HONG KONG: A HARD-EARNED SUCCESS
against $8.41 billion in 1966. Total loans and advances have risen to $3,262 billion compared with $5.38 billion.
Alongside the enormous rise in the Hang Seng Index mentioned earlier, there has also been an increase in the market capitalisation from a mere $3.75 billion at the end of 1966 to $2,085 billion at the end of 1994. Total turnover of the stock market for the whole month of December 1966 was $20.12 million, while the average daily turnover for 1994 was $4.6 billion.
The government's policy of minimum intervention and sensitive regulation has provided the basis for these dramatic financial market developments. We leave the markets to take as many decisions for themselves as possible, only assuming a more active role when that is necessary.
This does not mean the development of Hong Kong as a major financial centre has been trouble-free. The positive side is that we have learned from the various banking and stock market crises and, as a result, greatly strengthened Hong Kong's regulatory systems, which has enabled us to adjust to the rapidly-changing global financial scene. For example, the development of a sound system of banking regulation followed bank failures in the 1980s. This framework has continued to evolve and to be refined as Hong Kong's own status as a financial centre has grown. Similarly, in the wake of the 1987 stock market crash, the government completely overhauled the regulatory and risk management infrastructure of the securities and futures markets. The more notable measures included the establishment of an independent Securities and Futures Commission; the restructuring of the ruling bodies of the stock and futures exchanges to provide a wider spectrum of representation in the decision-making process; and the introduction of sophisticated clearing and settlement systems for both markets, which has made Hong Kong's risk management capability one of the best among the major markets in the world.
The setting up of the Hong Kong Monetary Authority in 1993 marked another significant step forward in the development of a more sophisticated regulatory structure, and in putting into one organisation responsibility for central banking functions in Hong Kong. The authority, established by merging the offices of the Exchange Fund and of the Commis- sioner of Banking, is responsible for maintaining currency stability, the safety and stability of the banking system, and the efficiency of the financial system.
Recent Events and the Future
The job of the administration has, of course, changed over the years, partly because of the increasing internationalisation of business and trade and partly because of political developments, most notably the growing role of the Legislative Council and the evolving relationship with China as we move through the transition towards the change in sovereignty in 1997.
We have to take account of a far wider range of issues than when I arrived in 1966. Generally, we seem to have adapted quite quickly to the challenges and I believe we have successfully resisted any temptation to use this trend as an excuse to unnecessarily enlarge the role of the government.
The development and democratisation of the Legislative Council, and accompanying cultural changes in the general community have had a major impact. The powers of civil servants to command and influence have, inevitably, been reduced. This is symbolically
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