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Competition among Financial Centres in Asia-Pacific

Prospects, Benefits, Risks and Policy Challenges

Soogil Young, Dosoung Choi, Jesus Seade and Sayuri Shirai

Publication Year: 2009

Many cities in the Asia-Pacific region serve as financial centres in their respective national jurisdictions or local areas. Noting that most were engaged in efforts to become premier international financial centres (IFCs) in competition with one another, the Korea National Committee for Pacific Economic Cooperation (KOPEC) convened an international conference in Seoul, Korea in October 2007 to examine the prospects for success for seven such financial centres (Hong Kong, Seoul, Shanghai, Singapore, Sydney, Tokyo and Wellington), weigh the costs and benefits of such competition for local economies as well as the region as a whole, and derive implications for cooperation among the regional governments. The present volume consists of case studies and commentaries presented at the conference as well as the synthesis report, which draws conclusions from those papers and commentaries. One of those conclusions is that, given the power of scale economies as well as the lack of integration of the financial markets in the region, none of the regional financial centres, even Hong Kong, Singapore or Tokyo, considered alone represents a meaningful rival to London or New York, the two existing global financial centres. The synthesis report thus argues for regional cooperation to integrate all those financial centres into an Asia-Pacific IFC network. It further argues that the present global financial crisis presents a major opportunity for regional governments to create such an IFC network that will challenge London and New York in quality as well as quantity of international financial business while helping the latter two overcome the current global crisis. This would open the path towards a stable and resilient Asia-Pacific financial community, with the constituent regional economies no longer vulnerable to the problems of the so-called original sin and double mismatch.

Published by: Institute of Southeast Asian Studies

Title Page, Copyright Page

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Table of Contents

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pp. v-vii

List of Tables

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pp. viii-x

List of Figures

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pp. xi-xiv

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Preface

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pp. xv-xvi

The Korea National Committee for Pacific Economic Cooperation (KOPEC) convened, in collaboration with the Korea Securities Research Institute (KSRI), an International Conference on Competition among Financial Centres in Asia-Pacific: Prospects, Benefits and Costs — Stumbling Blocks or Building Blocks towards a...

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Contributors

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pp. xvii-xxviii

Soogil Young, President of the National Strategy Institute, an independent think-tank in Seoul, has been serving as Chair of the Korea National Committee for Pacific Economic Cooperation (KOPEC) since November 2006. He served as a Senior Economist at four governmental economic research institutes during...

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Executive Summary

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pp. xxix-xxxvi

Competition among financial centres is intense globally but, in particular, in Asia-Pacific. There are many cities in the Asia-Pacific region that serve as financial centres in their respective jurisdictions or local areas. They do not just compete...

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Keynote Address - International Financial Centres: The Terms of Competition and Prospects for the Asia-Pacific Region

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pp. xxxvii-

The changing patterns in the global flow of capital are reshaping the world’s economic system, and Asia’s major financial centres are now poised to gain even greater prominence as hubs of commerce and creativity. As talent, technology and the drive for innovation speed the global mobility of capital, Asia’s aspiring...

PART I: Overview and Policy Recommendations

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1. COMPETITION AMONG FINANCIAL CENTRES IN ASIA-PACIFIC: Prospects, Benefits, Risks and Policy Challenges

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pp. 3-58

More than several cities and countries in Asia and the Pacific region are striving to become financial centres where financial institutions, investors, corporations, legal and accounting service providers, and many other types of financial market...

PART II: Case Studies

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2. HONG KONG AND EAST ASIA’S FINANCIAL CENTRES AND GLOBAL COMPETITION by Jesús Seade

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pp. 61-98

The importance of financial activity for East Asia cannot be overstated. The enormous and fast-growing regional economy requires to be underpinned by a strong, modern and diversified financial sector. The 1990s crisis is a receding memory, but many observers agree that two important contributing factors...

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3. SINGAPORE AS ALEADING INTERNATIONAL FINANCIAL CENTRE: Vision, Strategies, Roadmap and Progress

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pp. 99-129

After decades of rapid economic expansion, with gross domestic product (GDP) averaging 8.4 per cent growth per annum for Singapore throughout the 1970s and 1980s, it has become apparent that the high efficiency of the export-driven manufacturing sector is not matched by the increasingly internationalized but...

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4. PROMOTING TOKYO AS AN INTERNATIONAL FINANCIAL CENTRE

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pp. 130-178

Japan’s economic power is widely recognized worldwide, thanks to it being the world’s second largest economy (US$4.4 trillion equivalent GDP in 2007) and having a high per capita income (US$34,000 in 2007). According to Flow of Funds accounts, the amount of total assets held by resident financial intermediaries...

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5. CAN TOKYO BECOME A GLOBAL FINANCIAL CENTRE?

