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25 Years of Forging Ahead

Today is Father’s Day, the day for us to show gratitude to fathers in different ways. Local economic data published recently have shown some improvement. The unemployment rate in March – May fell slightly by 0.3 percentage point to 5.1%, reflecting the situation when the fifth wave of the epidemic was under control during the latter part of the period, as well as the support that consumption vouchers brought to the economy. However, the recent pick-up in the number of confirmed cases warrants attention.

On the other hand, the international environment we are facing has become more complicated. Inflation in the US rose to 8.6% in May, while inflation in major European economies ranged from 5% to 9% (5.2% in France in May, 7.9% in Germany in May and 9% in the UK in April). Global inflation continues to intensify, increasing the pressure for central banks to raise interest rates. The US Federal Reserve has raised interest rates by 0.75 percentage point last week, which is the largest increase since 1994 and the third time this year. These three rate hikes this year added up to 1.5 percentage points, with the federal funds rate rising to 1.5-1.75%. Many major markets have also raised interest rates recently. For example, the UK raised interest rates by a quarter of a percentage point last week, the fifth time this year; and Australia raised interest rates by half a percentage point, the second time this year.

Rampant inflation coupled with central banks’ monetary policy tightening at increased intensity and speed will further dampen global economic growth, which might further undermine Hong Kong’s export growth momentum. Rising interest rates in different economies may also trigger rapid changes in capital flows, and financial markets and asset prices will thus be more volatile. There will be a larger impact on selected economies with weaker fundamentals. Although market liquidity in Hong Kong remains abundant, Hong Kong interest rates will eventually rise under the Linked Exchange Rate System, following the US Federal Reserve’s actions of raising interest rates by larger amounts and at a faster pace and shrinking its balance sheet.

A few days ago, I visited some grass root families in Yuen Long and handed out gift bags for celebrating the 25th anniversary of Hong Kong’s return to the motherland.

In the past 25 years, Hong Kong has experienced many ups and downs, from the Asian financial crisis in 1998, the bursting of the IT bubble in 2000, the “SARS” epidemic in 2003, to the global financial tsunami in 2008, the black-clad violence in 2019 to the COVID-19 pandemic since 2020. Nevertheless, Hong Kong has achieved tremendous development in the past 25 years: GDP has doubled to more than HK$2.8 trillion; the total value of merchandise trade has more than tripled to an all-time-high of more than HK$10 trillion, ranking sixth highest in the world; total employment expanded by 15% to about 3.65 million; and the number of regional headquarters and regional offices located in Hong Kong has increased by 57% to nearly 4 000.

As one of the pillar industries, the financial industry has been serving the needs of Hong Kong and our country. Over the past 25 years, the Hong Kong stock market has expanded with its market capitalisation grown substantially from $3 trillion or so to over $40 trillion, representing a 12-fold increase; the number of listed companies has tripled from about 600 to 2 500; the average daily turnover has increased by nearly 10 times to $160 billion.

On banking sector, the total assets have increased by more than two times to HK$27 trillion; the total deposits (including Hong Kong dollars and foreign currencies) have increased nearly fivefold to HK$15 trillion; and the total bank loans (in Hong Kong dollars and foreign currencies) increased nearly by 1.6 times to HK$10.9 trillion.

The total amount of bond issuance rose 19 times to about US$400 billion last year. The average daily net turnover of the foreign exchange market increased sevenfold between 1998 and 2019. Its share of global transaction increased from 3.8% to 7.6% and its global ranking rose from 7th to 4th. The scale of our asset and wealth management business jumped ninefold to about HK$35 trillion in 2020, with about two-thirds of that sourced from non-Hong Kong investors.

The development of Hong Kong’s financial industry and the overall economy benefited from the solid support from the central government and the stable development of our country. Hong Kong’s development also benefited from our role as a bridge, a firewall and a testing field connecting the Mainland and the international markets, as well as the profit brought about by institutional innovations. More importantly, the hard work and flexibility of Hong Kong people, which maintained the vitality and resilience of our economy, would always lead us to new paths of development despite challenges ahead.

All these figures speak for the remarkable results achieved by generations of Hong Kong people through hard working and perseverance. As we celebrate the 25th anniversary of Hong Kong’s return to the motherland, we are now at a landmark occasion that enables us to continue to stay humble and determined, and join hands with citizens to build a brighter future for Hong Kong.

June 19, 2022