Could a burgeoning China drive Singapore and Hong Kong the way of the dinosaur? Some economists fear the answer could be yes. China’s emergence as a manufacturing powerhouse spells competition for every Asian economy, but none face a more compelling need to shape up for the challenge than the two city economies. Each has got a different response strategy — while Singapore scrambles to reshape itself, Hong Kong is betting on the status quo. While most Asian nations can look within — to seek growth in domestic consumption — if their export engines start to sputter, the relatively small populations of Hong Kong and Singapore give them little choice but to look outside for growth. Hong Kong ranked ninth and Singapore 15 th among the world’s top exporters in 2000, according to the WTO, leaving each just a narrow space to expand export growth. To address the shortcoming each is taking a different tack.
While Hong Kong is betting on geography, being well placed to plug in to the Chinese growth engine, Singapore is gearing up to become a more services- and knowledge-driven economy and reduce the impact of manufacturing cycles. l SHANGHAI THREAT But the clock is ticking. Regional analysts said within 10 years the emerging industrial; port and commercial hubs inside China may not leave the rivals much to fight over. “The debate over the rivalry between Hong Kong and Singapore has… become a side issue, in the sense that you are pretty much fighting for the spoils rather than the real thing,” said Paul Alapat, Nomura International’s economist in Hong Kong. “It’s inevitable.
... of Hong Kong before being handed over to China was one of stable growth.For the most part of the economic indicators in Hong Kong from ... the world. China's self-restraint will be put to test in this respect. Hong Kong's near laissez -faire economy has been rooted ... are certain to produce far reaching structural changes in the Hong Kong economy, how to handle them will be one of the largest ...
China has such a huge trained labor force and it’s still cheap, it’s going to be virtually impossible to compete.” Low-cost Shanghai offers the most immediate and direct competitive threat. It threatens to soon deprive Hong Kong of much of China-related air and shipping traffic. In the future, many multinational firms now operating out of Hong Kong and Singapore could move their regional headquarters there, along with a large share of investments and financial and manufacturing activities. Last year, Shanghai’s gross domestic product grew 10. 2 percent, while Hong Kong saw growth of just 0. 1 percent and Singapore’s GDP shrank two percent.
l FADING AWAY VIABILITY international financial adviser Marc Faber, dubbed “Dr Doom” for his often gloomy views, said the viability of financial services centers such as Hong Kong and Singapore would fade as cheaper or virtually free communications allow investors to trade from their location of choice. “In future, there won’t be a global financial centre,” he said. “The institutions can be anywhere they want to be. You won’t have to be in a financial centre any more.” Faber, who predicted in 1990 that Shanghai would emerge as a major market, said more mainland cities have the same potential.
“Hong Kong or Singapore, over time they will become relatively unimportant because in China there would be at least 10 cities that have economies the size of Hong Kong,” he said. Andy Xie, chief economist of Morgan Stanley Dean Witter, said China’s challenge to Hong Kong and Singapore could lead to a decline in living standards. “The issue is whether any plan can shield you from Chinese competition and hence preserve the living standard. I think the truth is somewhere in between,” he said.
Xie said investors may be willing to pay a premium for the developed infrastructure, tax incentives and business-friendly legal environment of Hong Kong and Singapore. But the size of that premium depends on how much they restructure their economies. l SEARCH FOR GROWTH Alapat said both would have to seek new growth engines as manufacturing, for Singapore, and property, for Hong Kong, may not remain such effective growth drivers as before. “Most of the easy solutions are now behind us.” Alapat said Hong Kong may be feeling the competitive pressure from China much more intensely at the moment. But Alapat and Xie both agreed that its proximity to China and North Asia would remain its biggest edge over Singapore. “Hong Kong doesn’t need to restructure to the same extent as Singapore,” Xie said.
... Hong Kong to China in 1997 makes the emergence of strong citizen participation in government even less likely. In both Hong Kong and Singapore ... Role of Citizen Political Participation in Hong Kong and Singapore Both Hong Kong and Singapore are city states that traditionally have ... coming years as Singapore's populace becomes more educated and affluent and Hong Kong comes under the control of China. ...
He said Hong Kong could continue to be a centre for China’s Pearl River delta — a very large economy of 80 million people with exports already above $100 billion dollars and growing. l BRIDGE THE DISADVANTAGE Singapore, despite being cheaper than Hong Kong, still has to figure out the level at which investors would think its relative geographic disadvantage has been bridged. Sanjeev Sanyal, Deutsche Bank’s regional economist, said Singapore was encouraging local companies to tap into growth outside the city state. More than half of the earnings of telecoms giant SingTel are already generated overseas. Singapore wants to encourage knowledge-based industries like biotechnology, so the emphasis would be on incentives like low personal income tax, Sanyal said. “Given their track record one has to give them the benefit of the doubt that they will do it again.
But having said that, when you make a one-directional bet and if it goes wrong, it goes wrong big time,” he said. Society factors Hong Kong Education within Hong Kong and attracting talents outside Hong Kong According to the World Economic Forum, Hong Kong consistently ranks among the world leaders in terms of management quality. Hong Kong also ranks among the very best in the world in terms of management’s experience in international business, according to the International Institute of Management Development (IMD).
As we know that Hong Kong has a disciplined, industrious, and highly trainable work force. Our workforce is highly educated, flexible and proficient in the use of English. The territory! |s education system has expanded rapidly with the growth of economy, such as The Open University of Hong Kong (OUHK); it offers more than 100 postgraduate, degree, associate degree and sub-degree programmes for adult students.
... is the Hong Kong dollar (7.5853 Hong Kong dollars equal U.S.$1; 1991).The dependency is an important international financial center, ... other electronic components. Hong Kong's principal trade partners are China, Japan, Germany, Taiwan, the United States, Singapore, South Korea, Canada ... by Victoria Bay. English and the Cantonese form of Chinese are the official languages of Hong Kong, but Chinese is ...
