Friday, 16 October 2015

HK a magnet for business

Chief Executive CY Leung

The country that I knew in the 1970's has moved on. The UK now is more chic, creative, cultural and confident. London continues to be a beautiful city, invariably rejuvenating itself, and growing in its influence in the financial and business world.

 

While the UK is thriving, Hong Kong has also been undergoing tremendous transformation, from an industrial city in the 1970s to a global financial and trading hub in the second decade of the 21st century. Like the UK, the description of chic, creative, cultural and confident, in my eyes, is also fit for Hong Kong. Towering skyscrapers, extensive and efficient railway, a modern airport, and yes, a fusion of Chinese and Western cuisine available in a great many Michelin-starred restaurants - these are the hallmarks of Hong Kong today.

 

HK's privileges

But old habits die hard. What remain unchanged throughout the days, and in effect buttressing the development of Hong Kong over the last few decades, are the common law system, independent judiciary, and the rule of law. Hong Kong's global success today - as a trading economy, as an international financial centre, as a regional business hub, and much more, I can confidently say, owes a lot to our fine tradition of the rule of law. It is the core asset that we cherish. I can assure you - I know a lot of you own or operate business in Hong Kong, or have friends and relatives living here - we will continue to uphold the rule of law, with our utmost effort.

 

Our legal institutions remain our foundation stone. Along with many other business advantages - from our low and simple taxes, to the free flow of capital and information, and level playing field for business - they have helped make Hong Kong the freest economy in the world.

 

Our institutional strengths work hand-in-hand with the "one country, two systems" arrangement that Hong Kong enjoys. Together, they have shaped an economy without precedent, a people powered by the twin engines of China and the world.

 

These dual advantages make Hong Kong singular in its global ties - practically unheard of among cities in China and the world at large. For example, we can, which is highly unusual for a city, and we do, initiate and build relations with foreign states and regions, as well as international organisations. Consider the following as an example.

 

Hong Kong is an active member of the World Trade Organisation, the Asia-Pacific Economic Co-operation and the Pacific Economic Co-operation Council. We belong, in our own right, to the Asian Development Bank and the World Customs Organisation. We have entered into free trade agreements with New Zealand as well as the Member States of the European Free Trade Association. We are now in talks with all the ten member nations of ASEAN for a free trade agreement.

 

Hong Kong's international ties and agreements cover a wealth of fields, everything from financial and monetary, to logistics and communications, tourism, culture, sports and more, all made possible by our Basic Law.

 

Our other great strength, our deepening economic integration with the Mainland of China, has also given us advantages no other economy can match. That includes CEPA, our free-trade pact with the Mainland. Thanks to CEPA, Hong Kong companies - and the UK companies that set up in Hong Kong or partner with Hong Kong - have preferential access to the vast markets in the Mainland of China.

 

China impact

How about the slowdown of economic growth of China? I know you might ask. The Economist magazine, after all, has a cover report entitled the "Great Fall of China" recently. But let's keep that in perspective. Last week, the World Bank cut its 2015 growth forecast for the Mainland to 6.9%, from its previous estimate of 7.1%. Next year's World Bank growth forecast for the Mainland is now set at 6.7%.

 

I think most European economies - indeed, most economies anywhere including Hong Kong - would gladly toast to numbers like that.

 

The point is that Hong Kong's deepening relations with the Mainland of China will continue to yield economic and financial opportunities - today, tomorrow and for the long haul.

 

Renminbi businesses

Take, for example, the growing popularity of the use of Renminbi. We are the world's largest offshore Renminbi centre. Renminbi deposits and certificates of deposit in Hong Kong, at the end of August, were worth about one trillion yuan. Last year, the Renminbi handled by banks in Hong Kong totalled about 6.3 trillion yuan. That's a year-on-year increase of 63 per cent. Hardly loose change.

 

Earlier this month, the Renminbi passed the Japanese Yen to become the world's fourth-most-used currency for payment. Hong Kong manages some 70% of that global Renminbi payment. You can see how huge the profit arising from our economic integration with the Mainland is.

 

Hong Kong, I should add, is the first place outside the Mainland to develop a Renminbi bond market. We call it the dim-sum bond market. Yes, even finance sounds better when it's twinned with food, Hong Kong's other great passion.

 

On the Renminbi, I am pleased to see that the London-Hong Kong Renminbi Forum will meet in Hong Kong in December - the fifth such meeting of the private-sector led Forum. Launched in 2012, the Forum was created to strengthen co-operation between Hong Kong and London in the development of the international Renminbi business.

