Our contacts with investors and financial institutions in the Gulf region have also reinforced our belief in promoting the development of Islamic finance in Hong Kong. This has in fact been articulated as a key policy initiative set out by the Chief Executive of the Hong Kong Special Administration Region in his 2007 Policy Address. In other words, it is now official Government policy to develop Islamic finance in Hong Kong and our commitment to this is beyond doubt. Being a major international financial centre in Asia, Hong Kong should seek to become an important player in the booming Islamic finance arena by providing a platform for Middle East  BIS Review 59/2008  1  investors to access investment opportunities in the Asia Pacific region. Hong Kong can also leverage on its experience, innovation and market diversification to serve as a capital-raising centre for Middle Eastern issuers to tap the funds made available by the high savings rate in Mainland China. Some people have expressed scepticism about how Hong Kong could play a role in these segments of the market. But market players in Hong Kong have answered this scepticism by quickly introducing our first Shariah-compliant product. In late 2007, we witnessed the first Islamic fund introduced by a local bank in Hong Kong. The fund is an index-tracking fund which tracks the performance of the Dow Jones Islamic Market China/Hong Kong Titans Index.
Such investments can be found in the emerging markets of Asia, especially in China. Although the dynamics are somewhat different in China, its tale of economic growth is as legendary as that of the Middle East. China has experienced a huge inflow of funds in search of growth opportunities and at the same time the Mainland authorities have been gradually opening up the country’s outward investment. As a Special Administrative Region of China, Hong Kong plays a pivotal role as the IFC of China in the course of financial liberalisation. Not only has it acted as a conduit for Mainland companies accessing international markets through IPOs, but also one of the largest sources of foreign direct investments for Mainland China. With the continuing financial liberalisation on the Mainland, Hong Kong is positioned as the most attractive destination both for investing into China and tapping China's funds. What are the challenges for us? Opportunities aside, we are of course aware that Hong Kong also faces challenges in developing Islamic finance. It is a fact that Hong Kong’s Islamic community is not big, but we are confident that the development of Shariah-compliant financial markets can take off even in environments in which the domestic Islamic community is relatively small, simply for the fact that investors nowadays are looking beyond domestic boundaries and traditional finances as financial activities gravitate towards the Middle East and China. Indeed Hong Kong’s relatively small population does not seem to undermine in any way our performance in the conventional financial and capital markets.