In the department of business administration, it offers different courses to student, such as financial management; their aims are introducing the financial market in Hong Kong, also equipping the students with the analytical skills to solve problems that involve making investment. Accordingly, the student statistics by OUHK during October 2002, more than 40% students held sub-degree, Diploma, university Degree or above before they study in OUHK, they also up to 40% students are professionals and managers, so we can know that the continuous learning is quite good nowadays, it can train more expertise to the financial, as a result, it increase competitiveness to become an international financial market. Besides, the Chief Executive announced in this 2001 Policy Address the setting up of HK$5 billion Continuing Education Fund (CEF), it is supporting and subsidizing Hong Kong people with learning aspirations to pursue continuing education and training programmes. The CEF will help people achieve sector-specific competencies in the areas of Financial services, China Business etc, the eligible applications will be reimbursed 80% of their fees, subject to a maximum sum of $10, 000. On the whole, Hong Kong! |s educational and training facilities are now able to cope with the demand for trained manpower, though there is obviously room for further improvement. A substantial number of young people also go abroad for further studies, and overseas-trained graduates have long been an important source of qualified manpower.
Another important source of qualified manpower is foreign professionals. With the development of a knowledge-based economy, the competition for talents has become worldwide. Hong Kong not only needs to invest in local human resources, but also attract talents from other parts of the world. For that reason, in Policy Address 2001, government was on a progressive basis, reduced time of the admission process that professionals from abroad to work in Hong Kong, the government is reviewing its immigration policy with a view to relaxing restrictions on the entry of overseas businessman to Hong Kong and eliminate all unnecessary restrictions and barriers. The new schemes to admit skilled people and talents from the Mainland, also encourage more foreign talents as well, it set up to develop and enhance talent and infrastructure for Hong Kong! |s financial center.
... allocations and private sector contributions and donations. Hong Kong and Singapore governments and private sector surely can implement ... and Malaysia are principal trading partners with Singapore. Oxfam Hong Kong Resource Partner Oxfam is an international confederation ... the economy. Singapore also has experienced vast economic growth since 1960. Singapore developed its financial and industrial sectors ...
Language The use of English has played an important role in Hong Kong! |s development as an international financial center, it is because English is the undisputed world language of banking, finance, trade, investment and technology. Virtually all-interbank business transactions in Hong Kong are conducted in English. English is the most important means of communication in correspondent banking business, in foreign exchange dealings, in the arrangement of loan syndications, and in all other types of banking services the world over. Also, the use of English is a necessary condition for the proper functioning of the legal system. While it is true that the use of English as an official language was originally a consequence of British rule, it is no longer considered a symbol of Hong Kong! |s colonial status.
Rather, it is now widely recognized as a pragmatic means whereby Hong Kong can survive as a small open economy in a fiercely competitive world. Singapore! |s emphasis on English, even after it became independent, is a good example of the importance of maintaining a high standard of English in order to remain competitive. However, many foreign companies have complained of the declining standard of English in Hong Kong. Both the government and officials in the educational system are aware of this problem. Singapore Education and Training Scheme within Singapore Singapore! |s university and polytechnics were set up with the mission to train professionals to support the technological and economic development of Singapore, these institution seek to train students with relevant and specific skills for workplace to give Singapore a competitive edge as them move into a knowledge-based economy.
The polytechnics are also a significant provider of continuing education and post employment professional development programmes and services. Therefore, Singapore! |s Government provides more choices of continuing education to the civil and good learning environment to them, it is an important factor to develop talent in the country. Due to technology, innovation and competition, Singapore needs to develop a pool of highly skilled professionals who are at forefront of their respective specialist areas. Monetary Authority of Singapore (MAS) has been set up The Financial Sector Development Fund to develop the talent for Singapore. The Financial Training Scheme (FTS) is one of the initiatives supported by the FSDF. Its objective is to encourage the development of financial sector expertise by providing financial support for programmes, also it aim to enhance the skills and capabilities of the Singapore developing business areas, or in developing more sophisticated or specialist skill sets, by providing grants to financial institutions to cover part of the costs of locally-based as well as overseas executive training.
... same time as Hong Kong’s return to China, the Asian financial crisis started in Thailand has spread to Hong Kong, economy including property ... – 2003, Asian financial crisis and HKSAR government’s housing policy After the transfer of sovereignty over Hong Kong from the United Kingdom ... total government’s revenue. The major reason behind Hong Kong’s low tax rate is because a large part of government’s ...
Under this scheme, the FSDF helps defray the costs incurred by financial institutions, companies engaged in significant financial activities or industry association in providing relevant training to its employees or its member participants. For local or overseas training, both external and in-house training courses and conferences conducted in Singapore, FSDF will reimburse 50% of the qualifying expenses incurred in the course of the training. The training programme enhances the specialization or exposure for new or developing business areas, and rapid development of the depth of skills and expertise of the financial sector workforce in Singapore. Language Since Singapore became an independent Republic in 1965, the use of English has increased still further, and now all Singaporean children have an English-medium education (they must also study another language at school).
For many Singaporeans, English is the main language. Many families speak English at home and it is one of the the first languages learnt by about half of the current pre-school children.
In Singapore, English is a co-official language together with Mandarin Chinese, Malay, and Tamil. It is the main language used in government, law, education, business, and international communication. Since 1987 English has become the sole teaching medium in primary, secondary, and tertiary education. A high percentage of the approximate 3. 3 million populations know English, to varying degrees. As more and more of its people experienced learning English at school, English became widely spoken, alongside Singapore’s many other languages.
Nearly everyone in Singapore speaks more than one language, with many people speaking three or four. Most children grow up bilingual from infancy and learn more languages as they grow up. This kind of ability will be helpful to their career, because they can communicate with people by different nationality easily. Communication takes an important role in the financial center, Singapore! |s government make a strategy to develop the infrastructure for international financial center. Conclusion To sum up above factors, we can know that both governments are devoted funds to pursue continuing education and training programmes, they aimed to prepare the citizen for the knowledge-based economy, it is beneficial to them to be an international financial market. However, conferring to the language superiority, we sure that Singapore has competitive advantage of this factor, because English has become the sole teaching medium in Singapore since 1987, they have a high percentage of the populations know English, the communication with different people is easily in Singapore rather than in Hong Kong, therefore, the businessman will choose to develop their business in Singapore, Hong Kong! |s government must consider this problem seriously, it is very important to the development of financial market.
... Cheung(1998), comparing with retailers in Singapore, Taiwanese tourists opined that those in Hong Kong should be more honest. It is ... tourists a negative image of Hong Kong, then causing them no longer want to shop in Hong Kong. Hong Kong is still a shoppers’ ... ; satisfaction levels and shopping preferences under the solo travel policy in Hong Kong. Journal of Fashion Marketing and Management, 12( 3), ...
