Monday, 8 June 2015

HK relishes super-connector role

Chief Executive CY Leung

More than Canada's financial and business capital, Toronto is one of the world's fast-rising global cities – and in so many ways.

 

Mercer's 2015 Quality of Living rankings ranked Toronto in the top 15, worldwide.  This year's AT Kearney Global Cities Index and Outlook placed Toronto among the 16 Global Elite cities. 

 

There's another measure I find fascinating, and that's Toronto's status as one of the world's most multicultural cities; a city of 2.8 million – and nearly half the population born outside Canada; a city where more than 140 languages and dialects are spoken; a city of brilliant, and enviable, inclusiveness.

 

That dazzling diversity, I'm pleased to note, includes about 500,000 Chinese immigrants. The number rises to about 1.2 million across Canada, with about half of them from, yes, Hong Kong.

 

It's certainly not a one-way street. About 300,000 Canadian passport holders live and work in Hong Kong. And the Canadian Chamber of Commerce in Hong Kong is the largest Canadian business organisation outside Canada, and among the largest and most active international chambers in Hong Kong and, indeed, in the entire Asia-Pacific.

 

Canada and Hong Kong are, in short, extended family and good business partners.  Last year, our bilateral trade reached nearly CAD$5.7 billion. And, through the first quarter of this year, our trade was up nearly 8%, year-on-year.

 

I'm also pleased to note that Canada's investment in Hong Kong is substantial, totalling CAD$5.1 billion at the end of 2013.

 

Forging closer ties

I'm here today, leading a delegation of more than 100 high-profile business leaders and government officials, including 27 from the Mainland of China. We're here because we believe that our strong and longstanding connections, in business and in culture, offer the promise of a far more rewarding future for our two economies and the companies that drive them.

 

I am here to invite you to take advantage of Hong Kong's super-connector role between Mainland China and the world – between the Mainland China and Canada. Hong Kong can connect you to the vast markets of the Chinese Mainland, thanks to our "one country, two systems" arrangement.

 

From a business standpoint, the combined advantage of "one country" and "two systems" is compelling. It gives us and our business partners advantages no other economy in the world can offer: Hong Kong is part of China, when you do business with Hong Kong, you do business with China. But Hong Kong is distinct from other Chinese cities.

 

It's why nearly 7,600 overseas and Mainland Chinese companies keep offices in Hong Kong. And that includes some 100 Canadian companies.

 

Level playing field

They do business with Hong Kong, with Mainland China and throughout Asia, with confidence. Knowing that capital, information, trade and people flow freely through Hong Kong. Knowing that the playing field in Hong Kong is open and even, the people of Hong Kong open-minded.

 

They know that they do not compete with the Hong Kong Government as we do not own businesses. Unless, of course, you are in the railway or theme park business because we do own part of them. They know that our tax system is simple and our tax rate low, our communications and logistics infrastructure world-class.

 

They count on Hong Kong because our legal system is based on common law, our judiciary independent, our intellectual property regime robust. And in case you don't know yet, our salaries tax return is a simple form of four pages.

 

Earlier this year, the Washington-based Heritage Foundation ranked Hong Kong first in its Index of Economic Freedom – the 21st year in a row it has done so.

 

And Hong Kong placed second in this year's World Competitiveness Yearbook rankings. The annual International Institute for Management Development report focuses on business and government efficiency, as well as infrastructure and overall economic performance.

 

R&D flourishes

There are other excellent reasons to turn to Hong Kong when you look to Asia for new market opportunities and investment prospects.

 

Take, for example, our research and development sector. It's flourishing, thanks to our sound legal system and IP strengths, our world-class tertiary institutions and technology infrastructure, and our close technology co-operation with the Mainland.

 

We've got the talent, too. Prof Charles Kao, Past President of The Chinese University of Hong Kong, is a Nobel Laureate in physics. Prof Tsui Lap-chee, who is here with us today, won the 2014 Henry G Friesen International Prize in Health Research, an award established by Friends of the Canadian Institutes of Health Research and the Canadian Academy of Health Sciences to recognise international leaders of exceptional achievement in science and health policy.