 

Let me add that the City of London and Hong Kong - two of the world's great financial centres - plan to collaborate on innovative financial areas such as green finance and financial technologies - better known these days as FinTech. My Secretary for Financial Services and the Treasury was in London, in May, to talk about FinTech with senior government officials, financial regulators and pioneering FinTech companies.

 

Belt-Road initiatives

Ladies and gentlemen, let's turn to something even weightier and mightier. Few global projects are bigger in scale, in ambition and in potential payoff than the Silk Road Economic Belt and the 21st Century Maritime Silk Road - a twinned initiative recently launched by President Xi Jinping.

 

The "Belt & Road", as they are collectively known, promises nothing less than the opening up of economic, political, infrastructural and cultural ties among more than 60 economies on three continents.

 

The "Belt & Road" will, of course, have its share of detours and roadblocks. Among other things, its countries have economies at disparate stages of development. Their resources and their cultures can vary widely, too. What they need is an intermediator.

 

HK as super-connector

Hong Kong has long excelled in bringing a world of people together, to invest and trade, to do business and exchange ideas, to change the world. We will, I'm confident, do the same with the "Belt & Road".

 

It begins with our status as the super-connector linking the Mainland with the economies of the "Belt & Road". Hong Kong has the busiest cargo airport in the world, and the third-busiest international passenger airport, after Dubai and Heathrow. Today, more than 100 airlines operate some 1,100 flights every day between Hong Kong and about 180 destinations worldwide. Equally busy, our port serves more than 500 destinations worldwide. And we are well-connected, by road and rail, to Guangdong Province and the Pearl River Delta.

 

We'll be even better connected, with the completion of several key infrastructure projects in the coming few years. One of them is the building of the third runway of our airport. The challenges we face are familiar to London, except that we have to take care of dolphins in the neighbouring waters. Upon completion of the project, expected in 2023, the airport will be able to handle about 100 million passengers and nearly 9 million tonnes of cargo annually by 2030. That would bring increases of some 60% and 100%, respectively, from current levels. Our efficient, high-quality and sophisticated transport infrastructure will no doubt cement Hong Kong's position as the "Belt & Road"'s maritime, aviation and logistics hub. And it means more opportunities for British companies to explore.

 

And it's not just hardware. I also see opportunities in software. We are blessed with a pool of multilingual, multicultural and multitalented professionals in a wide spectrum of industries. Banking, financing, accounting, law, dispute resolution, construction, infrastructure management, trading, logistics, ICT, and so on. We are in the process of establishing a Maritime Authority so that we could co-ordinate the development of our maritime services industry - a sector that Hong Kong would definitely benefit from British participation. All these make Hong Kong the most desirable headquarters backup hub and global operational support centre, as well as an ideal training centre, for the "Belt & Road".

 

Grasp opportunities

So I suppose my point is obvious enough. Hong Kong, combining the advantages of "one country" and "two systems", our institutional strengths, advanced infrastructure and first class services, will become the magnet for businesses in the "Belt and Road". British companies shouldn't miss these opportunities. We welcome you to join us, to partner with us.

 

And not just opportunities for profits. There will be opportunities for bigger and better collaboration - I am talking about the people-to-people links in the "Belt & Road". Our future counts on people. Understanding among peoples is a crucial foundation of the "Belt & Road" initiative. Well, Hong Kong's greatest strength also happens to be its people.

 

We have a highly experienced, connected and outward looking workforce. We have long-standing relationships with the world, through family bonds, business ventures, and through our students abroad. Hong Kong's freedom, openness, diversity and safety have made us an international centre for people-to-people exchanges. And with the development of the "Belt and Road", we see opportunities to initiate more people-to-people exchanges and promote friendship among peoples, leveraging on our experiences and strengths.

 

The Hong Kong SAR Government's aim, is to turn Hong Kong into a platform of facilitating understanding and fostering friendship among peoples. Peoples coming from not only "Belt and Road' countries, but from all over the world. This is in fact what we have been doing for over a century, bringing the West to the East, and the East to the West. To our young friends in other parts of the world, we are the only Chinese city that offers university courses in English.

 

Four weeks ago, I made an official visit to Indonesia, a country of 250 million people, and met separately with the President and Vice President. One of the follow-ups is education. Already we host 300 Indonesian students in our universities. We see good potential in the future as more students want to study in Hong Kong, China, in English.

 

Hong Kong will remain welcoming - our border pretty open, and more importantly, our minds very open.

 

Chief Executive CY Leung gave these remarks at the annual dinner of the Hong Kong Trade Development Council in London.

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