Government Policy Hong Kong Hong Kong has openness, stable environment with clear-cut rules of business, low tax and market friendliness. The government has adopted a non-interventionist policy, thus Hong Kong is one of the world! |s freest economy. Capital moves freely through Hong Kong – there is no restriction on the international movement of funds, or restriction on currency trading. Transparency of regulation is superb in Hong Kong. Fiscal Policies One of the superiority of policies is the favorable tax regime. While Hong Kong is by no means a tax haven, its tax rates are substantially lower than other countries in the world.
The standard rate on profits and income now stands at 16 per cent and Personal tax just 15% is also among the lowest tax for non-corporate payer in the world. Equally important is the relative simplicity of the tax structure and no comprehensive income tax, in which only specified types of income, namely profits, salaries and property rental income are taxable. This is different from an income tax system, under which a person is subject to tax on his aggregate income from all sources. Also salaries tax is only charged on Hong Kong sourced salaries. Expatriate employees who visit the territory for less than 61 days in a tax year are not liable to salaries tax. Employees who have paid tax of substantially the same nature as Hong Kong salaries tax in any territory outside Hong Kong are also exempt in respect of their foreign service income.
For financial institutions that engage only in offshore activities, this feature is, of course, most attractive. Moreover, in Hong Kong there is no tax on dividend, interest income from deposits with financial institutions, capital gains, valued-added, and entertainment. And Hong Kong profits only arising from a trade, profession or business carried on in the territory are taxable. A company pays no tax in the territory on income derived from outside Hong Kong. Thus, the Hong Kong simplicity taxation can attract a lot of foreigner to invest into Hong Kong and Hong Kong can maintain an international financial center continuously.
Hong Kong has been able to maintain this tax regime highly conductive to work effort and entrepreneurship because of the prudent fiscal policy the government consistently pursues. And over the years, Hong Kong has accumulated a sizable fiscal surplus, an extreme rarity in the world today. Monetary policies The Hong Kong Monetary Authority (HKMA) was established on 1 st April 1993, the functions of HKMA! |s is maintaining monetary and banking stability. In current years, under the Currency Board system and Linked Exchange Rate System, when there is a decrease in demand for Hong Kong dollar assets and the Hong Kong dollar exchange rate weakens to the convertibility rate, the HKMA stands ready to purchase Hong Kong dollars from banks, leading to a contraction of the Monetary Base. Interest rates then rise, creating the monetary conditions conducive to capital inflows so as to maintain exchange rate stability. Conversely, if there is an increase in the demand for Hong Kong dollar assets, leading to a strengthening of the exchange rate, banks may purchase Hong Kong dollars from the HKMA.
The Monetary Base correspondingly expands, exerting downward pressure on interest rates and so discouraging continued inflows. Thus, the stability of the Hong Kong dollar exchange rate is maintained through an automatic interest rate adjustment mechanism. In addition, with the aim of increasing the transparency of the Currency Board operation, the HKMA has been disclosing the forecast change in the Aggregate Balance attributable to the HKMA’s foreign exchange transactions on its Reuters page on a real time basis since June 1998. At the same time, details of the entire Monetary Base and a breakdown of its components are published on the HKMA’s Reuters page every day.
Information on the Monetary Base and Interbank Liquidity are released daily on the HKMA website under the Press Release Section. This measure enables market participants to anticipate changes in liquidity conditions in the interbank market and facilitates a more efficient adjustment in the interbank interest rates. A Currency Board Account has been published every month since March 1999. The Account shows the Monetary Base on its liabilities side, and the backing assets on its assets side. The publication of the records of the Exchange Fund advisory Committee (EFA C) Sub-Committee on Currency Board Operations and the Currency Board Account demonstrates the HKMA’s compliance with Currency Board principles and promotes public and investors confidence in Hong Kong monetary system. Moreover, Hong Kong has low regulatory costs.
Depository institutions under the three-tier system are not required to maintain statutory non-interest-bearing reserves against their deposit liabilities denominated in either local or foreign currencies. There is a minimum liquidity ratio of 25 per cent where liquefiable assets include earning assets. Hong Kong also has no deposit protection or deposit insurance scheme. Instead, the government-owned Exchange Fund, which the Hong Kong Monetary Authority (HKMA) manages, provides liquidity adjustment facility (LAF) to banks with liquidity problems. Finally, through regular meetings and consultations with the financial, the government makes every effort to reduce red tape and unnecessary burdens. Trade Policies Hong Kong is the one of freest trade place because there were no barriers on trade and uses many free trade policies to maintain this reputation.
There is no customs tariff on goods imported into or exported from Hong Kong. Import and export licensing are kept to a minimum. Most products do not need licenses to enter or leave Hong Kong and where licenses or notifications are required, they are only intended to fulfill obligations under various international undertakings, or to apply for public health, safety or security reasons. In addition, the HK SAR Government Trade and Industry Department is the body responsible for conducting of Hong Kong’s external commercial relations, certification of origin, and import / export licensing for textiles, strategic commodities and reserved commodes. Hence, Hong Kong can established a robust trade system to attract many investors to invest in Hong Kong and help the Hong Kong continued to play an important role as an international financial center Other Policies Since 11 th September 2001 the terrorist attacks U. S.
A, that serious affect the trade industry in the world. After that, the Hong Kong government has provided strong support for global anti-terrorism efforts to build up investors confidence in Hong Kong also try to maintain attract more investors to invest in Hong Kong. Moreover, the Government of the People’s Republic of China (P. R.
C. ) has generally kept its commitments to respect Hong Kong’s high degree of autonomy. In the period from August 1, 2001 to March 31, 2002, Hong Kong remained a free society that extended basic civil liberties to its citizens every day, largely defined its identity in terms of being an open international city, and continued to make its own decisions in pursuit of its own identity and economic interests. Finally, Hong Kong was a Independent Commission against Corruption (ICAC) to product a corruption-fee environment to increase Hong Kong attractive points as a international financial center. Singapore Singapore has adopted openness policy to attract a good share of foreign investment. Also, Singapore has stable environment with complete rules of business, low tax and market friendliness thus Singapore is the one of the world! |s freest economy.
Moreover, Singapore capital moving freely and there is no restriction on an international movement of funds, or currency trading. Thus, it will be help Singapore! |s to continue maintain as an international financial center status. Fiscal Policy: Fiscal policy in Singapore! |s to promote economy stable and non-inflationary growth of the economy. Singapore’s tax policy is to keep tax rates low, both for corporations as well as individuals. Singapore’s tax rate of 22% is with effect from the year of assessment 2003 (FY 2002).
