At a time when Europe and the United States are shedding jobs in the financial sector, one financial center is only adding to its ranks: Hong Kong.

Though it currently holds third place behind London and New York, Hong Kong’s presence as a world financial center is growing by the day. Credit Suisse Group (CS) is the latest financial firm to move a top executive to the Asian city.

Vikram Gandhi, the Swiss bank’s head of global financial institutions group, will relocate to Hong Kong from New York this summer to tap growth in Asia, Bloomberg News reported.

"As part of our ongoing commitment to transfer talented bankers to other regions, Asia Pacific will benefit greatly from having a banker on the ground with Vikram’s experience and client relationships," Jim Amine and Marc Granetz, co-heads of global investment banking at Credit Suisse, wrote in an internal memo. "We are going to continue to align our best bankers with areas of highest potential growth."

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This move follows similar relocations to Hong Kong by top brass at Deutsche Bank AG (DB), Morgan Stanley (MS) and Citigroup Inc. (C) as investment bankers look to cash in on the large number of sovereign wealth, private equity and corporate deals occurring in Asia.

China and the other emerging Asian economies haven’t been as adversely affected by the global credit crunch. While deals are slowing down in the United States and Europe, the pace of business is still fast and furious in the Pacific Rim.

"Investment bankers follow the money," Scott Moeller, a Professor at the Cass Business School and former executive with Deutsche Bank and Morgan Stanley, told BBC News.

"With sovereign wealth funds having a lot of money, with Asia having escaped the worst of the credit crunch and with the crunch having hit the U.S. and Europe the hardest, it is not surprising at all," Moeller said. "Once you get critical mass in a location, it begins to snowball and that is what is happening in Asia."

But despite the growing number of deals happening in Asia, competition between Hong Kong and Shanghai is likely to keep the former city from overtaking London or New York as the new global financial capital.

"I would be more worried if I was in a third tier financial center like Paris or Frankfurt than in London or New York," Moeller said. "I don’t think London or New York will be losing their crowns as leading financial centers any time soon."

News and Related Story Links:

• BBC News:
  Top bankers ‘leaving US for Asia’

• Bloomberg News:
  Credit Suisse to Move Global FIG Head to Hong Kong

Sitting on an estimated $15 billion budget surplus, Hong Kong’s financial chief, John Tsang, said he would slash taxes, eliminate duties on beer and wine, increase spending on health services and introduce measures to bridge the income gap and reduce air pollution, AFP reported.

Income taxes will be cut from 16% to 15% in 2008-09 and the corporate tax rate will be cut from 17.5% to 16.5%. Beer and wine tariffs will be abolished immediately, as wine consumption in Asia has ballooned in recent years.

Hong Kong will also lower the tax on hotel rooms from 16.5% to 15%, which should boost tourism prospects as the cut means a loss of $688 million in revenue per year if tourism levels remain steady.

Public spending will rise to 19.2% of GDP for the next financial budget year, up from 15.9% this year.

The bold move has two goals. First, it allows the government to rest on the economic hammock, so to speak – using its excess cash to beef up infrastructure intangibles.

Second, it puts more money in the hands of citizens that are facing rising inflation, which is expected to increase to 3.4% this year compared to 2% last year.

"This is a 360 degree budget, the first that actually benefits everybody," Agnes Chan, a partner at Ernst & Young Tax Services Ltd. in Hong Kong, told Bloomberg.

But the holiday can’t last forever. That $15 billion surplus can disappear quickly when a government spends more and taxes less.

In fact, the government is forecasting a $963 million consolidated deficit for the 2008-09 financial year. Meanwhile, Tsang estimates the city’s economic growth will probably slow to 4% to 5% this year, down from 6.3% last year.

"Financial policies should be sustainable," Tsang said, quoted by Bloomberg. "I will continue to manage public finances prudently by keeping expenditure within the limits of revenue."

News and Related Story Links:

• AFP:
  Booming Hong Kong cuts taxes as surplus soars

• Bloomberg:
  Hong Kong, With Surplus, Cuts Taxes to Boost Growth