 

And, at the recent International Exhibition of Innovations of Geneva, Hong Kong walked off with 13 gold awards, five silvers and a Grand Prix.

 

The Grand Prix was awarded to a Hong Kong-based biotechnology company Vitargent, which developed a technology using fish embryos, rather than animals, to test for toxic substances in a variety of consumer products. Vitargent is one of the many tech start-ups, alongside established companies, based in our Hong Kong Science & Technology Parks Corporation. I invite more Canadian IT start-ups to join us. Asia is waiting.

 

Financial launch pad

Finance is another area of great promise for our two economies. After all, Toronto is North America's third-largest financial services centre, behind only New York and Chicago.

 

As for Hong Kong, we are one of the world's leading financial centres. We are both China's international financial centre and the world's China financial capital. As the Mainland of China continues to reform and open up its financial markets, we serve as the country's launching pad. We have first-hand knowledge and first-mover advantages. We are pleased to share them with Canadian businesses and investors.

 

China's currency, the renminbi, is a prime example of our super-connector role in finance. In 2004, we were given the opportunity to internationalise the renminbi.  Today, we are the world's biggest offshore renminbi market. In the first quarter of this year, the daily turnover on Hong Kong's Renminbi Real Time Gross Settlement system reached US$140 billion. That's up 30% over the same period last year. And Hong Kong banks now handle some 70% of global renminbi payments.

 

As the super-connector between China and the rest of the world, the new chapters go on. Beginning July 1, the mutual recognition of cross-border funds will allow 100 eligible Hong Kong funds and 850 eligible Mainland funds to apply for approval to be sold in each other's market.

 

Mainland markets open up

This deal follows the launch, last November, of the Shanghai-Hong Kong Stock Connect, another significant move in the liberalisation of the Mainland's capital markets. Through Stock Connect, investors in Hong Kong, and around the world, can invest, directly, in over 500 Shanghai-listed shares through the Hong Kong Stock Exchange. And Mainland investors can trade in some 280 Hong Kong-listed shares via the Shanghai Stock Exchange using onshore renminbi funds.

 

This programme is popular. In April, record-breaking trading days were rung up on both northbound and southbound turnovers. The highest combined daily turnover hit US$5 billion. And that is daily turnover.

 

Up next is the Shenzhen-Hong Kong Stock Connect. We expect it to open later this year. The Shenzhen bourse, by the way, is known for its IT companies and start-ups.

 

Our super-connector role with the Mainland extends well beyond finance. CEPA, our free-trade agreement with the Mainland, gives Hong Kong companies tariff-free access to the Mainland for goods produced in Hong Kong. It also gives our services suppliers preferential access to the Mainland. And, CEPA is nationality neutral, Canadian companies need only partner with Hong Kong companies to take advantage of its singular benefits.

 

‘Belt-Road’ opportunities

Then there's the new strategy of China's Silk Road Economic Belt and 21st Century Maritime Silk Road initiatives. The grand "Belt-Road" will need investment on an equally grand scale. In this, too, Hong Kong can serve as a super-connector. We are, after all, the Asian region's major hub for overseas investors, as well as Mainland investors looking to go out to the world.

 

Along with capital, China's "Belt-Road" will create an overwhelming demand for services. Here again, Hong Kong is well-positioned to play a central role. From trade and finance, to law and accounting, together with infrastructural project management, environmental and risk assessment, and transport and tourism, we have the professional services to pave the "Belt-Road" way throughout the 21st century.

 

I invite Canadian companies, and investors, to join us. I invite you to "Think Asia, Think Hong Kong".

 

Chief Executive CY Leung gave this address at the opening of the Think Asia, Think Hong Kong symposium organised by the Hong Kong Trade Development Council in Toronto.


Regards,
Otmane El Rhazi
Department of Commerce
Economic Development
Text/Mobile, +44 7414 782 320

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