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Opening of the IMF's Hong Kong SAR Resident Representative OfficeRemarks by Horst Köhler
Managing Director of the IMF
Hong Kong, January 11, 2001
As prepared for delivery
Good afternoon Ladies and Gentlemen. Thank you for joining us in our "housewarming" celebration of the IMF's Hong Kong sub-office.
The formal name of our office-the Hong Kong SAR Sub-Office of the IMF's Resident Representative Office in the People's Republic of China-reflects Hong Kong's unique qualities. I am not only referring to the governing doctrine of "one country-two systems," but also to Hong Kong's strategic position in global financial markets.
Hong Kong has emerged as a major financial center by virtue of its traditional strengths. These include the rule of law, a strong financial infrastructure, and sound banking and financial systems. Indeed, Hong Kong's equity markets are among the deepest and most liquid in the world-serving as a source of funding for Hong Kong and Mainland Chinese firms. Yet fierce competition, advances in information technology, and structural changes in financial markets require that you continuously update your financial infrastructure, and bolster regulations and supervisory practices. I can easily predict that you will face both challenges and opportunities with China's accession to the WTO, and the development of the Mainland's financial system.
Even as Hong Kong's economy has rebounded strongly from the Asian crisis, and your financial system has shown its resilience, you have rightly implemented reforms to build up your already strong positions. I can readily point to three significant examples:
· The formation of the Council of Financial Regulators will help manage risks and reduce vulnerabilities from cross-market systemic shocks.
· The merger of stock and future exchanges and clearing houses will no doubt simplify and increase the transparency of securities markets.
· You have also taken important steps in adapting your financial legislation to keep up with modern financial practices and institutions.
Notwithstanding these and other important actions you have taken since the Asian crisis, I challenge you to go further. For example, you are already the standard setter for corporate governance and transparency Asia. But you have the capability for setting the benchmark for the world.
Let me turn to the Fund's reasons for coming to Hong Kong. Establishing an office in this key international financial center enables the IMF to perform better the work I outlined last September during our annual meeting in Prague. There I said that:
· the IMF should strive to promote non-inflationary economic growth that benefits all people of the world;
· it should play a key role in safeguarding the stability of the international financial system;
· it should focus its activities on macroeconomic stability, working in a complementary fashion with other international institutions;
· it should be an open institution, learning from experience and dialogue, and adapting continuously to changing circumstances.
The lessons from the Asian crisis, and subsequent financial market turbulence, point to the importance of economic and financial market surveillance for crisis prevention, and developing policies to promote economic growth. But globalization and rapid changes in financial markets and financial practices significantly challenged our ability to effectively monitor and diagnose problems at an early stage. For example, information technology and new financial instruments and practices have increased the speed and means with which capital moves across markets, sectors, geographic regions, and time zones. We are also striving to adapt the IMF to these changes in global financial markets. In this context, I have established a Capital Markets Consultative Group to open a dialogue with key financial market participants who are reshaping the global financial landscape. This is only one of many initiatives we have taken to enhance the IMF's financial market surveillance capabilities.
I expect that our new office-located in this important focal point of financial market activity for the region-will broaden our capabilities for understanding financial and economic risks and vulnerabilities. Even though it is sometimes challenging to obtaining adequate data for good analysis, it is by far even more difficult to discover the stories and understand the motivations behind the actions that generated those data. One of the main functions of our office will be to engage in a dialogue with both financial market participants and government officials. This will help us analyze developments, and spot trends that may signal potential risks and imbalances that affect not only Hong Kong, but possibly the region and even the global financial system. I am confident that we will work closely in this endeavor with the Hong Kong authorities and other national and international organizations based here in Hong Kong-especially the World Bank, IFC, and the Bank for International Settlements.
There can be no higher goal for our new office than to open further the lines of communications from the IMF. I expect our new office will be a resource through which we in Washington can receive comments and views, and answer questions about our work.
Your presence here today is a strong testament and sign of support. I therefore want to conclude by thanking you for your encouragement and by proposing a toast:
"To our new office-where old friends in Hong Kong, in China, and throughout the region can build even stronger bonds."
IMF EXTERNAL RELATIONS DEPARTMENT