1. The Challenges to Hong Kong as an International Financial Center

2. 1.Introduction

3. Our purpose? Financial Center of Hong Kong and Shanghai.
Find out which one is better.
Find out the advantages.

4. What Makes an International Financial Center (IFC)?
1) Cross-border and;
2) Cross-currency financial transactions.

5. 2.Background

6. Background
Background of Hong Kong.
Background of Shanghai.

7. Background of Hong Kong
last century 80s to 90s.
A successful international financial centre.

8. Background of Hong Kong
Economic freedom
Positive non-interventionism.
Free enterprise system.
Freedom of foreign exchange
Hong Kong dollar is freely convertible into other foreign currencies.
Enterprises enjoy flexibility movement of capital and repatriation of profit.
Sound legal system

9. Background of Hong Kong
Favorable tax regime
Tax rates are substantially lower than other countries.
Effective infrastructure
International airport, railway, telecommunication.
Freedom of information
Time zone advantage
Fill the time gaps between North America and European’s time zones.

10. Background of Shanghai
Shanghai has well development in recent years.
As a challenger of Hong Kong.

11. Background of Shanghai
The past 10 years, recorded double-digit annual economic growth.
Finance and foreign trade has increase.
Attract many transnational corporations.
Setting local control offices and production facilities.
Pudong New Area.
The largest Special Economic Zone in China.

12. Background of Shanghai
China’s leading international financial, trade and economic center.
China’s premier stock market.
Only foreign exchange center.

13. 3.Financial center between Hong Kong and Shanghai

14. 3.1 Professional and Experts

15. Pools of Talent
Hong Kong : Entrepreneurs, professionals, management and commercial talent in various, sectors.
Shanghai : Industrialists, industrial engineers and a relatively well-educate, skilled workforce.

16. Securities and Futures Commission (SFC)
Compare of 13 economic systems in Asia.
Australia, Mainland China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Thailand.

17. Availability of Skilled Personnel and Access to Suppliers of Professional Services
Rankings of the 13 Selected Economies in Items Related to Availability of Skilled Personnel and Access to Suppliers of Professional Services(2006) FS BD FH EH IE CS LR IT
All
Mainland China (Shanghai) 9 12 7 6 13 4 11
Hong Kong 1 2

18. Hong Kong Chartered Financial Analysts (CFAs).
Certified Public Accountants (CPAs).
Solicitors and Barristers.

19. 3.2 Foreign Exchange Control Policies

20. Foreign Exchange Control Policies
Hong Kong : Able to exchange 14 types of foreign currency.
(Australian Dollar, US Dollar, Euro, Canadian Dollar and Japanese Yen )

21. Hong Kong Item 2004 Australian Dollar 5.73 Philippine Peso 0.14
Canadian Dollar
6.00
Pound Sterling
14.27
Chinese Renminbi
(per HKD100)
106.21
Republic of Korea Won
0.0068
Euro
9.69
Singapore Dollar
4.61
Japanese Yen
0.072
Swiss Franc
6.28
Malaysian Ringgit
2.04
Thai Baht
0.193
New Taiwan Dollar
US Dollar
7.788

22. Hong Kong BASIC LAW Section 1:
Public Finance, Monetary Affairs, Trade,
Industry and Commerce.
Article 112
Article 113

23. 人民币汇率中间价 日期 美元 欧元 日元 港币 英镑 2006-12-18 782.55 1024.68 6.6323 100.666
日期　 美元 欧元
　日元
港币　
英镑　
782.55
6.6323
781.85
6.6236
781.97
6.6545
1537.8
782.54
1038.4
6.693
783.24
6.7041

24. Shanghai
Rigorous.
No flexibility to deal with the demand of the corporation.
Can not exchange the foreign currency those that are popular in the trade of the world.

25. 3.3 Access to International Financial Market

26. Access to International Financial Market
Research by Heritage Foundation.
( comprises 10 factors )
The freest economic in the world.
HK scored 1.28
CHINA scored 3.34
Business ready access to IFM.
Sources: The Heritage Foundation

27. Access to International Financial Market
Other study  conducted for the Corporation of London.
Four related items:
Access to capital markets, foreign and domestic, is easy (AC).
Direct investment flows abroad as a percentage of GDP (DA).
Direct investment flows inward as a percentage of GDP (DI).
Financial market sophistication is high in the economy (FM).
Free flow  goods, services, capital and information.

28. Ranking of Hong Kong and China (including Shanghai) in Items Related to Access to International Financial Markets HK
CHINA
(including Shanghai)
2006
2004 AC DA DI FM
Overall
Over all 1 2 13 11 5 12 9 4
Sources: IMD, WEF and SFC Research

29. Number of Overseas companies with RHQs and ROs
Access to International Financial Market
Attracted many multi-national companies.
Regional Headquarters (RHQs).
Regional Offices (ROs).
Number of Overseas companies with RHQs and ROs
in Hong Kong
2001
2002
2003
2004
2005
2006
RHQs
944
948
966
1098
1167
1228
ROs
2293
2171
2241
2511
2631
2617
Sources: Hong Kong Census and Statistics Department

30. 3.4 Banking System and Financial Market

31. Banking System and Financial MarketHK
 GDP growth double, an average annual rate of 4.9%.
 Per capita GDP in more than doubled , an average annual growth rate of about 3.7%.
 Freely convertible, free flow of capital and no exchange control.

32. Banking System and Financial MarketSH
 China lift foreign exchange control.
 Make renminbi freely convertible under the capital account.
 Requires a solid economic foundation.
 Lowering of Chinese banks' excessively high bad debt ratio.
 Standardization of the securities market.
 Successful reform of state-owned enterprises.

33. Banking System and Financial Market
 Highly-educated workforce.
 Ease of entry for professional staff from overseas.

34. Banking System and Financial Market
1. The Banking Sector
134 licensed banks, 121 were foreign-owned banks.
World's top 100 banks, 75 operations in HK.
2. Exchange market
Continue 24 hours a day around the world.
World’s 6th largest centre for foreign exchange trading.
3. Stock market
One of the world's largest in terms of market capitalization.

35. 3.5 Legislation and taxation

36. Legislation and Taxation
A) An enterprise investing with part of its non-monetary assets, or
B) An enterprise investing by transferring all of its assets as a whole. Independently accounted must:
Have its own bank account.
To prepare its own accounting books and financial statements.
To ascertain its own profit and loss position.

37. Legislation and Taxation
HK has lower tax rate than SH.
Enterprise invests externally with part of its non-monetary operating assets.
The transaction must be split into two economic activities at the time of execution.

38. 4. Conclusion

39. Conclusion That… Conclusion :
The gap will be narrowed between SH and HK.
Solution :
To be a channel for foreign funds entering China.
Upgrade the communication technologic.
Improve the quality of the professional services.
Maintain the low taxation and free trade area.

40. End

41. Section 3
Group No: 6
YAU Yin Ting
YEUNG Yau Fat
CHAN Cho Ming
LEE Cham Fung
CHONG Chun Fung

42. Q & A Section