Thriving China to provide opportunities for HK: Rubin

Thriving China to provide opportunities for HK: Rubin

HONG KONG (AFX-ASIA): Chairman of Citigroup Inc's executive
committee Robert Rubin said a thriving economy in China will
provide tremendous business opportunities for Hong Kong, although
he added that the territory's importance will "diminish" as
Shanghai becomes a financial center.

"Hong Kong is a world class locus of entrepreneurial,
financial and market skills that China so greatly needs, and it
has long served this function within the broader Chinese
economy," the former U.S. financial secretary said.

Meeting with representatives of the local financial sectors
and the press, Rubin said that as China undergoes its economic
transformation, "China must develop these skills more broadly,"
he said.

"There is an extraordinary opportunity for Hong Kong to be an
even greater commercial and market center in the years to come
because of the potential for economic growth in a market-based
Chinese economy," he added.

During his stay in Shanghai, Rubin said he was very impressed
by Chinese government officials.

"They have a good sense of what they are and what they have to
do (in terms of economic development)... With their efforts, I
think Shanghai will become a financial center," Rubin said.

"While the importance of Hong Kong will be diminishing (after
Shanghai becomes a financial center), a thriving economy in China
will provide Hong Kong with tremendous business opportunities,"
Rubin said.

Rubin said economic policy makers should focus on possible
risks, though the world economy has ridden out the latest
financial storm.

"I think we have seen a return to complacency, and assumed
things will always go well. And that is troubling... There is an
inherent tendency in economic and financial decision-making to
overemphasize the positive and focus too little on risk," Rubin
said.

"The right approach for policy makers, businesses and
investors is to be both dynamic and highly disciplined so as to
benefit from the potential on the one hand, and on the other to
avoid unwise positions based on enthusiasms of the market and to
be able to weather whatever disruption and difficulties may
occur," Rubin said.

Referring to the U.S. economy, Rubin said, while the U.S. has
maintained impressive economic growth with inflation in check,
the country has a current account which is more than 4 percent of
GDP and a personal savings rate which is less than 1 percent of
GDP.

Rubin said one real possibility is that the large inflows of
capital from abroad that finance the trade deficit, the low
savings rate and rapid growth in demand reflect a legitimate
belief in the strength of the U.S. economy, but as often happens
in good times, they may at the same time also reflect an
excessive reaction to those strengths.

"My own sense is that in too many quarters there is instead a
complacency and an over-enthusiasm about what are the real
strengths of the U.S. economy, " Rubin said.

Rubin said Japan has made little progress toward market
openness.

"The Japanese economy is still heavily regulated, and much of
that regulation deters or prevents change and new entrants,"
Rubin said.

He added that it makes little sense for Japan to tighten
fiscal policy, with its public debt as a share of its total
economy the highest in the Organization of Economic Cooperation
and Development.

As Japan attempts to put its economy back on track, "the
challenges are very substantial and a sustained recovery could be
difficult and could take time."

Commenting on the weakness of the euro, Rubin said Europe
should step up efforts in structural and regulatory reform and
market openness to attract investments and stimulate growth, all
of which in turn will be the basis for producing a sound euro.

"The (euro) weakness has promoted European exports, but what
Europe needs is domestic demand-led growth in Europe," Rubin
said.