It applies to both Singapore-incorporated subsidiaries as well as branches of foreign companies. It applies equally to resident and non-resident companies. Withholding taxes at the corporate income tax rate also apply to certain other payments to non-residents, such as technical assistance fees, management fees etc. Keeping our corporate rate low will help us to continue to attract a good share of foreign investment. Keeping our individual rates low will encourage our people to work hard. It will also make risk-taking worthwhile and encourage entrepreneurship.
Another fundamental tenet of our tax policy is to keep the tax base broad. The aim is to inculcate awareness among citizens the social responsibility of paying taxes. For this reasons, our personal relief! |s for individuals are deliberately kept low. This means that potential taxpayers would join the tax stream earlier. Moreover, Singapore adopts an imputation system of taxing dividends, meaning that taxes paid by a company can be imputed (passed on) to the shareholders as the shareholders’ tax. However, with effect from 1 Jan 2003, Singapore will implement a one-tier corporate taxation system.
In addition, this combination of fair tax policies and prudent expenditure programmes, augmented by high economic growth has enabled Singapore to enjoy consistent budget surpluses over the years. Such a prudent fiscal policy has also contributed to Singapore’s high savings rate and allows it to achieve one of the highest investment rates in the world without having to incur foreign debt. High domestic savings have, in turn, contributed to Singapore’s high level of foreign reserves, which has served to boost investor confidence and provided a buffer against adverse economic shocks. Finally, Singapore was establish Monetary Authority of Singapore (MAS) to focus on its primary goal of ensuring price stability and preserving confidence in the domestic currency through the appropriate management of the Singapore exchange rate, without needing to balance this against the requirements of deficit financing. All these fiscal policies can continuous improve Singapore as an international financial center status.
The tax collection for FY 2001/02 is $18. 36 billion. Monetary Policy: Singapore was set up some monetary policies to maintain price stability for sustained economic growth. Since 1981, monetary policy in Singapore has been centred on the exchange rate. This reflects the fact that in the small and open Singapore economy where imports and exports amount to more than twice GDP, the exchange rate is the most effective tool in controlling inflation. Monetary policy is reviewed on a semi-annual basis to ensure that it is consistent with economic fundamentals and market conditions, thereby ensuring low inflation for sustained economic growth over the medium term.
The MAS publishes a semi-annual Monetary policy Statement (MPS) in January and July which explains its assessment of Singapore’s economic and inflationary conditions and outlook, and sets out its monetary policy stance for the following six months. Singapore’s exchange rate-based monetary policy system and its experience since its adoption is reviewed in MAS’ monograph on Singapore! |s Exchange Rate Policy. In the context of Singapore’s open capital account, the choice of the exchange rate as the focus of monetary policy would necessarily imply that domestic interest rates and money supply are endogenous. As such, MAS’ money market operations are conducted mainly to ensure that sufficient liquidity is present in the banking system to meet banks’ demand for reserve and settlement balances. Thus, all these policies can promotes the public and investors confidence in the Singapore monetary system and maintain an international financial center continuous. Chart 1 Nominal Effective Exchange Rate (S$NEER) Trade Policy: Singapore is the one of freest trading place because she was adopted no barriers on trade industry.
Also, Singapore! |s trade policy is based on two principles: a free-market system and an outward orientation. About 96 per cent of imports enter Singapore duty-free. Exports also have the same privileges, except when bilateral restraint arrangements are in force. There are no controls on foreign exchange and no protectionist measures.
In addition, Singapore participates in multilateral trade forums such as the Asia-Pacific Economic Cooperation (APEC) and the Association for Southeast Asian Nations Free Trade Area (ASEAN AFTA).
That reflecting Singapore’s commitment to global and multilateral free trade, so it can attract many investors to invest in Singapore. Also, Singapore has Trade Development Broad is responsible for conducting of Singapore! |s trading commercial relations. After Singapore pay a lot of effort in Trading that the total trade expanded by 14. 6 per cent in February 2003, a further improvement from the 14.
2 per cent growth in the preceding month. This healthy expansion was evident in all the key trade components. On an m-o-m SA basis, growth however lost some shine, contracting by a mild 1. 3 per cent over January 2003. Government Authority Hong Kong The Hong Kong Monetary Authority (HKMA) was established on 1 April 1993 by merging the Office of the Exchange Fund with the Office of the Commissioner of Banking. This was done to ensure that the central banking functions of maintaining monetary and banking stability can be performed with a higher degree of professionalism and continuity, in the lead up to 1997 and beyond, to command the confidence of the people of Hong Kong and the international financial community.
The HKMA is the government authority in Hong Kong responsible for maintaining monetary and banking stability. The establishment of the HKMA has enabled Hong Kong to strengthen its contacts with other central banks and multilateral financial organizations and to promote Hong Kong! |s standing as an international financial center. To achieve this goal, HKMA actively participates in the activities of the World Bank and other central banking forums. As a leading international financial center, Hong Kong also participates in a number of international and regional initiatives to reform the international financial architecture. The focus has been on enhancing the transparency and accountability of the public sector, the private sector and international financial institutions to make the global economy more resilient to volatile capital flows. The HKMA is committed to transparency and public access to economic data by meeting the international standards expected of a leading international center.
The mandates of the HKMA are: Efforts to Develop the debt Market and Market Infrastructure One of the mandates of the HKMA is to promote the efficiency, integrity, and the development of the financial system, particularly payment and settlement arrangements. In pursuit of this mandate, the HKMA has undertaken a number of important initiatives over the years in reforming Hong Kong! |s interbank payment system and promoting the development of the local debt market. Exchange Fund Bills and Notes The Exchange Fund Bills and Notes are Hong Kong dollar debt securities issued by the HKMA. As Hong Kong has a consistent track record of fiscal prudence, there was no urgency for the Hong Kong government to develop a comprehensive debt issuance program.
The program is primarily aimed to facilitate the local debt market development by increasing the supply of high quality Hong Kong dollar debt paper and to establish a reliable benchmark yield curve for Hong Kong dollar debt. Debt Securities Clearing and Settlement System The HKMA has developed an efficient computerized clearing and settlement system for debt securities in Hong Kong. The Central Money markets Unit (CMU), operated by the HKMA, was set up in 1990 to provide clearing, settlement, and custodian services for the Exchange Fund Bills and Notes. Establishment of an Efficient and Robust Payment System An efficient and robust interbank payment system provides the foundation for sound and competitive financial markets. In order for Hong Kong to maintain its competitiveness as an international financial center and to enhance the robustness of the interbank payment system in Hong Kong, the HKMA together with the Hong Kong Association of Banks, successfully launched the Real Time Gross Settlement (RTG S) system on December 1996. It is one of the most advanced interbank payment systems in the Asia Pacific region.
