Riding the wind of rebirth

“Among our competitors, the Singaporean government currently maintains strict control over the financial sector, with limited financial freedom. It still implements strict foreign exchange controls, and international and domestic financial businesses are separated,” Li Laosan said. “Until these issues are resolved, Singapore’s overall financial system is not as developed as Hong Kong’s, and it lacks the revenue-generating effect brought about by the development of the mainland. Competitive pressure will certainly exist for a long time, but we are not incapable of dealing with it rationally.”

"The financial markets in Bangkok and Taipei are relatively small in scale, their financial infrastructure is not well developed, and they lack talent. Their financial strength, especially in terms of size, is significantly different from that of Hong Kong Island. Therefore, it is difficult for them to form substantial competition with us in the short term."

"The Tokyo banking syndicate is also facing a crisis of serious non-performing loans or even bankruptcy of a large number of financial institutions. Some are too busy to take care of themselves. Moreover, like Singapore, their international financial business and domestic financial business are separated. Before these problems are resolved, it will be difficult for them to replace Hong Kong Island's status as a free port."

"In fact, Hong Kong Island has an advantage that other financial centers do not have, and I believe this advantage will determine whether Hong Kong Island can maintain its status as an Asian financial center in the long term."

"Oh? What are the advantages?" the old man asked.

“The Renminbi,” Li Laosan said. “Hong Kong should maintain and expand its existing advantages, actively make up for its shortcomings, further improve its financial center infrastructure, make full use of its special status after the handover, develop various financial instruments denominated in Renminbi, and strive to establish and operate an offshore currency market for Renminbi, so as to provide impetus and opportunities for the sustainable development of Hong Kong’s finance.”

"This is something that cities like Tokyo, Singapore, Bangkok, and Taipei cannot replace."

"If we do all of these things well, I think the outflow of talent, business and capital that is currently occurring during the transition period can be curbed, and even brought back."

"Although there were some negative phenomena in 1993 and 1994, such as the outflow of talent and capital and the relocation of conglomerates, this phenomenon began to decrease from 1995 onwards."

"Many people are natives of Hong Kong Island, and many others have lived there for a long time. They have a deep affection for the island. As long as we maintain Hong Kong Island's status as an international financial center and continue to maintain stability and development, the return of these talents and funds should be expected. Everyone will certainly be willing to stay in Hong Kong Island."

“Both conglomerates and listed companies are profit-driven. We found that starting in 1993, a wave of relocation of business registrations and overseas investment was triggered among some banking conglomerates and listed companies. However, by 1995, this trend had not grown larger and instead showed signs of subsiding. Why is that?”

"The reason is simple: for several consecutive years, Hong Kong Island's total outflow of external factor income has reached more than HK$300 billion, of which nearly 80% of the income is income from overseas financial claims; while the total inflow of external factor income has reached HK$320 billion, of which more than 80% of the income is income from Hong Kong financial claims."

"These figures demonstrate that these conglomerates have made money, and a lot of money, in Hong Kong. This fully proves the high efficiency of conducting financial transactions in Hong Kong. Hong Kong remains the profit center for these conglomerates. As long as there are sufficient profits to be made, they will not give up their core businesses in Hong Kong, but will choose to stick to them or even continue to expand."

"Currently, a significant financial force, Chinese capital, has begun to increase its investment in Hong Kong, and even international capital from Japan and the United States has followed suit. Regardless of their purpose, this indicates that Hong Kong Island holds considerable appeal for them."

"The current opportunities are actually quite good. Hong Kong's real estate and stock markets are starting to recover, and the US dollar, after several interest rate adjustments, is now stabilizing and unlikely to see significant changes in the short term. If more mainland and private capital can participate in Hong Kong's infrastructure projects, the enormous spending pressure on the Hong Kong government will be alleviated." "Starting this year, the further decline in mainland inflation and the slow depreciation of the RMB exchange rate will also reduce the price increases of daily necessities imported from the mainland, which will be very beneficial in easing inflationary pressures in Hong Kong."

"Once the problems of businesses, especially small and medium-sized enterprises, are alleviated, the unemployment problem will be greatly reduced."

"This is a structural problem, and it should be solved by structural adjustment and reorganization," Li Laosan said. "We have also made some attempts, such as trying to establish an electronics factory on Hong Kong Island to produce various audio and video chips and equipment. Another example is that after paging industry talents went north, we started to change the communications industry on Hong Kong Island, vigorously promoting new mobile communications and maritime satellite communications to inject new blood and vitality into the industry."

"Besides, there are many other industries that can be explored, such as international business e-training, computer games, new media film and television, animation, etc. These will undoubtedly increase Hong Kong Island's own talent advantages and employment opportunities."

"There are two other points that I think can also greatly strengthen the relationship between the mainland and Hong Kong Island."

"The first point is talent exchange. On the one hand, we will carefully select a group of outstanding talents to go to Hong Kong for training, so that they can become high-quality talents who are proficient in international financial business, familiar with the rules of international financial operation, understand Hong Kong's customs and culture, and can use foreign languages ​​fluently, and participate in Hong Kong's future financial management work."

"When these talents can perform their jobs well in accordance with Hong Kong's financial laws and international rules of the game, eliminate the concerns of local Chinese and foreign financial institutions, and win their trust and respect, Hong Kong Island's international financial center will have another talent channel."

"On the other hand, it is to select outstanding talents from Hong Kong Island to go to various industries in the mainland and participate in the construction of the motherland. These talents include those in education, film and television, business management, customs, maritime affairs, communications, finance and other fields. They can bring the latest international concepts and management methods, and also understand the mainland, comprehend the realities of the mainland, seriously consider practical problems, and propose solutions."

"The second point is that Hong Kong should also follow international trends and commit to the innovation of international financial technology and instruments, such as the development of virtual settlement currencies, digital Hong Kong dollars and digital RMB. If we can take the lead, we will surely gain a good competitive position in international competition."

"Digital currency?" A hint of surprise finally appeared on the old man's face.

“This is a method we’ve been thinking of to quickly build an FPS system, or ‘Fast Payment System,’” Li Laosan said. “This was a suggestion from Zhou Zhi, who believes that it is necessary to achieve timely and efficient interconnection between the financial systems of the mainland and Hong Kong Island, so that the two places can work together to combat financial risks, and bypass the current internationally accepted settlement system to avoid attracting the attention and interference of other forces.”

"In the future, this system can be opened up to more countries and organizations, and they can be incorporated into our system. At that time, this system will naturally be transformed into our own international settlement system and become a powerful tool for us to play a role in the international financial market!"

"Young men, you have big ambitions!" The old man slapped his thigh, his face showing admiration. "But how will this kind of digital currency be implemented? And how can its security and efficiency be guaranteed?" (End of Chapter)