Following is the speech (English only) by the Financial Secretary, Mr Antony Leung, at the Hong Kong General Chamber of Commerce 8th Annual Hong Kong Business Summit today (December 13):
Ladies and gentlemen,
I am most happy to have the opportunity to address this distinguished gathering today.
Two days ago, the landscape of international trade changed forever. After 15 years of protracted negotiations, China has finally become a full member of the World Trade Organisation. Now, the WTO can really be called a "World" trade organisation. As the world's 5th largest trading entity (taking the European Union as a single entity), the progressive integration of China into the global economy will have significant implications for the entire world. To some extent, these have already been taking place in anticipation of the accession.
Implications for the Mainland economy
China's WTO accession will no doubt bring about substantial benefits to the Mainland economy. Much has been said about this by many others, and I do not need to go into details today. But just let me make a few observations. For example, WTO rules and discipline offer a consistent and transparent framework within which China will conduct trade with other members. China now has full recourse to the WTO dispute settlement mechanism that provides effective and objective redress to trade disputes within the multilateral framework. This will add certainty to China's trading environment.
Moreover, China can now enjoy "most-favoured nation", or MFN, treatment accorded by some 140 WTO members, including its major trading partners. Import tariffs on Chinese exports will be reduced significantly. Market access barriers will be much lower. And business opportunities will be greatly enhanced.
Opportunities usually come with challenges. China's accession to the WTO also means that her domestic manufacturing and service industries will be subject to keen competition from all over the world. However, in recent years, Mainland authorities have already been taking significant steps to adjust and adapt to the changing economic environment. It is more than evident that the leadership in Beijing is determined to move the Mainland economy into a more liberalised and transparent regime.
A more certain trading environment, wider market access, and a firm commitment to transforming the economy on the basis of internationally- recognised trading rules will encourage foreign investment. In particular, the opening up of the services sectors will offer huge investment potential. As the World Bank has estimated, China would probably become the world's second largest trading entity within the next 20 years, ahead of Germany and Japan. It has also estimated that by then consumers in China would also have a purchasing power larger than all of Europe.
Implications for Hong Kong economy
So what about Hong Kong in this big picture? I can speak with confidence that Hong Kong stands to benefit from the continued robust growth and further economic liberalisation in the Mainland. Indeed, the advantage of geographical proximity as well as a prominent hub-hinterland relationship has proved highly beneficial for both places. Just look at a few figures. In Guangdong, we have more than 36,000 Hong Kong-linked companies employing some five million people - the equivalent of 1.5 times the Hong Kong workforce, or 21 times our manufacturing workforce. Areas of investment range from electronic goods to toys, plastic products, computer manufacturing to catering, infrastructure development and the provision of services. Hong Kong remains the largest source of external investment in the Mainland, with cumulative investments of 181 billion US dollars, or about half of all external investment in the Mainland. Hong Kong entrepreneurs are the biggest external investors in every Mainland province, autonomous region and municipality. Wherever you go in China to do business, there will always be someone there from Hong Kong.
Compared with their Mainland counterparts, Hong Kong companies have generally more efficient operations, richer experience in the import/export and distributive trades, and better business networking with the rest of the world. Compared with those from overseas, Hong Kong people have much closer cultural and language links with the Mainland. Moreover, Hong Kong companies moved into the Mainland well ahead of others. They have accumulated extensive experience on how to do business in the Mainland. These entrenched advantages should enable Hong Kong companies to continue to secure a significant share of the liberalised trade in the Mainland.
Along with a more liberalised trading regime, more small and medium-sized enterprises in the Mainland will engage in foreign trade. These SMEs will find intermediary services available in Hong Kong very useful. Also, Hong Kong companies can capitalise on a well-established business network in the Mainland to help facilitate foreign direct investment into the Mainland, including through tri-partite joint ventures and other forms of business collaboration.
The opening up of the Mainland's service sectors such as trading and logistics, retail, distribution, telecommunications, finance, professional services, and travel and tourism will provide ample business opportunities for Hong Kong. Over the past years, many foreign companies have set up branches and representative offices in the Mainland. The business activities of these offices often needed support from the Hong Kong side. For many of these companies, their functional headquarters are in Hong Kong. As at June 2001, there were over 3,200 regional operations, representing a 7.9% increase over 2000. With China's accession to WTO, Hong Kong's status as the preferred location and regional headquarters for multinationals will be strengthened further.
Hong Kong's economic position as the region's premier financial, business and logistic hub can only be strengthened if we interact seamlessly with our hinterland. The Hong Kong SAR Government is determined to facilitate the flows of people, cargo, capital, information and services between Hong Kong and the Mainland. Some progress has been made but more will be done.
To maintain Hong Kong's attractiveness, we must capitalise on our strengths. Hong Kong has a well-established, efficient and mature financial market with no exchange controls and a fully convertible currency. It can be used as the base for the Mainland to raise capital and to conduct various sorts of financing activities, including offshore banking and the issuing of bonds. We also have the world's busiest container port and international airport, and the best quality infrastructure that enables us to be the prime logistics hub of the region. The practice of the Common Law system, and a respected legal system, provides Hong Kong with an ideal opportunity to act as China's legal services and arbitration centre. These are but some examples, and the list could go on.