Introduction and Extension of the Market-Making System To enhance secondary market liquidity, the HKMA has put in place an effective market-making system for Exchange Fund Bills and Notes. Hong Kong Mortgage Corporation The HKMA conducted a public consultation on the proposal to set up a mortgage corporation. The results of the consultation indicated general agreement that the establishment of a mortgage corporation would help promote baking and monetary stability and home ownership. Singapore Prior to 1970, the various monetary functions associated with a central bank were performed by several government departments and agencies. As Singapore progressed, the demands of an increasingly complex banking and monetary environment necessitated streamlining the functions to facilitate the development of a more dynamic and coherent policy on monetary matters. Therefore in 1970, Parliament passed the Monetary Authority of Singapore Act leading to the formation of Monetary Authority of Singapore (MAS) on 1 January 1971.
The MAS Act gives MAS the authority to regulate all elements of monetary, banking and financial aspects of Singapore. The MAS has been given powers to act as a banker to and financial agent of the Government. It has also been entrusted to promote monetary stability, and credit and exchange policies conducive to the growth of the economy. In line with Singapore! |s goal to become a premier global financial center, MAS has instituted a new supervisory framework based on the key tenets of: Maintaining High Prudential and Supervisory Standards MAS continues to oversee the financial sector professionally, vigilantly and proactively. The maintenance of high standards of integrity and sound financial management does not contradict the aim to create a more dynamic, innovative and vibrant financial sector. Shifting the Emphasis from Regulation to Supervision MAS will shift from ‘one-size-fits-all’ regulation towards a greater emphasis on supervision, which entails monitoring and examining institutions for compliance with laws and guidelines, and assessing asset quality and the adequacy of risk management systems.
This enables MAS to provide stronger institutions the flexibility to develop and innovate, while maintaining stricter controls on weaker ones. Implementing a Risk-Focused Approach to Bank Supervision MAS has adopted a risk-focused, top-down approach to bank supervision, moving away from the traditional, bottom-up method. The approach will enable the allocation of limited supervisory resources to major risk areas and improve the effectiveness and efficiency of the examination process. A Risk-Based Examination Approach for Banks MAS adopts a risk focused approach to bank examination, which focuses on the institution’s management quality and processes, and its risk management and control systems. This new approach is better suited to cope with the growing complexity of banks’ activities and organizational structures, increased linkages with non-bank financial institutions and institutions abroad, and technological advancements. Vesting the Public with the Responsibility to Make Their Own Informed Investment Decisions To assist investors in making informed decisions, MAS is providing greater transparency in its regulations, raising disclosure standards and fostering market discipline in the financial industry.
MAS also encourages industry groups to develop and enforce standards of good practice. Forging a Closer Partnership Between the Government and the Financial Services Industry MAS is building a closer partnership with the industry and promoting a more open operating environment. MAS actively seeks industry inputs to adjust its policies to rapidly changing market realities. It will also set up private sector committees to examine issues pertaining to the financial sector. Furthermore, MAS will disseminate policy thinking through associations of the finance industry. External/Internal Auditors External and internal auditors play an important role in MAS’s supervisory process.
MAS engages in regular dialogue with the external auditors, and the internal auditors upon the completion of their audits of the Singapore operations to discuss the internal control environment of the institution and issues of mutual concern. Auditors are required to submit audit reports to MAS on the institution’s internal controls, and compliance with prudential standards. In addition, external auditors are required to confirm the adequacy of provisions, in conjunction with their statutory audit. u Compare the objectives between the Monetary Authorities of Hong Kong and Singapore HONG KONG MONETARY AUTHORITY (HKMA) MONETARY AUTHORITY OF SINGAPORE (MAS) To maintain currency stability, within the framework of the linked exchange rate system, through sound management of the Exchange Fund, monetary policy operations, and other means deemed necessary To conduct monetary policy and issue currency, and to manage the official foreign reserves and the issuance of government securities To promote the safety and stability of the banking system through the regulation of banking business of taking deposits, and the supervision of authorized institutions To supervise the banking, insurance, securities and futures industries, and develop strategies in partnership with the private sector to promote Singapore as an international financial centre To promote the efficiency, integrity, and development of the financial system, particularly payment and settlement arrangements To build a cohesive and integrated organization of excellence Economic Factors Hong Kong Major Economic Indicatiors, Hong Kong, 1999! V 2003 (%) The economy of Hong Kong, China suffered a sharp slowdown in 2001, with GDP growth decelerating to a virtually stagnant 0.
1% from 10. 5% in 2000. The major contributing factors were a drop in exports and a weakening of consumer and business sentiment, stemming from the difficult economic environment worldwide Partly as a result of a sustained fall in import prices, a depreciation of regional currencies against the US dollar, and a benign external inflationary environment, deflation took hold, as the consumer price index fell by 1. 6% in 2001. Fierce retail price competition and a weak property market that resulted in falling property rentals also put downward pressure on prices. Under the currency link to the US dollar, the Hong Kong dollar strengthened against most regional currencies in 2001.
Money market interest rates fell, due to aggressive monetary easing by the US Federal Reserve and to excess liquidity in the domestic market. Notwithstanding the economic slowdown and difficult operating environment, the profitability of the retail banks (locally incorporated banks plus a number of the larger foreign banks which operate a branch network and which are active in retail banking) held up well, recording only a moderate decline. With low interest rates making debt servicing more affordable, the overall asset quality of the retail banks continued to improve. Preliminary figures indicate that the consolidated capital adequacy ratio of locally incorporated authorized institutions remained strong at 16. 8% at end-2001.
The Hang Seng Index fell in 2001, on concern about the global economic outlook as the external environment deteriorated. Share prices plummeted to a near 3-year low of 8, 934 in the wake of the September 11 th events in the US, but recovered to over 10, 000 in October, as anxieties surrounding the likelihood of future attacks subsided. Mirroring the strength of the US stock markets, the Index subsequently rose, to 11, 397 at end-December, though this was still 24. 5% below the level of a year earlier. Amid the deterioration of global growth, total exports of goods and services dropped by 2.
