry requirements under CEPA are overly restrictive in terms of balance sheet and business history. Local insurers other than subsidiaries of foreign giants could hardly meet these thresholds. If there were supplemental arrangements to allow more indigenous insurers easier entry, it would enable the local insurance industry to partner and share its extensive international experiences with its counterpart on the Mainland at more fronts in developing the expansive national market jointly. Both sides would mutual benefit.

On his duty visit to Beijing last month, our Chief Executive has assertively expressed our wish of asking the State to make better use of advantages of Hong Kong as an international financial centre in the 12-5 Plan. I am encouraged that the SAR Government is taking a positive stance in participating in the national economic planning on this occasion. I am also looking forward to its equally positive stance in gathering and representing views of the local public on this important project.

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