I would like to add that in a knowledge-based economy, we must also strive to compete on the speed, quality and creativity of the services we offer. This points to the need for us to upgrade our human capital.
The Government is investing heavily in education reform and augmenting our higher education. We have also committed substantial resources to retraining and lifelong learning. These will remain our priorities. At the same time, we should grasp the opportunity of the further opening up of the Mainland to enable more talented Mainland people to come to Hong Kong to work, to do business here and to visit for leisure. We have already agreed on a number of improvement measures with Mainland authorities, including a more user-friendly business visa system for Mainland residents and the removal of quotas for Mainland tour groups coming to Hong Kong. We will continue discussions with Mainland authorities on ways to further enhance the "human flow" to Hong Kong. As announced by the Chief Executive in his Policy Address, we will also review our immigration policy to see how we can attract more talented people to Hong Kong to live and work.
Exploring the Mainland Market
Of course, apart from consolidating and strengthening our advantages, we must also proactively explore the vast market potential in the Mainland. While the business sector must obviously position itself to maximise opportunities in China following WTO accession, there are also increasing calls for the Government to do more to help business. In this respect, I have recently started an internal discussion with relevant departments and public organisations on the matter. I would like to share with you some of our current thinking.
To facilitate the economic integration with the Mainland, an effective government-to-government link is indispensable. Existing liaison mechanisms include the Mainland/HKSAR Joint Commission on Commerce and Trade, the Hong Kong/Guangdong Co-operation Joint Conference, and of course the HKSARG Office in Beijing. Moreover, the Chief Executive, the Chief Secretary for Administration and myself will meet with our Mainland contacts from time to time to discuss general or specific matters. This is in addition to the many contacts and meetings that our bureaux and department colleagues have with their Mainland counterparts on regular basis. In order to better focus our liaison work in the Pearl River Delta area, we will establish an Economic and Trade Office in Guangzhou next year. The office will also be able to provide assistance to Guangdong enterprises that may wish to invest in Hong Kong or seek business partners here.
In future, it will be useful to see how to co-ordinate our collective efforts. I have asked the Secretary for Commerce and Industry to look into the matter and come back with his recommendations in this respect.
Information collection and dissemination
Many people suggest that "information is power". I should add that "information means business opportunities". At the official level we maintain close contact with Mainland authorities to ensure the timely dissemination of the Mainland's trade and commerce policies. The Trade and Industry Department (TID) works closely with the Hong Kong Trade Development Council (TDC) to collect and disseminate news and information on the implications of China's WTO accession. Last month they jointly published a special supplement entitled "China's Accession to WTO - Embracing the Opportunities, Meeting the Challenges" to highlight China's commitments following WTO accession and their implications for business. It is a highly user-friendly publication and is a handy reference for all of us.
The Trade Development Council regularly organizes seminars and courses to help Hong Kong businesses to better understand the working of the Mainland market both in general terms and in specific sectors. The Council is also often involved in arranging exhibitions promoting Hong Kong brands and services in the Mainland. Recently the Council has enhanced its China Advisory Service with two Mainland experts providing advisory services to our businessmen wanting to set up business in China.
Both the Government and the TDC will certainly strive to further enhance the information collection and dissemination mechanisms. And we welcome your advice, as you are the users.
Support for the business sector
As I said earlier, it is primarily for the business sector to use your market sensitivity and business acumen to explore the Mainland market. But we are prepared to lend support and offer some financial assistance. For example, we have set aside 100 million Hong Kong dollars to establish a fund that will support, on an equal matching basis, projects to enhance professional service standards in Hong Kong and promote our professional services sector.
We have set aside 1.9 billion Hong Kong dollars to establish four funds to help SMEs in the areas of business installations and equipment, training, marketing and SME Development.
Collaboration with chambers of commerce
There is one particular area that I hope to work more closely on with the various chambers of commerce such as the HKGCC. During my recent visits to Shanghai and Beijing, I met representatives of the Hong Kong business associations there and listened to their views on how to further our existing collaboration. I also noticed that some foreign enterprises had the benefit of direct assistance from their chambers of commerce present in China. Indeed in some circumstances, especially when it involves commercial disputes, it may be more appropriate for the chambers rather than the Government to provide the necessary assistance. I will be discussing this with our business chambers in Hong Kong to see how we can take this matter forward.
Free Trade Agreement
I do not think I could possibly stop here without making some remarks on much closer economic co-operation, including a possible free trade agreement between HKSAR and the Mainland. As we have stated before, the SAR Government has been talking with the Mainland authorities on ways to further enhance the economic ties between the two places. Any options will have to be WTO-consistent and mutually beneficial. We are pursuing various options actively. I understand the HKGCC has started a study on how this should be taken forward and I look forward to receiving your study report.
Ladies and gentlemen, as I said earlier, our entrepreneurs have been laying the foundations for China's WTO entry for more than two decades. International businesses have been flocking to Hong Kong over the past three years to establish their own launching pad into the Mainland market, often with a Hong Kong partner or expertise. The Government is working closely with business in Hong Kong, and with the authorities in Mainland to facilitate a seamless interaction.
I am certain that China will make enormous strides forward as a country, and as an economy. We will continue to build on our strengths as the premier business, services, financial, logistics and tourism hub for China, the region and the rest of the world.
Thank you very much.
End/Thursday, December 13, 2001