1%, reversing a 16. 7% surge in 2000. Merchandise exports contracted by 3% from 17. 1% expansion in 2000. Within this total, domestic exports tumbled by 11%, in contrast to a 7. 5% rise in the previous year, and reexports registered a 2% decrease, after soaring by 18.
5% a year earlier. Domestic exports of electronic components registered a marked fall, while reexports of consumer goods, raw materials, and semi manufactures also slumped. The growth in services exports moderated to 3. 5% from 14. 1% in 2000, largely on account of a fall in tourist arrivals and a deterioration of regional demand for trade-related and other business services. Total imports of goods and services likewise fell, by 2.
2% from a robust 16. 7% growth in 2000, in tandem with slower reexports and a worsening of domestic demand. The combined visible and invisible trade surplus, nevertheless, widened slightly by $0. 8 billion to $8. 6 billion in 2001, as the fall in imports outpaced the decrease in exports. Policy Developments The volatility of Hong Kong, China! |s fiscal revenues and the faster growth of recurrent fiscal expenditures over recurrent revenues in the past decade have raised concerns about the tax system.
The authorities have been running operating deficits since fiscal year (FY) 1998/99 (1 April 1998! V 31 March 1999).
On the revenue side, while a significant amount of total revenue is derived from non tax sources, the tax base is narrow, with nearly 93% of income tax coming from 15. 6% of the employed workforce and 60% of profit tax from 1% of the registered corporations. In addition, revenues have fallen, reflecting the slump in the property market. On the expenditure side, the growth in government spending has exceeded revenues at an average rate of 8% a year since 1998. Moreover, social expenditures, including social welfare, health, and education, are expected to grow over time, in response to an aging population and the need to upgrade human capital.
Against the backdrop of a worsening economic outlook, the authorities, in the Chief Executive! |s October policy address, proposed HK$15 billion-worth of measures to relieve economic difficulties faced by the community. Enhancing human resources to support the transition to a full-fledged knowledge-based economy is at the top of the policy agenda. Aimed at improving labor flexibility and upgrading the labor skills required for technological development and application, reforms of basic and tertiary education will be continued. The measures include updating the school curriculum, strengthening the preservice training and professional development of teachers, and increasing the allocation of secondary school places to improve accessibility of educational resources. The authorities are pushing ahead with large-scale infrastructure projects, including both roads and railways linking with the Pearl River Delta, to enhance the transport network and economic cooperation between Hong Kong, China and neighboring provinces in the PRC.
Measures to improve the business environment were also emphasized in the policy address, involving financial assistance to SMEs and investing in the construction of a new exhibition center. Finally, the policy address emphasized both reinforcing the comparative advantage in tourism and in transport and logistics, and tapping the opportunities brought about by the new knowledge-based economy and economic growth in the PRC. Outlook for 2002! V 2003 GDP is projected to grow by 2. 1% in 2002. A moderate economic recovery by the second half of the year is forecast, following an anticipated gradual firming in external demand and some stabilization in domestic sentiment. Exports are expected to pick up, particularly in the second half of the year, as the world economy strengthens further.
Imports are expected to grow at a modest rate in 2002. Private consumption will probably remain lackluster, dragged down by high unemployment rates and the uncertain outlook for the property market. Machinery and equipment investment by the private sector will stabilize and begin to improve in late 2002, along with the gradual upward trend of exports. The trade-related services sector is expected to register growth again in 2002, reflecting the recovery in exports, while the banking sector will continue to be weighed down by the supply overhang in real estate. Over the near term, the economy will continue to suffer the restructuring pains of intensifying integration with lower-cost production centers in the PRC. While economic growth is expected to pick up in the second half of the year, structural unemployment will likely remain high as displacement of employees in traditional manufacturing and low-end services continues.
Unemployment, coupled with subdued consumer sentiment and ongoing supply and demand integration with the Pearl River Delta, will exert a downward pressure on prices, maintaining deflation for yet another year in 2002. As global economic growth gathers momentum, the economy is forecast to strengthen by 4. 8% in 2003. Singapore Major Economic Indicatiors, Singapore, 1999! V 2003 (%) The economy contracted in 2001 amid a difficult external environment, despite fiscal stimulus measures and a move to a neutral exchange rate policy.
Given Singapore! |s high dependence on external demand, trends in the global economy are a key determinant of domestic economic activity. The deterioration of economic conditions worldwide and a severe downturn in global electronics demand exerted a strong drag on the Singapore economy in 2001. The slowdown was broad based, reflecting a sharp drop in international trade and a weakening of consumer and business sentiment. The financial services sector decelerated to 2. 2% growth in 2001 from 4.
6% in 2000, as a result of weak equity markets and reduced regional demand for insurance and investment advice. In the financial markets, the Singapore dollar depreciated by 6. 7% against the US dollar during 2001, and weakened marginally against the Thai baht and Korean won. Domestic interest rates softened over the year, in light of monetary easing in the major economies and low inflationary pressure. While growth of commerce and manufacturing loans slackened in line with the deterioration of the overall business outlook, overall commercial bank lending increased by 3.
3% in 2001, supported by growth in loans to the transport and communications sector. The Straits Times Index lost over a third of its value in the year to late September 2001, weighed down by a protracted downturn in technology, media, and telecommunications stocks, and by substantial selling after the September 11 th attacks in the US. The Index made up some ground in December, in light of better than expected month-on-month industrial production figures during the last quarter of the year, and ended 2001 at 1, 624, or 14% below its level at the start of the year. Policy Developments With worsening economic conditions both worldwide and domestically, the Government enacted a series of off-budget measures to support the economy and help households and local companies over the severe slowdown. The first off-budget package, unveiled in July 2001, amounted to S$2. 2 billion.
It included measures to accelerate expenditures on economic and social infrastructure projects, and to cut business costs through property tax and rental rebates. The package was followed by S$11. 3 billion-worth of stimulus measures in October, involving a range of corporate and personal income tax rebates; cuts in utilities, education, and hospital costs; the distribution of! SS New Singapore Shares!” to citizens (providing a guaranteed investment return and a bonus tied to the economy! |s GDP growth); further assistance to SMEs; and expansion of the social safety net program. Taken together, the two packages added up to 8. 4% of GDP. Given the severe external slowdown weighing heavily on the domestic economy, the measures helped market demand, but could not reverse the domestic downturn and its effects.