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pp. 179-192

In the late 1980s, London, New York, and Tokyo were the top three global financial centres, and Tokyo was challenging the leading role of New York in global finance. Today, however, the consensus view is that London and New York are the only...

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6. MAKING AUSTRALIA A SUPPLIER OF FUND MANAGEMENT TO THE WORLD

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pp. 193-230

At any half-decent lunch in the City of London a few decades ago, the cabbage was overcooked and the conversation was about cricket. Today’s financiers eat their brassica puréed, with seared scallops and a cumin jus, while chatting about the property they own back home in the Auvergne or New England. And...

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7. BUILDING THE SHANGHAI INTERNATIONAL FINANCIAL CENTRE: Strategic Target, Challenges and Opportunities

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pp. 231-244

When Deng Xiao Ping made his inspection tour of Southern China in 1991 he pointed out to Shanghai officials that Shanghai had been an important international financial centre where currency had been convertible. He hoped Shanghai could regain its financial centre status in the future. The following year, the Communist...

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8. THE KIWI THAT HAD TO FLY: Path Dependence and Evolutionary Niches among International Finance Centres

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pp. 245-276

Why should some small countries end up batting well out of their league in international capital markets? In some cases this might be due to location at geographical trading hubs, or from geopolitical accidents of history. In others it might arise...

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9. SEOUL AS AN INTERNATIONAL FINANCIAL CENTRE: Roadmap, Progress and Challenges

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pp. 277-295

The proposal to develop Seoul as an international financial centre was introduced as early as January 2002. In his New Year’s message, then President Kim Dae-jung, shared the vision of becoming an international hub for business. The following government, headed by President Roh Moo-hyun, inherited...

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10. COMMENTS ON CASE STUDIES BY DISCUSSANTS

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pp. 296-301

Let me begin my comments by asking what has been and will be the role of a financial centre in Asia. Before the Asian financial crisis, the answer was rather straightforward: Its aim was to work as a distribution centre of international funds to Asian countries that pursued rapid economic growth without sufficient domestic savings and well...

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SESSION I: HONG KONG AND SINGAPORE

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pp. 302-323

of a financial centre in Asia. Before the Asian financial crisis, the answer was rather straightforward: Its aim was to work as a distribution centre of international funds to Asian countries that pursued rapid economic growth without sufficient domestic savings and well...

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SESSION II: TOKYO AND SYDNEY

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pp. 324-33

“Why is an international financial centre so important? It’s certainly not a new trend that many countries and cities in Asia are trying to become financial services hubs.” Why? A financial services hub, a world class financial centre, creates a large pull of technological know how, a range of products within the country’s economy...

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SESSION III: SHANGHAI, WELLINGTON AND SEOUL

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pp. 333-343

We have heard a lot of excellent presentations, all of them stimulating and some of them perhaps rather depressing. I will talk about the ones from this session first. So Wellington is a “cow economy”? Because cows are very valuable, even milk powder has become a derivative. The New Zealand people love to buy land, the land that...

PART III: International Perspectives

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11. FINANCIAL CENTRES IN THE ASIA-PACIFIC REGION: Recent Trends and Developments

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pp. 333-343

This chapter provides an overview of macroeconomic and structural trends in East Asia that are conducive to financial centre growth. It also examines the link between the quality of domestic financial markets and level of foreign capital flows. The chapter...

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12. COMPETITION AND INTEGRATION: Financial Centres and Financial Market Integration in Asia

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pp. 344-352

From the excellent case study reports presented in this volume, it is clear that many cities are vying to become financial centres, and that there will be fierce competition over the next decades. One fundamental question is the relationship...

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13. FINANCIAL CENTRES IN THE ASIA-PACIFIC REGION

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pp. 353-362

Five years ago under the administration of President Roh, there was a strong push by the Korean government to make Korea a regional and financial hub for Asia. The Korean government and other agencies have sought to deliver that vision but questions remain on whether Korea has become a financial hub...

PART IV: Observations

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14. ISSUES AND FINDINGS

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pp. 365-374

For all of us who share a strong commitment to promoting a wellfunctioning, first-class international financial centre in Asia, what are the kinds of questions we ought to ask to realize that goal? I have come up with four sets of questions. I am not sure if you will agree with them, but here they are. The first set...

Appendix I: Korea's Financial Globalization and Challenges Ahead

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pp. 375-378

Appendix II: Programme of the Conference

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pp. 379-384

Index

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pp. 385-399


E-ISBN-13: 9789812309310
Print-ISBN-13: 9789812309303

Page Count: 399
Publication Year: 2009

Edition: 1

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Subject Headings

  • Financial institutions, International -- Asia -- Congresses.
  • Financial institutions, International -- Pacific Area -- Congresses.
  • Competition -- Pacific Area -- Congresses.
  • Competition -- Asia -- Congresses.
  • Asia -- Economic integration -- Congresses.
  • Pacific Area -- Economic integration -- Congresses.
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