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Following is a speech (English only) by the Chief Secretary for Administration, Mrs Anson Chan, at the business luncheon in Vancouver co-organized by the Hong Kong Economic and Trade Office, the Hong Kong Trade Development Council, Hong Kong-Canada Business Association (Vancouver) and the Vancouver Board of Trade on Thursday (June 17, Vancouver):
Mr. Turner, Ms. Mau, Senator Carney, Senator Poy, Mrs. Leung, Mr. Farnworth, Mayor Owen, distinguished guests, ladies and gentlemen,
It is a delight to be back in beautiful Vancouver - with its stunning backdrop of harbor and mountains, something that Hong Kong shares with your city. It reminds me of Hong Kong.
Every visit here reminds me of the tremendous bonds between our two communities. Canadian Consular officials in Hong Kong have had told me that they have your country's busiest overseas passport office, overtaking London a couple of years ago. In a five-year cycle, more than 75,000 passports have been issued through Hong Kong.
There are now more than 300,000 people living in Canada who were born in Hong Kong. At the same time, there are some 150,000 Canadian citizens living in Hong Kong. Many of these are people who had emigrated to Canada but have returned to Hong Kong to work. I also believe that Chinese is now the third most spoken language in Canada, and that some high schools offer mandarin as an optional course.
I mention these facts and figures to illustrate the depth of the people-to-people interaction between our two communities; the bonds of family and friends that span the Pacific. Of course, on top of all this we have our economic links. Last year total trade was worth some C$6 billion, slightly down on the previous year and obviously due to the on-going economic downturn in East Asia. Continued strengthening and expansion of economic links is clearly in both our interests. The promotion of stronger economic ties is of course, one of the reasons why I am here today.
Another is to give you an update on how Hong Kong has managed since reunification in 1997. In only two weeks, we will celebrate our second anniversary as a Special Administrative Region of China. The past two years have been very eventful. For all of us in government, it has been a time of great challenge. But it has been a rewarding time as well. The biggest challenge, without a doubt, has been managing change. And there have been two fundamental changes - one political, the other economic.
Our reunification on July 1st, 1997, could not have gone more smoothly. It was a virtually seamless transition for the administration. Hong Kong people have taken that change in their stride and are moving ahead under the concept of 'one country, two systems'. Hong Kong people are running Hong Kong with the high degree of autonomy promised under our mini-constitution, the Basic Law. The challenge then, as it is today, is how to fully and successfully implement this unique concept.
As you can imagine, it is a new journey for all of us. Today, nearly two years on, we have accomplished a lot. And while we have had to contend with several important and difficult issues, we are confident that with the experience we have gained during the past two years, we will be able to continue our steady progress in implementing this cornerstone of our development as a Special Administrative Region.
The rule of law is the foundation of our success. Despite what some commentators might say, I can assure you that it is alive and well in Hong Kong. And to guarantee our future stability, we will ensure that the institutions which protect the rights of our citizens remain intact and continue to gain strength.
The second change we encountered has been the effects of the Asian financial turmoil. This was totally unexpected and, as it turned out, has had far greater impact than any other factor in our transition. It came rather inconspicuously, a day after the establishment of the SAR - on July 2, when the Thai baht was devalued. Within three months, Hong Kong had been engulfed by the Asian contagion. Over the past 21 months or so, we have had to manage financial turmoil and a sudden reversal of economic fortune. In August last year, speculators launched a severe attack on our currency, stock and futures markets. I am happy to say that we beat them off. It was for us, a matter of survival to maintain the integrity of our linked exchange rate to the US Dollar under our currency board system.
The fallout has deeply affected us in Hong Kong. Our economy shrank by 5.1% in 1998 - a dramatic turnaround from 5.3% growth in 1997. Unemployment has more than doubled to 6.3% - a great shock for a community used to an unemployment rate of 2.5% to 3%. Wages have been frozen or reduced. Property prices for residential units and offices have fallen by up to 50%. Rents are down by about the same amount, or even more. Deflationary pressure threatens to stall a resurgence in consumer confidence. And, five consecutive quarters of negative GDP is a situation with which we have never had to deal before.
But in the first five months of the year, there have been some promising signs. The property market has stabilized and there has been healthy buyer interest in competitively priced new units coming onto the market. This has been helped by a lowering of interest rates, and an easing of the credit crunch. Our government land auction in April - the first since a moratorium was introduced in June last year - attracted good buyer interest. The three lots on offer were sold at 20-30% above market expectations. The stock market has been more active, and rather more liquid than it was in 1998.
However, despite improving local and overseas sentiment, I believe 1999 will continue to be difficult. We have probably hit the bottom of the trough, but will stay at this level for some time. We expect, all going well, to see the economy begin to pick up towards the end of the year.
For us, the key has been how to manage this downturn. On the one hand, we realized that high inflation for much of the '90s, coupled with high property prices, had made Hong Kong uncompetitive. With such an open and externally-oriented economy we were heading for a correction anyway, the question was just when. But the financial crisis made that adjustment process all the more fast and furious.
