Speech – Promoting Hong Kong’s economic restructuring (Christopher Cheung)

President, Hong Kong is well-known for its status as an international financial centre. The report published by the World Federation of Exchanges early this year pointed out that the total market value of companies listed in the Hong Kong Exchanges and Clearing Limited surpassed that of the Shanghai Stock Exchange and the two ranked the sixth and seventh among the members of the Federation. Although the Hong Kong IPO market did not succeed in becoming again the one single stock market raising the highest amount of capital last year, it still stood at the fourth place worldwide.

As Mr John TSANG, the Financial Secretary, pointed out in his Budget speech in February this year, the financial services industry underpins our economy, which is a high value-added industry that contributes 16% to our GDP. To maintain the industry’s competitive edge, we must focus on the diversification of its business and products.

I agree that the financial industry should continue to develop but I do not wish to see one single industry dominate in Hong Kong. On the contrary, I very much agree to Mr Martin LIAO’s motion concerning the promotion of a diversified development of our economy. Mr Kenneth LEUNG proposed to add the land policy and to foster economic diversification and the development of industries, other than the four pillar industries, with competitive edge. I think that the concept of diversification is not only applicable to the development of the industries, but also the development within the financial sector. However, any new financial policies should never be a replica of the practices in foreign countries. Rather, we should adopt a model which suits the local needs and it should be balanced and not lopsided. That is why I move my amendment today.

President, as the Chinese saying goes “inequality is worse than insufficiency”. The market capitalization of the Hong Kong stock market has risen from over $3,000 billion in 1997 to about $23,000 billion today but the market share of Group C brokers has fallen from about 30% at that time to about 10% now. The market share of the 65 medium to big financial corporation has risen to close to 90%. From this we can see that the policy on the financial services industry is seriously tilted towards the big firms.

The survival space of small and medium securities brokers continues to shrink and that has a lot to do with the government policies. The Government often blindly believes that being big is good and secure but it ignores the importance of maintaining a healthy and balanced market development and imposes various restrictions on the small firms. Take the financial crisis set off by the bankruptcy of the Lehman Brothers, one of the four major investment banks in the United States of America then, as an example. The world has not fully recovered from its aftermath yet, an indication of how dangerous it is to overly rely on big firms.

After the abolition of the minimum brokerage system in 2003, the Government allowed the well-capitalized banking sector to reduce the commissions in a predatory manner and some of them even enticed customers by offering zero commissions in order to snatch the market share. That has led to unfair competition. If the Government continues to ignore this situation and allows the big firms to dominate the market, the small firms will have difficulty even to scratch a bite. As a result, there will only be “big fish” in the “fish pond” without any “small fish” and small local investors will be deprived of the choice. The development of the whole market will become increasingly unhealthy. I hope that the Government will formulate fairer policies to allow the various members in the industry the room for competition in a fair and reasonable manner.

Therefore, the industry has a certain expectation toward the newly established Financial Services Development Council and hope that it can truly pool the wisdom of the masses and look fore and aft, so that all members of the financial sector in Hong Kong, be they foreign or local, big or small firms, can all share the fruit of a better business environment; otherwise big firms all have the pie while small firms do not even have the crumbs.

As the new President of the People’s Republic of China, Mr XI Jinping, has said that with all people gathering the firewood together it can make a big fire. Without the small fire made by local small and medium securities brokers, how can there be a big fire burning as an international financial centre now? Only when everyone is with one heart and one mind can we consolidate our status as an international financial centre.

President, other Members of the Business and Professionals Alliance for Hong Kong will speak on other aspects of the motion. With these remarks, I propose the amendment. Thank you.


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