Dark Horse Voices from June 4 Echo in Today's Fight for Basic Rights
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Monday, June 4, 2012 A15 Dark horse Michael Chugani says Stamp of success suspicions about Leung Chun-ying being a closet Communist Party member Anita Fung says Hong Kong’s depth of experience and could still come back to haunt him liquidity mean it is destined to continue playing the lead role in the renminbi’s global rise, even with the here are those who still can’t shake off the development of other offshore hubs such as London suspicion that incoming chief executive Leung TChun-ying is a closet communist. They see him as a Trojan horse planted by the central government rrespective of location, the renminbi’s in- to mould us into being more like the motherland. It ternational rise will be a wide-ranging all seems a bit far-fetched, but believers say Leung’s event. It will transcend national borders. actions since winning the election more than confirm It will exert a major impact on global their suspicion. They point to his high-profile visit to trade and investment flows. It will influ- Beijing’s liaison office in Hong Kong the day after his Ience how businesses, investors and regulatory victory, his hiring of a former Communist Youth functions operate in the decades to come. League member, and his reported choice of Florence Based on the economic road map outlined Hui Hiu-fai, who has close mainland ties, as head of by China’s policymakers, we expect that the the new culture bureau. renminbi will become a global trade currency, a It wasn’t that long ago when even a hint of global investment currency and finally the next communist leanings would sink anyone aspiring to global reserve currency. The recent announce- be our top leader. Just a year or so ago, Leung ranked ment that China and Japan will start direct trad- poorly in popularity polls on the belief that he was an ing of renminbi and yen to boost trade ties is underground communist. Despite his denials, few consistent with this master plan. Direct trading felt at the time that he could overcome his of the currencies between China and Japan communist baggage to become chief executive. Yet demonstrates not only the growing clout of the he is now our leader-in-waiting. renminbi, but further reinforces the emergence To understand why so many Hongkongers have of the former on the international stage. embraced someone who not so long ago carried a Measurable progress has already been communist stigma, we have to understand the deep made, irrespective of this announcement. Last desire for change in our society. People, mostly the year alone, about 9 per cent of China’s global grass roots, have long felt that Hong Kong has been trade was settled in renminbi (total trade for heading the wrong way, tilted in that direction by 2011was over US$3.5 trillion). By 2015, over half locked-in societal injustice that favoured the of China’s trade with emerging markets (US$2 privileged. They had no vote but faced the prospect of trillion) is likely to be settled in renminbi. But as either Leung or Henry Tang Ying-yen becoming the interest in the renminbi will only intensify, the next chief executive. currency will require deep global support and a Leung had worked hard to reinvent himself by broad offshore network and infrastructure. reaching out to the grass roots with promises of Policymakers, financial institutions and change that would make society fairer. The people businesses acknowledge that in order for the saw Tang as someone from the privileged class who renminbi to become a major component on would preserve the old order. Scandals involving his the international stage, its offshore develop- illegal basement and Chief Executive Donald Tsang ment must move beyond Hong Kong. Yam-kuen’s hobnobbing with tycoons only helped Last month, representatives from govern- confirm this in the public mind. So they backed the ment and finance converged on the city for the suspected communist rather than the devil they Hong Kong-London Forum to discuss this knew. The message was clear: so what if he is a future development, to enhance the flow of the liberalised by authorities, has increased in its in Hong Kong rose 87 per cent year-on-year ship role in facilitating renminbi payments in communist, as long as he can bust up the old order. yuan across borders and to explore synergies by Hong Kong from 369.2 billion yuan (HK$451.7 to 588.5 billion yuan. These deposits did decline Europe, which now account for roughly 7 per But that doesn’t mean Leung is rid of his improving links between Hong Kong and billion) in 2010 to 1.9 trillion in 2011, based on by 2.1 per cent month-on-month in March this cent of global renminbi payments according to communist bogeyman. His opponents still see much London. Monetary Authority figures. In the first quarter year but we believe this is largely due to the our estimates. mileage in playing the communist card against him. While this is a positive development for the of this year, 571.2 