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.