On the other hand, we also needed to reform and realign our economy to maximize the benefits of recovery when they eventually come. This has meant reforming our securities and futures market and the whole range of financial services; and promoting high-tech, high value-added industries as part of our drive to become the innovation and technology center for East Asia and beyond.
Our plans to 'energize' Hong Kong involve some important changes in direction. We must diversify away from our former heavy reliance on property and stocks into new areas such as innovation and technology. This is vitally important in today's knowledge-based, global economy. Innovation and technology are the principal means of improving efficiency and productivity, adding value and enhancing overall competitiveness. But in going down this route, we are also mindful of the need to enhance our traditional strengths such as financial services, tourism, communications and trade. We are keen to see more small and medium enterprises start-up and flourish and have a comprehensive range of products and services - including financial packages - to support them in this quest.
We continue to open up our economy in areas such as telecommunications, where liberalization has brought healthy competition, a wider choice of services and, best of all, lower prices for consumers. A completely liberalized mobile phone sector has led to a big surge in the number of people using cellular phones - our penetration rate is now well over 50%, which I believe is the second highest in the world after Scandinavia. If present indications are anything to go by we may well take No 1 spot in the not too distant future.
We will dispose of a substantial minority stake of the Mass Transit Railway Corporation which will enable Hong Kong people and international investors to share in, and own, a successful and profitable operation.
We plan to be a leading city in the world for a number of initiatives, including the development and application of information technology, especially in electronic commerce and information services. A world center for the development of health food and pharmaceuticals based on Chinese medicine.
We are actively encouraging investment in high value-added and high productivity industries, but within the framework of our renowned free and open market philosophy. A philosophy firmly based on the premise of a level playing field for all. One that ensures maximum support and minimum intervention.
We have some exciting new projects falling into this category, which we hope and expect will generate considerable international interest. They include a proposed international high-tech multi-media and information services center known as Cyberport; a Science Park; and new projects to boost tourism.
The Cyberport, a joint venture between the government and the private sector, will create a center of high-tech talent where creativity will be enhanced by the 'cluster effect' of various professional disciplines working in close proximity. About 10 leading, international IT companies have already signed up as anchor tenants at Cyperport, while another 40 have registered interest in joining them.
Complementing Cyberport will be a new satellite Teleport being developed on Hong Kong Island that is due to come on line in 2000. Teleport is a vital component in attracting new telecommunications and broadcasting business following deregulation of the telecommunications market this year and in 2000. Together, Cyberport and Teleport will form a strategic digital communications corridor, which will act as a catalyst for the development of new digital media types and applications for TV, telecommunications and Internet.
A number of projects are being planned to consolidate Hong Kong's position as Asia's most popular international tourist destination. As a direct consequence of this, we have started intensive negotiations on the establishment of an international theme park on Lantau Island, just a stone's throw from our new airport. We recently appointed our first Tourism Commissioner, who is taking forward this initiative as well as a number of other exciting proposals including the development of an international wetland park, a cuisine training institute, and an Adventure Bay theme park. The Millennium will naturally enough, feature heavily in our tourism promotions next year. In the Chinese calendar, the year 2000 is doubly significant as it is also the very auspicious 'Year of the Dragon'. So if you are seeking good fortune in the new millennium, Hong Kong is the obvious location from which to pursue the spirit of the noble Dragon.
As you can see, we continue to build for the future. I once heard it said that Hong Kong is a great city - but it will be even greater once they finish building it! We are forging ahead with an ambitious infrastructure development program, which will cost some C$45 billion (US$30 billion) over five years. These projects will enhance our position as a regional transport hub, improve the quality of life for everyone in Hong Kong and create tens of thousands of jobs. We plan a significant expansion of our railway and strategic road networks, which will facilitate urban development, open up new tracts of land and eventually improve transport access into southern China and beyond. More than 600 hectares of new land will be formed for housing, commercial, retail and recreation purposes. A new container terminal is being built to consolidate our position as one of the world's busiest and most efficient port operators.
We have put a sharper focus on quality of life issues. We understand that our role as an international and cosmopolitan community relies on attracting and retaining the best international and cosmopolitan talents from around the globe. And to do that then we need to offer a lifestyle that promises not just commercial stimulation and ample reward for hard work and enterprise, but a pleasant and enjoyable living environment as well.
We know that our environment has deteriorated, despite large expenditure and policy initiatives to tackle some of the worst problems. Part of the problem is Hong Kong's high population density, which creates unique environmental pressures. In some older parts of our city we have population densities of 50,000 people per square kilometre, while the average urban population density is 27,000. Manhattan has a population density of about 9,000 per square kilometre, while it is something like 5,500 in Toronto. Our annual population growth of 150,000 is the equivalent of about one-fifth of Manhattan Island each year.
