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INTERNATIONAL FINANCIAL CENTRE

The global recovery was modest and uneven in 2013, with the advanced economies showing increasing signs of improvement, while emerging market economies generally experienced a slowdown in growth. New policy challenges arose as financial markets responded to the changing pattern of global growth, and capital flows became more volatile amid expectations of a turning point in US monetary policy. Against this background, the HKMA actively participated in international and regional forums to help enhance co-ordination on macroeconomic management and the implementation of global financial regulatory reforms. The increasing use of renminbi in cross-border trade and investment activities further entrenched Hong Kong’s role as the global hub for renminbi business. Hong Kong’s strong credit standing and robust fiscal performance were recognised by credit rating agency Standard & Poor’s, which maintained its top-rated AAA rating for Hong Kong.

 

OVERVIEW

A divergent trend in growth emerged between the advanced economies and emerging market economies during the year. While the US and Japan saw a pick up in economic activities, many emerging market economies experienced a slowdown in growth. Global financial markets turned more volatile from the second quarter of 2013 as market expectations for the US Federal Reserve’s tapering of asset purchases sparked widespread re-pricing of financial assets. For some emerging markets, there were increasing concerns about capital outflows at a time when domestic vulnerabilities and external sector imbalances started to manifest themselves following several years of strong credit growth and sharp asset price rises. In the face of heightened uncertainty, closer international and regional co-operation is needed to promote greater financial stability and to achieve a sustained global economic recovery. International co-ordination is also necessary to ensure consistency and compatibility in the implementation of the various global and national financial regulatory reforms that are being finalised.

 

The HKMA actively contributes to international discussions on issues of significance to global and regional financial stability. In 2013, it chaired the Monetary and Financial Stability Committee established under the Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP). The Committee reviews economic and financial developments in the Asia-Pacific region, discusses areas of common interest and, where appropriate, reflects common views. The HKMA also took part in various meetings of multilateral organisations, notably the Financial Stability Board (FSB), which plays the leading role in the reform of the international financial system. In addition, the HKMA continued to work closely with ASEAN+3 authorities on the implementation of enhancements to the Chiang Mai Initiative Multilateralisation (CMIM).

 

The development of Hong Kong as the premier offshore renminbi business centre gained further momentum in 2013 with progressive growth in a full range of offshore renminbi activities, including a 46% increase in both renminbi deposits and trade settlement transactions. The scale of clearing and settlement activities and offshore renminbi foreign exchange transactions all reached new heights. Hong Kong’s role as a global renminbi hub was also strengthened by efforts to expand renminbi business links and financial flows with the Mainland and overseas markets.

 

The safe and efficient operation of Hong Kong’s financial infrastructure and its continued development play a significant role in reinforcing the competitive edge of Hong Kong as a premier offshore renminbi business centre and an international financial centre. During the year, different components of the financial infrastructure operated smoothly. From January, the operating window of the cross-border renminbi payment service between Hong Kong and the Mainland was extended by six hours to the new cut-off time of 10:30 p.m. This facilitates timely cross- border payments via Hong Kong’s renminbi Real Time Gross Settlement (RTGS) system for banks located in time zones behind Hong Kong and the Mainland. The reporting function of the local trade repository for over-the-counter (OTC) derivatives was introduced in time to support the commencement of the interim reporting requirements in August, which brought Hong Kong into line with major overseas markets in terms of the pace of OTC derivatives market reforms.