In view of low inflation and declining exports, the Monetary Authority of Singapore adjusted its monetary policy in July 2001. It moved from a tightening stance that sought to achieve a gradual and modest appreciation of the Singapore dollar, to a neutral stance that targeted a constant trade-weighted nominal effective exchange rate. With the intensified uncertainties in the global economy after September 11 th, its target band was widened in October to permit greater flexibility in managing the exchange rate. The trade-weighted nominal effective exchange rate weakened in the fourth quarter. The Government continued restructuring and revitalizing the economy to retain its competitiveness globally. Key economic sectors, particularly financial services, telecommunications, energy, and the media were liberalized to enhance efficiency and competitiveness.
In particular, as part of the comprehensive reform of domestic banking announced in 1998, the retail and wholesale banking markets were further liberalized in 2001, to allow foreign banks to engage in broader business in these markets. Reforms of the regulatory and supervisory environment to enhance the safety and soundness of the financial system were also implemented in 2001, and included setting guidelines on the issuance of new capital instruments for Singapore banks, and revising the framework for valuation and capital adequacy requirements for insurance Outlook for 2002! V 2003 The substantial amount of government infrastructure expenditure in the off-budget packages is expected to provide some support to the economy. In addition, the tax rebates and transfers, such as the New Singapore Share scheme, are expected to cushion the slowdown in private consumption through relief measures to liquidity-constrained households. Nevertheless, with exports accounting for 143% of GDP in 2001, the revival of the economy depends on the upturn in the global electronics cycle and on the economies of the US and other key trading partners.
Inventory de stocking is at an advanced stage, which, together with improved microchip sales and new electronics orders in the US, points to some bottoming out of the global electronics cycle. This will, in turn, buttress Singapore! |s electronics manufacturing and exports. Growth in trade-related transport services should also improve, in line with an expected moderate revival in regional trade. The economy is forecast to strengthen by 6. 5% in 2003. Anticipated buoyant external demand will reduce excess industrial capacity and improve investor sentiment toward the domestic ICT industry, while an expected recovery in asset values and wages growth will support private consumption.
Inflation is expected to creep up to 1. 4% in 2003, based on a strengthening economy alongside a decline in unemployment. The trade surplus is projected to fall further in 2003. As a result of the import-dependent nature of exports and higher demand for capital goods, the rise in imports will likely outpace the increase in exports, in light of stronger trade flows. Political factors Hong Kong Hong Kong became a Special Administrative Region of the People’s Republic of China on 1 July 1997. Under the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China, the Hong Kong Special Administrative Region (HKSAR) is vested with legislative power and the Legislative Council is the legislature of the Region.
The Legislative Council have following main functions are to enact laws; examine and approve budgets, taxation and public expenditure; and monitor the work of the Government. In addition, the Legislative Council of the HKSAR is also given the power to endorse the appointment and removal of the judges of the Court of Final Appeal and the Chief Judge of the High Court, as well as the power to impeach the Chief Executive. All these politics are try to protect Hong Kong a higher Sovereign and keep Hong Kong never change in next fifty years. Moreover, after Hong Kong became a HKSAR the China Government must be maintain Hong Kong stable develop. Because Hong Kong is a first example to implement One Country, Two Systems Principal, so the China Government gives support to Hong Kong.
Also Hong Kong as an international financial center if political and economic conditions unstable will affect the rapidly developing country — – China. Furthermore, today China being a stronger country she make many political and support to keep as an international communication bright of Hong Kong. In current event, we can saw the China government suppose enhanced co-operation between Hong Kong, Guangdong and Macau to make a win-win-win situation. In the conclusion, in next fifty years Hong Kong political conditions will also keep it stable. Because of these reasons it can attack more foreigners to invest in Hong Kong.
But nowadays Hong Kong face a serious problem such as the outbreak of the mysterious atypical pneumonia in Hong Kong is troubling, so it will affect the stability political of Hong Kong and confidence of investors. Singapore Despite the superficial appearances of a competitive political system, notably regular elections involving a range of political parties, Singapore is a defacto one-party state. Through a variety of means, effective challenges to the ruling People’s Action party (PAP) are obstructed. Historically, this included some crude forms of intimidation of political adversaries and critical elements of the media by invoking the Internal Security Act (ISA), under which people can he held indefinitely without trial. However, the more pervasive and definitive features of authoritarianism in Singapore involve a sophisticated and systematic combination of legal limits on independent social and political activities on the one hand, and extensive mechanisms of political cooption to channel contention through state-controlled institutions on the other. This suppression of a genuine civil society not only fundamentally hampers the PAP’s formal political opponents, it generally blunts political pluralism, including interest group politics.
The PAP’s political monopoly is rationalized through an elitist ideology, which depicts government as a technical process that must be the preserve of a meritocracy. As a result, the increasing affluence of many Singaporeans has gone hand in hand with a growing dependence on the state, producing vulnerability to both co-option and political discipline. During the 1997 election campaign, the PAP nakedly exploited this. Prime Minister Goh Cook Tong warned that multi-million dollar commitments to upgrade public housing, in which around 90 percent of Singaporeans live, would be undertaken on a priority basis, with areas supporting the opposition last in line.
To reinforce this threat, the government announced a new system of vote counting, which enabled it to ascertain voting preferences down to a precinct level of 5, 000 votes. Whether out of fear of retribution or the seduction of government rewards, the electorate responded by arresting a sustained decline in the government’s share of votes at every general election since 1980. However, the increasing social complexity accompanying the city-state’s economic development has posed challenges for the authoritarian system. In particular, the PAP has found that more diverse social interests require some sort of political accommodation to preempt pressure for civil society. Accordingly, we have seen initiatives in cooption reaching out to sectional interests, including domestic business groups, women’s groups, and professionals.
Mechanisms to open up consultation with such groups are intended to divert disaffection from competitive political processes and reinforce the PAP’s elitist and technocratic ideology. Thus, whether it be through the Nominated Member of Parliament (NMP) scheme or the incorporation of wider community involvement in Government Parliamentary Committees, individuals are officially brought into such fora to add particular expertise to the decision-making process on a non-confrontational basis, rather than to represent any constituency. Instead of opening up space for civil society, the PAP state is in effect expanding its own space. Significant examples of the former include modifications in the late 1980 s to the acts covering legal and other professions and the introduction of the Maintenance of Religious Harmony Bill in 1990, effectively outlawing uninvited public social or political comment from institutions that had hitherto escaped the strictures of the Societies Act. Meanwhile, the scale and propensity of legal actions has escalated, with the most capable and combative opposition figures primary targets.
