HKMA: "Offshore financial center" label inappropriate

[FaGal]

HKMA: "Offshore financial center" label inappropriate
news.xinhuanet.com - March 11, 2005


HONG KONG - Hong Kong Monetary Authority Chief Executive Joseph Yam said although the label "offshore financial center" has been used in relation to the conduct of renminbi business in Hong Kong, the term is inappropriate.

In his latest Viewpoint article posted on the authority's website Thursday, Yam said within the international financial community the label "offshore financial center" should be avoided.

He said there has been discussions in the Financial Stability Forum by the G10 governments soon after the 1997-98 financial turmoil about the need for offshore financial centers to upgrade their supervisory and disclosure standards.

Unfortunately, Hong Kong has been included in the forum's list of offshore financial centers, although the city tops the list as a model for others to follow.

"But the label is irksome in that, simplistically, offshore financial centers are considered as those thriving on financial activities that cannot be conducted onshore for regulatory reasons," he said.

"While, as one of a few non-G10 members of the Financial Stability Forum, I have been pressing for Hong Kong to be taken off the list, sometimes that label has been used in relation to the conduct of renminbi business in Hong Kong. It is important to note that we are not seeking to engage in regulatory arbitrage."

Yam said Hong Kong's regulatory standards are of international status and there are no opportunities for regulatory arbitrageurs.

"What we are angling for is both to serve as the testing groundfor financial liberalization for the renminbi and to position ourselves in capturing a significant share of renminbi financial business (certainly the lion's share of the international aspect of that business) in Hong Kong as liberalization progresses.

"If in the process our sophisticated and robust financial infrastructure enables us to play a significant role also in domestic financial intermediation of the Chinese mainland, that would be a welcome bonus. But I much prefer not to call Hong Kong an offshore financial center for the renminbi," he said.