{ "title": "Globalization and Asia: The Challenges for Regional Cooperation and the Implications for Hong Kong", "publication": "IMF News, March 7, 1997", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/spmds9703", "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/spmds9703", "overlayPath": "/en/news/articles/2015/09/28/04/53/spmds9703/index.md", "summary": "Address given at a conference sponsored by the Hong Kong Monetary Authority and the IMF on Financial Integration in Asia and the Role of Hong Kong, Hong Kong", "publishDate": "1997-03-07", "sections": [ { "heading": "Overview", "content": "- Address by Michel Camdessus, Managing Director of the International Monetary Fund, at the conference \"Financial Integration in Asia and the Role of Hong Kong\", Hong Kong, March 7, 1997.\n- Central theme: the impact of globalization on Asia’s role in the world economy, the internal transformations within Asia, and implications for regional cooperation and for Hong Kong specifically.\n- Framing: successes of the \"Asian miracle\", rising trade and financial integration, and preparatory context less than 120 days before the resumption of Chinese sovereignty." }, { "heading": "Global and regional integration: key findings", "content": "- Asia’s share of world output:\n - As recently as a decade ago, the developing countries of Asia accounted for only one-sixth of world output.\n - Asia, excluding Australia, Japan, and New Zealand, now accounts for about one quarter of world GDP on purchasing power parity-adjusted terms.\n - On this trend, the region could account for one-third of world output by the year 2005.\n- Trade:\n - Over the last decade the developing countries of Asia have seen their share of world exports nearly double, to about one-fifth of the total.\n - Increased share of industrial country exports helped cushion the impact of recessions in industrial countries during 1990-93.\n- Capital flows:\n - Net private capital inflows to the region rose to over $100 billion in 1995, described as well over half of total private capital flows to developing countries.\n - Between 1990 and 1995, foreign direct investment in the region increased more than fourfold.\n- Financial market deepening:\n - In some countries, equity market size as a share of GDP now matches many industrial countries; examples given: Hong Kong, Malaysia, and Singapore—stock market capitalization as a share of GDP exceeds that of France, Germany, and Italy.\n- Financial intermediation geography:\n - Japan is and is likely to remain the world’s largest exporter of capital.\n - Hong Kong and Singapore have emerged as major financial centers intermediating savings within Asia and channeling saving from other parts of the world.\n - Hong Kong is the main conduit for investment in China and arranges a significant proportion of Asia’s syndicated borrowing; Singapore has evolved into the main banking center for Southeast Asia." }, { "heading": "Trade challenges and policy recommendations", "content": "- Structural change and comparative advantage:\n - Comparative advantages are shifting; high-wage economies are moving toward higher value-added products and services.\n - Example: labor-intensive manufacturing shifting out of Hong Kong into mainland China, with Hong Kong benefiting via trade and financial services growth.\n- Policy recommendations:\n - Maintain and extend open trade regimes; countries that have not fully opened should do so.\n - Extend openness to new trade frontiers, notably services.\n - Increase transparency and free flow of information critical for services and financial sectors.\n - Develop effective \"exit\" policies for noncompetitive industries.\n - Improve infrastructure (transportation, telecommunications, power) while avoiding undue strain on public finances or external positions.\n - Encourage private sector participation in infrastructure—requiring greater regulatory transparency and clarified pricing policies where necessary.\n - Reduce less productive public outlays (e.g., military expenditure) to strengthen public finances.\n - Ensure regional trade initiatives are compatible with global trade liberalization, with optimism that Asia’s cooperative approach will complement WTO efforts." }, { "heading": "Financial sector challenges and policy recommendations", "content": "- Domestic policy fundamentals:\n - Stable macroeconomic policies, transparent and predictable regulation, and reliable legal frameworks are essential to attract savings and investment.\n - Prudential regulation and supervision in many countries have not kept pace with financial innovation and integration.\n- Risks and consequences:\n - Large capital inflows reduce policy maneuver room and increase exposure to financial sector risks.\n - Weak supervision could impede the ability of monetary authorities to tighten policy without aggravating banking problems.\n- Financial infrastructure and regional centers:\n - Asia needs a stronger, more dynamic financial infrastructure to handle complex intermediation requirements.\n - Expected development of a network of modern financial centers: Tokyo, Hong Kong, Singapore, and emerging centers such as Shanghai, Bangkok, Kuala Lumpur, and Seoul.\n- IMF-related steps and safety nets:\n - Strengthened IMF surveillance will give greater attention to capital account developments, banking system soundness, data quality and timeliness, and emerging-market-specific issues.\n - The New Arrangements to Borrow will double the credit lines available to the IMF to deal with exceptional situations threatening the international monetary system.\n - Emphasis that these resources supplement, but do not replace, the Fund’s quota-based resources; membership will soon decide on a quota increase described as needing to be substantial." }, { "heading": "Regional cooperation and coordination", "content": "- Rationale:\n - Closer integration raises each country’s stake in the stability and prosperity of others.\n- Examples and recommendations:\n - Swap arrangements among Asian central banks cited as constructive cooperation to maintain regional stability; explore further development of such initiatives.