Question Raised in the Chief Executive’s Question & Answer Session

MR CHAN KIN-POR (in Cantonese): Chief Executive, I greatly welcome the proposal raised in the policy address on strengthening our role as the testing ground for the regionalization and internationalization of RMB and to build a market offering a broad range of RMB products and services. I believe this policy will surely create more job opportunities to help resolve the problems confronting Hong Kong.

Actually, many people in Hong Kong envisage a rise in the value of RMB and so there is a huge demand for RMB products. Many people have enquired with insurance companies whether there is any way to take out insurance policies denominated in RMB. However, it is simply impossible for insurance companies in Hong Kong to provide services for Hong Kong people to take out RMB insurance policies mainly because a lot of technical difficulties are involved. Not only is it basically impossible for insurance companies to open RMB accounts with banks, there is also a serious shortage of long-term RMB investment instruments. For instance, we must have some long-term RMB bonds to match the risks involved in doing RMB insurance policy business. Actually, these are the shackles imposed on the development of diversified RMB business. I believe other trades and industries wishing to do business in RMB will also encounter similar problems. Will the Government “break down barriers and streamline procedures” for various trades and industries to enable them to do this type of business for the purpose of creating more job opportunities for Hong Kong?

CHIEF EXECUTIVE (in Cantonese): Actually, one of the key tasks of the SAR Government in recent years is to fight for RMB clearing in Hong Kong as an off-shore RMB centre. Therefore, it can be said that some achievements have
been made in this respect in recent years, including the issue of RMB bonds in Hong Kong and RMB clearing by our banks. From this we can see that we are gradually developing our role as a testing ground for RMB. Of course, we must ensure the financial safety of RMB in the process.

I greatly encourage the insurance sector to develop a diversified range of products, including RMB products. I think this is a good thing. And it is also good for various trades and industries to continue to do so and move forward in this direction. However, we must understand that when the State, in consideration of the financial safety, especially when the RMB capital account is being affected, the State will adopt a very cautious attitude.

I believe the RMB capital account will be liberalized progressively, and in the process of liberalization, we will strive to find room, especially in taking advantage of Hong Kong as a platform for handling these transaction procedures and transaction proceeds. I firmly believe various trades and industries, including the insurance industry, in Hong Kong will surely stand to benefit.

I would like to point out to Members that we are very proactive in campaigning for Hong Kong to become a pilot point of RMB business. We will also fight for Supplements V and VI to the Mainland/Hong Kong Closer Economic Partnership Arrangement, and our campaign in this respect will also continue. However, we must also respect the cautious attitude adopted by the State in liberalizing the capital account.

MR CHAN KIN-POR (in Cantonese): President, I hope the Chief Executive can make persistent efforts in lobbying and explaining to the State. I also hope departments responsible for financial and monetary affairs can assist the Chief Executive in explaining to the State the merits of our financial system and our sound regulatory regime such that the liberalization of RMB can be implemented expeditiously.

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