We are determined to tackle the problems of air and water pollution. There is a very strong commitment to this process from the Chief Executive down. One thing we are looking at is to create pedestrian zones in some of the more built-up areas. This will significantly reduce air pollution, as well as provide Hong Kong with several new and distinct pedestrian areas in prime shopping districts. We are also expanding our energy-efficient railway system with the aim to increase its share of total public transport patronage from the current level of 30% to 45%. Hong Kong's 18,000 diesel taxis will all be running on LPG in the future, instead of diesel. We are spending US$1.1 billion on a major sewage treatment scheme to significantly reduce water pollution in the harbour and waterways. We have a comprehensive plan to reduce by 60% the amount of waste sent to landfills by 2007. And we are planting more than half a million trees each year in urban areas and country parks.
These are just some of the initiatives and reforms we are undertaking now and for the future. The Asian financial crisis has hit us hard, but it has not stopped us in our tracks. Rather, it has been a wake-up call that has provided an opportunity to look at where we are going. To consolidate. To build on our strengths. To diversify into new directions.
We have an excellent base on which to start. The basic building blocks of our success are already in place and are guaranteed under our mini-constitution, the Basic Law. These include the rule of law, an independent judiciary, a level playing field for all who do business in Hong Kong, low and business-friendly taxes, a clean and efficient administration, a commitment to free and open markets, and the free flow of information, including a free and vigorous press. All these fundamental freedoms and incentives are built into our open and pluralistic society.
We remain a leading international financial, business and services center, a communications and transportation hub and we are constantly upgrading to expand our range of services and technological flair.
We are the pre-eminent gateway to the mainland of China. In this context, and despite the spill-over of the Asian financial crisis, the Mainland has continued to grow at a healthy pace. Last year growth was almost 8% and this year, the official growth target is a respectable 7% - by far the highest GDP target in the region. The Mainland still offers tremendous potential in terms of trade and investment.
As the springboard to the Mainland, Hong Kong has no equal. We have a unique cultural and constitutional access to its burgeoning markets. We have a huge reservoir of talent, knowledge and experience and decades of business interaction through joint ventures and cross-boundary trade and two-way investment. We are the largest 'external' investor in the Mainland and we have also seen increased investment from the Mainland in Hong Kong. As restructuring gathers momentum throughout the Mainland, Hong Kong's role as a facilitator of capital and expertise will increase.
Premier Zhu Rongji's visit to North America in April this year has increased the likelihood of a further opening up of the Mainland market now that China's entry to the World Trade Organization seems just a matter of time, notwithstanding recent difficulties in the US-China relationship following the bombing of the Chinese embassy in Belgrade. It is our view that China's membership of the WTO will provide all members with better market access, improved transparency and predictability of trade policies and measures. And as we are the Mainland's number one trading partner, we believe Hong Kong has a lot to gain.
We very much want to see China successfully assuming its rightful role in the world trading system. We strongly believe that market liberalization will bring about more business and trade opportunities. Our proximity to the Mainland and our unrivalled knowledge and experience of the Mainland market, coupled with our world-class business and financial services and excellent infrastructure, will all allow Hong Kong to play out its natural role as middle-man and gateway. China's accession will enhance our direct involvement in the economic development of the Mainland, as more sectors are open to foreign participation. We are well-prepared, and doing more, to make the most of the opportunities ahead.
This is perhaps a good point at which to remind you about Hong Kong's international attributes. Our history and the externally-oriented, trade-based nature of economy means that we are perfectly at home with the rest of the world and at ease with people from all parts of the globe. This has not changed since the handover. There are actually more foreign nationals in Hong Kong now than there were before the transition. The latest estimate puts this figure at close to half a million expatriates.
The Hong Kong government welcomes the international community with open arms and stays close to it in many ways. One of our most important groups is the Chief Executive's Council of International Advisers. It has on it people like Andre Desmarais, Jack Welch, Maurice Greenberg, Paul Volcker and Rupert Murdoch. They give us their counsel on our policies and strategic global economic issues.
Another is our International Business Committee set up in 1989, which I chair. This group addresses in a very frank but constructive way issues of concern to them and the community at large. All the foreign chambers of commerce are represented.
We work with the international community in practical ways, too. For example, we provide land so that they can build their own schools. Apart from the Canadian International School which has recently moved to new premises there are American, Australian, British, French, Swiss-German, Japanese, Korean and Singaporean schools in Hong Kong. Even the Norwegians have their own school.
Finally, I would simply like to say what we are doing in Hong Kong is establishing a distinct position for ourselves. We have looked at the roles of New York and London, which are not only the most cosmopolitan cities in America and Europe, but are also international financial centers, tourism destinations, headquarters for multi-national corporations and international communication and transportation hubs. Hong Kong has the potential to become a major city within one country, but the most cosmopolitan city in Asia. In other words - Asia's premier international city. We invite all Canadians.
Thank you.
End/Friday, June 18, 1999
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