billion yuan has been settled. opening of additional renminbi channels and Additionally, establishing a second offshore Legislators played the card just last week by grilling renminbi internationally, many are asking Hong Kong’s offshore renminbi market also the onset of more normalised growth patterns. renminbi hub will leverage London’s standing Leung’s top transition aide, Fanny Law Fan Chiu-fun, what the forum will mean for Hong Kong’s provides an unmatched depth of capital mar- Another solid example of the depth of Hong as the largest and most liquid foreign exchange on suspicions that Leung was letting Beijing decide status as the leading offshore renminbi centre. kets and financing products, including yuan- Kong’s renminbi liquidity pool is found in the market globally. The City of London estimates the make-up of his new team. Law’s fudging only Understandably, some market commentators denominated fixed income and equity prod- rapidly emerging offshore renminbi bond (dim that roughly 26 per cent of the global offshore fuelled the suspicion. And, for the first time, the are concerned that the potential establishment ucts, yuan loans and overdrafts. sum) market. In 2011, gross issuance of dim sum renminbi spot market is already in London. Communist Party will be a target at the annual July 1 of London’s offshore business would be to the From a foreign exchange perspective, daily bonds was 189.3 billion yuan, triple the 2010 Furthermore, expanding the range of off- protest march. President Hu Jintao will be detriment of Hong Kong’s leading status. turnover last year was around 1 billion yuan on figure. At the end of this April, gross issuance shore renminbi markets will improve pricing here for the handover anniversary celebrations but This could not be further from the truth. the spot market and 1.8 billion yuan on the for- totalled about 100 billion yuan, on track to hit efficiency and drive product development. De- the real target is Leung, who assumes office that day. London’s development as an offshore ward market. our end-of-year target of between 260 billion veloping a broader renminbi product range will Leung is fighting fire with fire. He is playing the renminbi hub would only complement Hong Second, Hong Kong is easily the largest and 310 billion yuan. rest heavily on Hong Kong-based experience, public opinion card against his critics, who are, Kong’s position. Hong Kong’s leadership posi- renminbi market outside mainland China, So how does this compare with London? As and London has already accepted its willing- likewise, using public opinion to play the communist tion will not be threatened, particularly as no measured by liquidity. In 2011, renminbi depos- of April, renminbi deposits in London stood at ness to learn from Hong Kong’s expertise. card against him. Neither of Leung’s two post- other market has received the level of endorse- 109 billion yuan, but are forecast to grow rapid- In other words, global infrastructure for the handover predecessors competed with opponents for ment from the Chinese government as Hong ly. However, London’s retail renminbi market is renminbi will only be strengthened by bilateral hearts and minds. It’s a high-stakes gamble for him. Kong has through policy directives such as the not expected to ever approach the size of Hong agreements such as the Hong Kong-London Public opinion destroyed Tang. And it has left Tsang’s 12th five-year plan. Kong’s, given the latter’s close proximity to Forum. As renminbi internationalisation will legacy in tatters. If Leung does anything at all that Hong Kong stands alone as the world’s pre- No other market has mainland China. be a staged process, development of London suggests he really is the Trojan horse some suspect, mier offshore renminbi centre for a number of While this base is incomparable to Hong will complement, not challenge, Hong Kong’s you can be sure his communist ghost will spring right reasons. First, the market is the most developed received the level of Kong, London will serve in other areas as a crit- leading status. back to haunt him. globally in terms of the offshore renminbi endorsement from ical component in the overall picture of products and services available. For example, renminbi internationalisation. For example, Anita Fung is chief executive officer, Michael Chugani is a columnist and TV show host. renminbi trade settlement, one of the first areas …[Beijing] as Hong Kong London has and will continue to play a leader- Hong Kong, of HSBC [email protected] Voices from June 4 echo in Crossing borders to build Numbers on health-care today’s fight for basic rights the leaders of tomorrow aid add up to great gains Carol Christ says exposure to different cultures is Jeffrey Sachs says spending on disease eradication Lijia Zhang says Tiananmen-style calls for change abound without political reform essential in helping women succeed at the top has clearly saved and improved millions of lives was still a rocket factory girl in made the decision didn’t consider any time soon.