\n - Enhanced cooperation among national supervisors will improve bank supervision effectiveness and contribute to a more global approach.\n - Welcomes membership of several emerging Asian economies in the Bank for International Settlements and their support for strengthening IMF surveillance." }, { "heading": "Implications for Hong Kong and reasons for confidence", "content": "- Hong Kong’s role:\n - Seen as essential to continued Asian prosperity and global integration.\n- Ingredients of Hong Kong’s success:\n - Long record of sound policies: exchange rate link to the dollar, tight rule-based fiscal policy, macroeconomic stability, investor confidence.\n - Institutional assurances: Joint Declaration and the Basic Law enshrine \"one country, two systems\"; arrangements for the Hong Kong Monetary Authority and the People’s Bank of China to operate as two mutually independent, but cooperating, monetary authorities.\n - IMF consultations: IMF annual review of Hong Kong completed two weeks prior to the address; Executive Board strongly endorsed the policy framework; consultations to continue after the transfer of sovereignty.\n - Flexible product and labor markets; entrepreneurial and management skills emphasized.\n - Openness: free port and no capital controls; reference to China’s progress—renminbi trades on a market basis in China and exchange controls on current transactions have been eliminated.\n - Prudential supervision: high standards, well-capitalized banks, large official foreign exchange reserves.\n - Sound legal and administrative framework, neutral civil service, impartial judiciary, and freedom of information.\n - Economic integration with the mainland: continued mainland development provides market opportunities for Hong Kong; Hong Kong’s dynamism supports China’s growth.\n- Outlook:\n - Transitions present uncertainty but \"one country, two systems\" approach expected to ensure smooth transition and short-lived uncertainty.\n - IMF and World Bank members to observe arrangements at the 1997 Annual Meetings in Hong Kong.\n - Continued IMF interest and yearly consultations reaffirmed." }, { "heading": "Key statistics and numeric highlights", "content": "- \"Less than 120 days before the resumption of Chinese sovereignty.\"\n- Developing countries of Asia previously: one-sixth of world output.\n- Current share: about one quarter of world GDP (PPP-adjusted) for Asia excluding Australia, Japan, New Zealand.\n- Projection: could account for one-third of world output by the year 2005.\n- Share of world exports for developing Asia: about one-fifth.\n- Recessions in industrial countries referenced for 1990-93.\n- Net private capital inflows to the region: over $100 billion in 1995.\n- Private capital inflows described as \"well over half of total private capital flows to developing countries.\"\n- Foreign direct investment in the region increased more than fourfold between 1990 and 1995.\n- Stock market capitalization as a share of GDP: in Hong Kong, Malaysia, and Singapore exceeds that of France, Germany, and Italy.\n- Reference to IMF document identifier: 97/3.\n- New Arrangements to Borrow: \"will double the credit lines available to the IMF.\"\n- IMF quota decision: membership will soon be deciding on a quota increase, described as needing to be \"substantial.\"\n\nAddress by Michel Camdessus, March 7, 1997.\n\n---\n\n\n References\n\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/spmds9703" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/28/04/53/spmds9703/index.md)", "[Structured JSON version](/en/news/articles/2015/09/28/04/53/spmds9703/index.json)", "[Bundle manifest](/en/news/articles/2015/09/28/04/53/spmds9703/bundle-manifest.json)", "Published: March 7, 1997", "Address by Michel Camdessus, Managing Director of the International Monetary Fund, at the conference \"Financial Integration in Asia and the Role of Hong Kong\", Hong Kong, March 7, 1997.", "Central theme: the impact of globalization on Asia’s role in the world economy, the internal transformations within Asia, and implications for regional cooperation and for Hong Kong specifically.", "Framing: successes of the \"Asian miracle\", rising trade and financial integration, and preparatory context less than 120 days before the resumption of Chinese sovereignty.", "Asia’s share of world output:", "Trade:", "Capital flows:", "Financial market deepening:", "Financial intermediation geography:", "Structural change and comparative advantage:", "Policy recommendations:", "Domestic policy fundamentals:", "Risks and consequences:", "Financial infrastructure and regional centers:", "IMF-related steps and safety nets:", "Rationale:", "Examples and recommendations:", "Hong Kong’s role:", "Ingredients of Hong Kong’s success:", "Outlook:", "\"Less than 120 days before the resumption of Chinese sovereignty.\"", "Developing countries of Asia previously: one-sixth of world output.", "Current share: about one quarter of world GDP (PPP-adjusted) for Asia excluding Australia, Japan, New Zealand.", "Projection: could account for one-third of world output by the year 2005.", "Share of world exports for developing Asia: about one-fifth.", "Recessions in industrial countries referenced for 1990-93.", "Net private capital inflows to the region: over $100 billion in 1995.", "Private capital inflows described as \"well over half of total private capital flows to developing countries.\"", "Foreign direct investment in the region increased more than fourfold between 1990 and 1995.", "Stock market capitalization as a share of GDP: in Hong Kong, Malaysia, and Singapore exceeds that of France, Germany, and Italy.", "Reference to IMF document identifier: 97/3.", "New Arrangements to Borrow: \"will double the credit lines available to the IMF.\"", "IMF quota decision: membership will soon be deciding on a quota increase, described as needing to be \"substantial.\"", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/28/04/53/spmds9703/index.md", "json": "/en/news/articles/2015/09/28/04/53/spmds9703/index.json", "bundleManifest": "/en/news/articles/2015/09/28/04/53/spmds9703/bundle-manifest.json" }, "generatedAtUtc": "2026-09-27T11:13:19.203Z" }