Mr Esmond K. Y. LEE

1
Can Hong Kong Macao Pearl River Delta
be qualified as a world class metropolis?
Mr Esmond K. Y. LEE Executive Director
(Financial Infrastructure) Hong Kong Monetary
Authority 13 October 2012
2
Octopus ? Lingnan Pass Card Octopus ?
Shenzhen Tong Card 3 hour living circle
Pearl River Delta/HK Metropolis
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Pearl River Delta (PRD) Metropolis
9 Cities 2 SARs Hong Kong
Area 55,866 km2 1,104 km2
Resident Population 63.77 mn 7.05 mn
GDP USD 833 bn USD 224 bn
GDP per capita USD 13,061 USD 31,869
Sources Guangdong Yearbook, Hong Kong Yearbook,
Macao Statistics and Census Service, Macao
Yearbook 2010 figures.
4
What is a World Class Metropolis
1. A cluster of vibrant and mutually interactive
cities capable of achieving synergy 2. Smooth
flow of factors of production - goods, talents,
capital and information 3. Sharing a common
living area
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Movement of goods
Source China Custom
Guangdong Province includes Guangzhou,
Shenzhen, Zhuhai, Shantou, Foshan, Shaiguan,
Heyuan, Meizhou, Huizhou, Shanwei, Dongguan,
Zhongshan, Jiangmen, Yangjiang, Zhanjiang,
Maoming, Zhaoqing, Qingyuan,Chaozhou, Jieyang,
Yunfu
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Movement of people
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Movement of money (1)
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Movement of money (2)
Cheques issued by banks in Hong Kong and
deposited in banks in Guangdong (Daily Average
Turnover)
Value HK US RMB Total (HK equivalent)
2007 162,591,910 1,855,838 106,942 177,177,603
2008 190,149,821 2,466,195 161,813 209,567,373
2009 139,532,455 1,551,492 114,336 151,759,863
2010 158,727,496 1,858,199 142,144 173,384,918
2011 152,964,805 1,771,429 169,995 166,986,626
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Liabilities and Claims
10
Cross-Border Small-Value Payments within the
Metropolitan Living Area

• Banknotes and coins are very inconvenient for
  cross-border purchases
• Credit or debit cards are inefficient payment
  means for small-value purchases
• The use of e-money is convenient for people
  within the metropolitan living area in making
  cross-border payments
• Mutual use and access of e-money is an important
  financial infrastructure

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Small-Value Payments Means in Hong Kong
Convenience (Storage/ Giving changes)


Security
Public Acceptance
Coverage
Coins
1 5 1 1
Small-denomination notes
1 4 1 1
Credit/debit cards
3 3 3 4
1 1 1 1
1 1 1 1
An ideal small value payment device
1 best, 5 worst
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Overview of e-Money in Hong Kong
Currently there are around 23 million Octopus
cards in circulation
No. of daily transactions processed exceeds 12 mn
Launched in 1997, Octopus card system became the
e-payment system for public transport
Value of daily transactions exceeds HK120 mn
Scope of service has steadily expanded to
small-value retail payments
Average value of transaction is HK10
Source Octopus Cards Ltd.
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Overview of e-Money in Hong Kong
HK1.1bn
HK16.2bn
HK24.4bn
HK17.1bn
Annual Transaction Value
Annual Transaction Value
HK40.6bn
HK18.2bn
(Outstanding store value HK1.3 billion)
Source Octopus Cards Ltd.
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Comparing Small-Value Payment Tools in Hong Kong


Convenience (Storage/ Giving changes)
Public acceptance
Coverage
Security
Coins
1
5
1
1
Small-denomination notes
1
4
1
1
Credit/debit cards
3
3
3
4
An ideal small value payment device
1
1
1
1
1 best, 5 worst
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Current Status of Electronic Stored Value Cards
in PRD
Huizhou Public Transport Card
Jiangmen Public Transport Card
Zhuhai Public Transport Card

• Mainly used in public transport with limited
  application in retail payments
• Different technology platforms and modes of
  operation, offering limited mutual access and
  usage

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Strategy for Long-Term Development

• Development, mutual access and usage of e-money
  in the PRD region and Hong Kong should facilitate
  the need for small-value payments within the PRD
  metropolitan living area

PRD
E-money in the Mainland (e.g. Lingnan Pass,
Shenzhen Tong, Bank Card)
E-money in Hong Kong (e.g. Octopus Card)
HK
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Collaboration and/or competition between cities
and their hinterland in the Metropolis

• Cities and their hinterlands are usually
  complementary
• Different cities in the metropolis can
  collaborate as well as compete.

18
Office Rental
Prime office property rental (average annual increase) Hong Kong HK/ sq ft Guangzhou HK/ sq ft equivalent
2007 67 -
2008 88 (31) -
2009 69 (-21) -
2010 72 (4) 13.7
2011 93 (29) 16.5 (20)
2012 98 (5) 17.1 (4)
Source Rents and Rates Office Savills Research
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Level of office rental

• Cost of doing business
• Indicator of the attractiveness of the city for
  business, especially financial business

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Are we a metropolis yet?
Intensity of activities Yes GPD per
capita No, not yet Implication Much
potential for future growth
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Thank you!