BIS Review 90/1999  2  Public sector The financial position of the public sector has been strengthened appreciably in recent years, partly as a result of decreased unemployment, but also because interest expenditure on government debt has been reduced as a consequence of lower interest rates and debt repayment. This has been accompanied by comparatively high tax payments from households as well as the corporate sector. For 1998 the financial surplus – measured as public sector revenue less expenditure – was almost SEK 40 billion, which is equivalent to over 2% of GDP. In recent years the central government budget process has been changed with a view to tightening the control of government spending. The new budget process includes a spending ceiling that sets the maximum level for central government expenditures. In addition to the new budget process, the goal has been established of achieving a general government financial surplus equivalent to 2% of GDP over the business cycle. Thus, the goal is formulated in terms of the average over the business cycle, not as an annual target. These rules do not owe their existence to happenstance. Both the expenditure ceiling and the goal of a government financial surplus over the business cycle serve to promote greater confidence in economic policy. The direction of budget policy, like the monetary stance, is highly important for economic developments. The observance of these rules is important. Stable fundamental rules encourage economic agents to make long-term decisions.
Quite apart from our excellent ecosystem and proven resilience, we have a strong record as the Mainland’s trusted partner in its entry into the global financial system. We have been able to assist in achieving the desired outcomes while ensuring the integrity and stability of the Mainland’s own financial system. Similarly, Hong Kong is a trusted partner for international investors. We offer them access to Mainland markets in the language and rules with which they are familiar. In doing so we help maximize their opportunities while minimising their compliance costs and risks. One exciting aspect of the Connect schemes is the prospect of unleashing the potential of Hong Kong as the world’s leading offshore renminbi business hub. The internationalization of the renminbi and the opening of China’s capital account are interdependent issues. Today’s seminar will focus on Hong Kong’s role in driving offshore RMB business, and the opportunities that come with it. I would simply like to stress the point that Hong Kong has the infrastructure, the expertise, and the markets to perform that role. Before I conclude, let me mention two other opportunities Hong Kong cannot afford to miss: green finance and technology. We intend to be at the forefront of these two trends that will define the future of finance. We are joining hands with local and international financial regulators to ensure that the financial sector plays its part in achieving global net-zero objectives. We are working with the banks to manage their own climate risk as they help the real sector go green.