In this exercise, Lee Kuan Yew continues to consolidate his reputation as “the most successful individual litigant in history”, but more of his colleagues in the PAP are following the example. In 1997, Lee was joined by ten other government leaders in a total of thirteen libel actions against Tang Liang Hong of the Workers’ party. Tang had accused government leaders of lying during the January 1997 election campaign after they labeled him some contend baited him? as a “dangerous Chinese chauvinist.” A total of U. S. $5. 65 million was awarded in damages to the PAP members of parliament.
Tang also faces thirty-three counts of tax evasion, not the first time the Inland Revenue Department has shown a sudden interest in an individual after that person has locked horns with the government. The centrality and distinctiveness of legalism to the reproduction of authoritarian rule in Singapore has not escaped theorists’ attention. Essentially making the same point, Kanishka Jayasuriya describes this as “rule through law rather than rule of law: , while Christopher Treme wan characterizes it as “thinly disguised rule by decree.” In contrast with legal institutions in liberal democratic systems, where challenges to state power are not only possible but common, in Singapore they serve more to consolidate and expand the power of the state and to enforce the government’s objectives and policies. The structural conditions under which the judiciary operates, including the granting of short-term appointments to the Supreme Court that may or may not be renewed at the government’s discretion and the potential for un tenured lower court judges to be transferred between judicial and government service, provide an avenue through which political influence and pressure can be exerted over the judiciary. Considerable ideological store is placed by the PAP, however, in the depiction of Singapore’s judicial system as independent and fair. Ironically, such is the government’s insistence on this that it is virtually impossible to publicly debate the question without inviting an action for contempt of court.
As Jayasuriya observes: “The distinguishing feature of this legalism is the use of liberal language, rhetoric and the ritual of law to pursue its distinctly illiberal political objectives.” Finally, Singapore also face the disease of atypical pneumonia but she was handled better than Hong Kong Government so it can maintain confidence of investors in Singapore. (International relationship Hong Kong Hong Kong has an international identity. It is often referred to as one of the world’s most international cities. Although “internationalization” has been viewed as taboo by the Chinese government in the sovereignty transition negotiations, clearly Hong Kong has external relationships to manage. In fact, Hong Kong as we know it today was born international. In the 19 th century when Hong Kong was first colonized, it was established as a trading port between Britain and China.
Hong Kong often has been called China’s “window on the world” before Deng Xiao Ping’s open door policy. Today, Hong Kong not only brings major investments, technology, markets, management know-how and many other critical elements to support China’s construction and modernization, it is also one of the world’s major financial and commercial centers, as well as a popular regional center for multinational corporations. As a treaty making entity, it is also a member of the comprehensive network of treaties governing bilateral and multilateral relations of the world community. Upon its handover to Chinese sovereign control on 1 st July 1997, Hong Kong became a Special Administrative Region (SAR) of the People! |s Republic of China. The Hong Kong SAR enjoys a high degree of autonomy, with executive, legislative and judiciary powers, as well as responsibility over all areas except for defence and foreign affairs which are the preserve of the Central Government of the People! |s Republic of China. The Basic Law, approved in 1990, nonetheless states that the SAR will conduct external relations in areas such as trade, economic, financial and monetary affairs, shipping, communications and tourism.
The free-market principles that have served Hong Kong so well in the past have been safeguarded. The business-friendly climate and open society in which traders and investors like to operate have been maintained. Hong Kong SAR continues to enjoy a high degree of autonomy with regard to economic and trade policies under the! yen one country, two systems! | framework. The Commerce and Industry Branch is responsible for the conduct of the Hong Kong Special Administrative Region (HKSAR) ‘s external commercial relations.
Now, we will look into the relationships that Hong Kong had built with some main countries / regions in the world, such as Europe and USA. l Europe Since the handover to China five years ago, the EU! |s relations with the Hong Kong Special Administrative Region (SAR) have focused largely on supporting the “one country, two systems” formula on which Hong Kong! |s future autonomy under China is based. The EU aims to safeguard Hong Kong! |s role as an open economy gateway to China, an advocate of free markets in Asia and an important partner of the EU in the World Trade Organization. The EU intends to strengthen relations with Hong Kong in all areas where it has retained its autonomy as provided for under the Basic Law of the Special Administrative Region. The EU was Hong Kong! |s third trading partner in 2001, representing 12. 5% of Hong Kong! |s total external trade, after China (42.
3%) and the USA (14%), and before Japan. Total bilateral trade in 2001 amounted to EURO 31. 3 billion (Eurostat figures), a decrease of 1. 9% in comparison with 2000. The EU! |s exports to HK are highly diversified and include in order of importance, telecommunications equipment and parts, semiconductors and electronic valves and tubes, automobiles, textiles and clothing and luxury goods. Exports of manufactured products represented in 2001 88.
3% of the EU! |s total exports to HK. The EU! |s imports from HK include in order of importance textiles and clothing, toys, games and sporting goods, telecommunications equipment and parts, office equipment, travel goods and handbags. In addition to the formalized cooperation between the EU and Hong Kong in the Customs area, Hong Kong and the EU cooperate and work together in a number of areas either through government contacts or through business or civil society initiatives. A Business Cooperation Committee bringing together representatives from the EU and from Hong Kong meets once a year to discuss economic developments and other matters of mutual interest. Senior Officials from the SAR Government and from the European Commission meet regularly in bilateral visits or in international fora. Trade, economic and immigration issues figure prominently in those meetings.
EU-Hong Kong Trade Statistics (lb ” abn) 2001 Growth, year on year 2000 Growth, year on year 1999 Total 31. 5 – 1. 9% 32. 1 21.
6% 26. 4 EU imports 10. 2 -12% 11. 6 8. 4% 10. 7 EU exports 21.
3 3. 9% 20. 5 30. 6% 15. 7 EU trade surplus 11. 1 24.
7% 8. 9 78% 5 l USA The United States has been the leading investor in Hong Kong for many years. The U. S. remains the most important market for Hong Kong’s re-export, and major U. S.
financial and business establishments have significant presence in Hong Kong. In addition, for Hong Kong to remain a major international business center, it needs the endorsement of the U. S. as such. Therefore, in the vacuum left after the British retreat, the United States with its vested interests in Hong Kong will most likely assume, de facto, more or less the British role in the balance of influence vis — vis Beijing on matters related to Hong Kong. This delicate balance demands careful and effective management by Hong Kong.