Strategic Treasury

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From West to East Speech by Michael Geoghegan, Chief Executive, HSBC Holdings plc, to the American Chamber of Commerce in Hong Kong, 27 April 2010-06-08.

From West to East

When the HSBC Board announced last year that we were moving the Group Chief Executive’s main office to Hong Kong, it prompted a number of reactions. Some asked if it was a first step towards moving HSBC’s headquarters away from London. Some wondered if we were going to split the bank into two. 

In fact, my move had everything to do with our Group strategy. At HSBC, we have long been convinced that the world’s centre of gravity is steadily shifting east and south. It’s a view we’ve held since several years BC – BC is after all ‘before the crisis.’ And, in my view, it is a shift which the crisis has just accelerated. We have now reached a point of no return. In a few years’ time, who’ll remember the G7? We’ll remember the E7 – China, India, Brazil, Russia, Mexico, Indonesia and Turkey. These are the ones which will matter. 

My coming to Hong Kong tells you where we believe the future lies for financial services. We aren’t abandoning London. It remains an important nerve centre, for global finance and for HSBC. Three of my executive team are based there, along with three in Hong Kong. We aren’t splitting HSBC into ‘two banks’ either. But we do know that a global organisation in more than 80 countries and territories needs more than one ‘home’ – and, after all, we have been in our home of Hong Kong since 1865.

Hong Kong is perfectly located. Not only to tap into what’s happening in mainland China, but also the flows of business in Asia and between Asia and the rest of the world. So I am now managing our global business from where the action is: Hong Kong. And over the next twenty minutes or so, I want to share four personal convictions – about what the shift from West to East means for business and for finance in the coming decade. 

A new phase for the global economy

The first thing I’m convinced about is that we are entering a new phase for the global economy. Fact number one: emerging markets are set to grow three times faster than developed ones this year. In other words, they are driving the global recovery. I do think the biggest jolt has now passed through the world’s economy. But many Western nations will struggle for some time, and we could see further setbacks, particularly in Europe. It is now the emerging markets that are leading the way forward, in a way few would have thought possible only a few years ago. Of course there is a lot of talk about asset bubbles. And there are questions about whether growth is sustainable. But I think those doubts are overblown. Everything I see suggests that – overall – the recovery in emerging markets is secure. And I’m in no doubt that governments when they need to act will act to reduce any bubbles.

Here’s fact number two: within three years, for the first time, the economic firepower of emerging markets will overtake the developed world – measured by purchasing power parity. It’s a defining moment. It’s hard to believe the term BRIC was invented only ten years ago. And what a ten years it has been. Brazil, India and China’s roles are now secure on the world stage. As for Russia, the potential is there with its strong commodity base and its growing wealth. Its economic story will unfold, but probably at a different pace.

Since then, BRIC has become the mantra for every business expansion strategy. But in this decade to come, a new group of emerging market dynamos will also emerge. Personally, I like the prospects for the CIVETS. CIVETS are named after the cat-like animals found in many of these countries. These are the new BRICS: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Each has a large, young, growing population. Each has a diverse and dynamic economy. And each, in relative terms, is politically stable. Each has a very bright future.

Any company with global ambition needs to act now in regards to these markets. In today’s world, you can’t afford to wait for business. You have to go where the business is. This presents those of us based here in Hong Kong with a challenge, but also a unique opportunity. We are better placed than many to get out there and make things happen.

In today's world, you can't afford to wait for business. You have to go where the business is. 

Hong Kong has been ranked the world’s freest economy by the Wall Street Journal for the last 15 years – ever since they started the index. Its entrepreneurs and its trading spirit have made it what it is today, and it’s a spirit we need to harness now more than ever. What’s more, our location couldn’t be better for tapping into the Asian growth story. And at HSBC, we are excited by the opportunities in markets like Vietnam – where we were the first foreign bank to incorporate. And Indonesia, which has the world’s fifth largest population, where we doubled our presence last year. But, as the list of CIVETS shows, the growth story is much wider than Asia. Companies that want to capture these opportunities need a global platform. 

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