HONG KONG TO LOSE FINANCIAL FORUM SEAT IN 2011?

C O N F I D E N T I A L HONG KONG 000530 SIPDIS STATE FOR EAP/CM AND EEB/IFD/OMA, TREASURY FOR A/S SOBEL AND DAS DOHNER, NSC FOR SENIOR DIRECTOR BADER E.O. 12958: DECL: 03/20/2034 TAGS: PREL ECON HK CH SUBJECT: HONG KONG TO LOSE FINANCIAL FORUM SEAT IN 2011? Classified By: Consul General Joe Donovan, Reason 1.4 b/d ¶1. (U) This is an Action Message. Action Request para 5. ¶2. (C) Hong Kong Monetary Authority (HKMA) Chief Executive Joseph Yam told the Consul General March 20 that in the recent Financial Stability Forum (FSF) meeting in London, participants agreed to expand FSF membership to include all G20 members. The agreement also included a provision to abolish the Hong Kong Monetary Authority seat, following a two-year transition period. It will be up to the PRC authorities to decide whether they want to include an HKMA representative among their three seats, said Yam. The agreement was not specified in the FSF press release describing the results. Hong Kong has been an active and constructive member of the FSF almost since the forum's inception, said Yam, but now finds itself looking at the possibility of being excluded by 2011. ¶3. (C) Excluding Hong Kong would be a serious mistake, he said. Hong Kong has its own currency and economic policy, is an important regional financial and trade center, and has been playing an active and valuable role in bodies like the FSF for many years. Hong Kong representatives are staunch defenders of free markets, open systems, transparency and sound regulation. Hong Kong's participation in the FSF is a prime example of "one country, two systems" in action, said Yam. As China has not yet officially become a member of the FSF, it is unclear what position Chinese leaders will take on Hong Kong's future role in the forum, but Yam believed that Beijing would not object to the Hong Kong Monetary Authority retaining its FSF seat. ¶4. (C) Yam added that responsibilities in Hong Kong had prevented him from attending the latest FSF meeting in London, and he was quite upset when he learned of the decision to phase out Hong Kong's seat. He told the Consul General he would raise the matter with Treasury Secretary Geithner and Federal Reserve Board Chairman Bernanke when they next met and asked for USG support in retaining Hong Kong's FSF seat. The Consul General promised to look into this issue and provide Yam with a readout before the upcoming G20 meeting. ¶5. (C) Action Request: please provide the USG position on the Hong Kong Monetary Authority's seat in the Financial Stability Forum and our assessment if this move may be reversed. DONOVAN