Citigroup Chief Says Hong Kong Important For Market-Based Chinese Economy

Mary Swire, Tax-news.com, Hong Kong

13 September 2000

China has been undergoing a great transformation since 1997, when Hong Kong was handed back to the Communist giant. The position of Hong Kong, since then, has been uncertain. Would the former British territory fade into the shadow of China and see an erosion of its role, or would it hold its own? Last year Premier Zhu Rongji described Shanghai as the "New York of China", relegating Hong Kong to the title of the "Toronto of China", which did little for Hong Kong's self-esteem. Earlier this week, however, former US treasury secretary Robert Rubin, now chairman of the executive committee at US financial services group Citigroup, stated that Hong Kong need not fear competition from a resurgent Shanghai, whose re-emergence as a financial hub could bring only benefits.

Mr Rubin's comments back up those of Hong Kong's monetary chief Joseph Yam Chi-kwong, who has been defending the SAR's position as China enters the World Trade Organisation, rejecting sceptics who predict a diminished role as Beijing opens up.

Speaking during a visit to Hong Kong, Mr Rubin stated: 'Clearly, as reform takes place in China, as it gets people to conduct the kind of activities in Shanghai you conduct here, it will become an enormous financial centre. It may be that Hong Kong as a percentage of the whole will diminish, but I don't think that will be negative because it will mean China is reforming.'

He added that the introduction of a market-based financial system in the mainland would offer tremendous opportunities to Hong Kong. Similarly, Hong Kong's advantages, such as the rule of law, would safeguard its importance: 'These things take a long time to develop. Hong Kong can be a vibrant, growing and robust financial centre for long in the future - even if Shanghai develops as a powerful competitor. If I was in Hong Kong I wouldn't worry about Shanghai as competition. That can only happen in a free-flowing market-based economy in China and that's a tremendous opportunity for Hong Kong.'

Mr Rubin said that Hong Kong's status as a great global financial and commercial centre was never in doubt. He stated: 'Hong Kong is enormously important for China and China is enormously important for Hong Kong. Hong Kong is a world class locus of the entrepreneurial and financial and market skills that China so greatly needs and has long served this function within the broader Chinese economy. Now, with China undergoing its great transformation, China must develop these skills more broadly - but it seems to me there is an extraordinary opportunity for Hong Kong to be an even greater commercial and market centre in the years ahead because of the potential for economic growth in a market-based Chinese economy.'

Mr Rubin did, however, warn China and Hong Kong not to become complacent after the passing of the Asian financial crisis, as real risks still existed, despite sound conditions and promising outlook for growth in the region.

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