Hong Kong is an international financial centre with much financial news and many important news stories every year. Perhaps you will ask me about my criteria for my choice of the top 10. Broadly speaking, I choose the news stories that are directly related to the work of the Financial Services & the Treasury Bureau, hoping that through this, people can have a better understanding of our work.

In accordance with this criterion, the following news items are my top 10 financial news stories of this year, in chronological order.

1 - Offshore Funds exempted from profits tax

In March this year, the Legislative Council passed the relevant bill to implement the proposal of exempting offshore funds from profits tax. This measure helps to attract new offshore funds to Hong Kong and encourage existing ones to continue to invest in Hong Kong, and is favourable to the development of the local asset-management business. It enhances Hong Kong's competitiveness and reinforces the status of Hong Kong as an international financial centre.

2 - Pan-Pearl River Delta regional co-operation in financial services

The financial co-operation between Hong Kong and the Pan-PRD region has made great strides this year. In March, we organised a forum to promote Hong Kong's financial services to officials and representatives of enterprises from the Pan-PRD region and to explore business opportunities for co-operation. The forum met with an enthusiastic response. Leaders of Hunan Province subsequently invited the FSTB to organise a financial services delegation visit to the province in September for the purpose of jointly exploring business opportunities. During the visit, a number of agreements were signed by institutions of Hong Kong and Hunan to enhance the financial co-operation between the two places.

3 - Rail merger

In April, the Government and the Mass Transit Railway Corporation Limited announced that they had reached a consensus on the terms of the merger deal between the MTRC and the Kowloon Canton Railway Corporation. The merger proposal, which has balanced the interests of all stakeholders, is beneficial to Hong Kong people who own the assets of the KCRC, the passengers of the two railways, the staff of the two railway corporations and the MTRC shareholders. The proposal is being examined by the Bills Committee of the Legislative Council, and will be put to a vote by the MTRC minority shareholders.

4 - QDII

In April, the Mainland authorities announced measures to relax the foreign-exchange management system by allowing Mainland institutions and residents to entrust qualified financial institutions to invest in financial markets outside the Mainland. This includes allowing the qualified commercial banks to operate offshore financial management for their clients. Upon implementation of these measures, commonly known as QDII - for qualified domestic institutional investor, some of the Mainland funds may be invested in the financial products of Hong Kong's markets, thereby increasing the trading volume and liquidity of the markets. Besides, in making global investments, Mainland investors can engage our financial institutions which possess rich international experience and professional knowledge. In the long run, the measures are conducive to the development of Hong Kong as Asia's asset-management centre. 

5 - Brokerage incidents

Between May and August, three small and medium brokerages were found in breach of the Financial Resources Rules or misappropriating their clients' assets. The incidents were mostly uncovered by the SFC during its routine inspections of the brokerages, which have demonstrated the effectiveness of its regulatory and inspection systems. Besides, the SFC has adequately protected the interests of the affected clients in handling the cases. This shows that Hong Kong has a robust regulatory regime to protect investors' interests.

6 - Financial Reporting Council

In July, the Legislative Council passed the relevant bill to establish the Financial Reporting Council with statutory powers to investigate auditing irregularities and accounting non-compliances of listed companies in Hong Kong. The establishment of the council is conducive to further boosting the investors' confidence, enhancing corporate governance and improving market quality. The Government appointed Sophia Kao as the council's chairwoman and appointed seven independent members this month. It is expected that the council will begin operation in early 2007. 

7 - Public consultation on tax reform

In July, the Government conducted a public consultation on the reform of Hong Kong's tax system as a preparation for broadening the tax base to provide a stable source of revenue and meeting the challenges brought by an ageing population in the long run. The Government hopes to collect the views of the public on the proposals to broaden the tax base, including the Goods & Services Tax. According to the interim report published in December, although the public recognises the need for broadening the tax base, the majority of people are against introducing GST as the main option to do so. In response to the views of the public, the Government has decided not to advocate GST for the remaining part of the consultation. The Government will continue to listen to the views of the public on other feasible options. When the consultation ends in March next year, the Government will draw up a report for consideration by the Government of the next term.

8 - Summit on "China's 11th Five-Year Plan & the Development of HK"

China's 11th Five-Year Plan clearly indicates support for developing Hong Kong's financial, logistics, tourism and IT industries, and maintaining Hong Kong's status as an international financial, trade and shipping centre. It also encourages the enhancement of exchange and co-operation between the Mainland and Hong Kong in various areas. To explore with various sectors of the community the opportunities and challenges brought by the 11th Five-Year Plan and the role of Hong Kong in our country's economic development, the Chief Executive convened an economic summit in September. The Focus Group on Financial Services has set up three working groups to draw up proposals on securities, futures and commodities trading, and insurance for submission to the Chief Executive by the end of this year. At the same time, the Focus Group on Professional Services, Information & Technology and Tourism is actively exploring the strategic issues of further developing the accounting sector.

9 - Appointment of new SFC Chairman

In October, the Government appointed Eddy Fong as Securities & Future Chairman. He is the first appointed non-executive chairman after the Legislative Council had earlier passed the Securities & Futures (Amendment) Bill 2006 to split the post of the SFC Chairman into a non-executive chairman post and a newly-created chief executive officer post. In future, the chairman will lead the SFC board in setting the overall directions, policies and strategies, and will not take part in the day-to-day operations. This model is in line with best governance practices both locally and internationally.

10 - Stock market hits new highs

Hong Kong's stock market staged an outstanding performance and continuously hit new highs this year. The total market capitalisation hit a new high of over $13 trillion. According to the November figures, Hong Kong has overtaken Germany to rank seventh in the world. Besides, the world's largest capital-raising activity, the initial public offering of Industrial & Commercial Bank of China was conducted in Hong Kong. In terms of the total funds raised in IPOs for the first 11 months, Hong Kong has outperformed New York for the first time, ranking second in the world, only after London. The annual turnover also hit a record high, exceeding $8.3 trillion.

We owe our achievements in the development of financial services not only to the contributions of the industry, but also to the efforts of Hong Kong people, because the economic prosperity of a place must be built on social and political stability. I believe that every one of us will be proud of the achievements of our financial services industry.