Riding the wind of rebirth

"In contrast, Latin American regions such as Mexico, as well as non-emerging economies such as Eastern Europe and even parts of Western Europe, opened up their financial markets very quickly, which brought about rapid development for a time, but now they have paid a heavy price for it."

"This trend is already evident in Southeast Asia. The Bank of Thailand began implementing a tight monetary policy in the middle of last year to curb overheating of the economy."

"This policy was immediately reflected in the stock market and the real estate market, and soon entered a period of stagflation."

"I know the discussion about Thailand's financial liberalization is still ongoing, and many who agree with it argue that without financial liberalization, Thailand wouldn't have experienced its rapid economic growth in the previous period." Li Laosan's tone was calm and confident: "We could actually think about it from a different angle: is there a path that can lead us to sustainable development without triggering a crisis like Mexico's? If such a path exists, even if the momentum of development isn't as rapid as a full and swift financial liberalization, wouldn't it be worthwhile just to avoid systemic financial risks?"

“Look at the current dire situation in Mexico, the dire situation in Latin America, and look further back at the passivity that the European currency crisis brought to Britain, and even further back, look at what China has suffered in the past hundred years under conditions of poverty and weakness. I think it is much more reliable to listen to the great man’s words, ‘Independence and self-reliance,’ than to pin our hopes on others not actively attacking the flaws in our own system.”

"Therefore, I still believe that financial regulation must be strengthened. Financial opening should be gradual, because we cannot establish a sound financial regulatory system overnight. The level of financial management in developing countries can only be gradually improved as the timetable progresses. Therefore, the financial system must also be opened up gradually accordingly."

"If developing countries suddenly allow banks, funds, and other financial institutions from developed countries to enter the market, their governments will not know how to regulate them, nor will they have the means to do so. Domestic financial institutions will only learn the superficial aspects of modern financial instruments and derivatives from Western economies, without following up on the core goldmine of Western financial systems, such as internal monitoring systems and incentive mechanisms. They will ignore the fact that financial opening and financial regulation are a complementary and interconnected system. If financial regulation lags behind, problems may, no, will inevitably occur."

"Another point I would like to make is that simply upholding the bottom line of financial security under open conditions is not enough."

"In an era of increasingly internationalized financial markets, the world has entered a 'risk-sharing' model. Every regional crisis will ultimately have a serious impact on the entire international community. Therefore, it is necessary to strengthen international cooperation and actively explore new models of global financial governance."

"To achieve this goal, we must first improve our modern financial regulatory system and strengthen our ability to maintain financial stability and prevent systemic risks."

"The next step is to actively promote trade and investment facilitation, steadily expand the institutional opening-up of the financial market, and expand the interconnection between domestic and foreign financial markets."

"In addition, financial supervision and cooperation mechanisms in developing countries must be strengthened, information sharing and sharing of beneficial experiences must be enhanced, the overall voice and influence of developing countries in the formulation of major international financial rules and standards should be gradually increased, policy coordination should be strengthened, and systemic risks should be jointly prevented."

"In the global financial landscape, there is a need for an organization that can give developing countries a voice. This organization must be led by a country with absolute influence, and I believe that this is China's inevitable position and obligation in the future."

Everyone present was intelligent, and they all understood the implication of Li Laosan's words: as China's strength grows, it should treat the global financial landscape as a battlefield, tentatively testing the waters, or rather, preparing for the tests that are inevitable in the future. "Thirdly, we should establish a global information exchange and early warning mechanism for systemic financial risks, continuously improving the 'macro-prudential' and 'micro-regulation' of cross-border capital flows. We should even provide timely warnings and rescue to countries and regions experiencing crises to effectively control the regional spread and even global contagion of adverse effects."

“We believe that the return of Hong Kong Island to China is an excellent opportunity,” said Li Laosan. “Hong Kong Island boasts a superior geographical and time zone location, convenient transportation, advanced information technology, a sound legal system, and a concentration of talent. It also has long-standing relationships with Chinese communities around the world. All of this makes it an ideal location for multinational banks and corporations to expand their businesses into Southeast Asia and China. It provides favorable conditions for the development of finance, trade, commerce, transportation, and tourism, thus becoming a world-renowned international financial center, international trade center, international transportation center, light industrial manufacturing and export center, international information center, and international tourism center. This provides a strong foundation for the overall urban functions of Hong Kong Island to maintain and enhance its status as a financial center.”

"After decades of dedicated efforts, Hong Kong Island has developed a highly advanced financial industry and a mature financial operation mechanism, which together form a solid foundation for its status as an international financial center."

"As a world-renowned free port, Hong Kong Island's internationalization of its financial industry is particularly prominent. It is not only comprehensive, multifunctional, and open, but also highly efficient and has a strong radiating influence. In terms of financial markets, Hong Kong Island's syndicated loan market and gold market are world-leading financial markets; its foreign exchange market ranked fifth in the world in terms of daily net turnover last year; its stock market ranked sixth globally in terms of total capital; its futures market was the earliest established in the Asia-Pacific region, thus holding a high position and influence; and its insurance market is also one of the largest in Asia."

"In addition, Hong Kong's fund market, leasing market, diamond market and credit card market all occupy a certain position in the international financial market."

"In terms of financial institutions, Hong Kong is one of the most concentrated areas of financial institutions in the world, and is the third largest concentration of international banks in the world, after London and New York."

"In terms of financial business, the concentration of international banks and speculative capital has made it possible for international banks to meet huge funding needs and adjust surpluses and shortages among themselves or between enterprises and investors. Investment and financing businesses have abundant funds, offshore financial businesses are highly developed, and settlement businesses are carried out extensively internationally."

"In terms of financial regulation, the financial regulations and regulatory indicators covering all aspects of Hong Kong's financial industry are in line with international practices and have universal applicability."

"In the field of financial communications, the telecommunications system with Yangtze Communications as its core is one of the most advanced telecommunications systems in the world. It can quickly collect and provide the intelligence information needed by all parties, thereby enhancing the efficiency of operations and fund utilization."

"In terms of currency, the Hong Kong dollar has a stable intrinsic value and is highly convertible. It is one of the world's sixteen major freely convertible currencies and is a widely accepted means of pricing and payment internationally. The money supply reached HK$2.1 trillion this year."

Zhou Zhi thought to himself, "Damn, this is incredible!" After so many years of reform and opening up, China's M2 money supply is only 584 billion RMB. The exchange rate between the Hong Kong dollar and the RMB is roughly 1. This means that the M2 money supply in Hong Kong alone is almost four times that of the entire country of China! (End of Chapter)