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The following is a speech by the Financial Secretary, Mr Antony Leung at the Hong Kong Association of New York Breakfast Meeting today (February 1, New York time):
Distinguished guests, ladies and gentlemen,
Good morning. I can think of no better way to start the day than being among good friends and supporters of Hong Kong, and fortified along the way with New York's famous coffee and American breakfast. I could smell the coffee all the way
across town from the Waldorf!
This is my first visit to New York since taking up the post of Financial Secretary at the start of May last year. And I hope it will be the forerunner of many more as we continue to build strong links between our two great business capitals.
As you probably know, I'm no stranger to New York. I have some very close friends here from my earlier days as a banker. Indeed, I would have been here last year but for the horrific terrorist attacks on New York and Washington on September 11. And I would like to add my words of sympathy and comfort to those who have suffered as a result of that outrage.
Can I just say here, that the Financial Action Task Force on money laundering, which expanded its mission last October to combat terrorist financing, has just completed its plenary meeting in Hong Kong. At the meeting, countries around the world reaffirmed their commitments to strengthening their capability in detecting the sources of terrorist financing and cutting off their supply of funds. Hong Kong, as the current President of the Task Force, is playing a leading role in this endeavour.
I know it may take a long time before the physical and emotional scars of that tragic September day could be totally erased. But, like the people of Hong Kong, New Yorkers are very resilient and life will return to normal.
At the moment, Hong Kong people are drawing on every ounce of that renowned 'can-do' spirit as we work our way through the global economic downturn. It is hitting our region hard, particularly a highly externally-oriented economy like ours.
Those of you who keep a watching brief on Hong Kong will know that our unemployment rate has now crept above six per cent - not especially high in many parts of the world, but exceptional for Hong Kong. Companies have been downsizing as orders decline. We in the Government are looking at ways we can be smaller and more efficient, and allow the private sector to take a bigger share in the delivery of public services. Economic restructuring as a result of globalization, the advent of a knowledge-based economy, and the rapid economic integration with the Mainland of China, have exacerbated our position.
But all of these challenges bring opportunities, so it would be extremely unwise to be writing off Hong Kong and the region. We have a lot going for us. We still enjoy very high per capita GDP by international standards. Our overall savings are at a high level. Our economy is doing better than many other places in Asia. And it will pick up, just as the economy here in the United States will improve. And I was heartened by the latest US consumer confidence report. Our own problems mirror a familiar set of circumstances that much of the world is coming to grips with.
In Hong Kong's case, there are a number of positive factors that will add to our fundamental strengths as Asia's world city. First and foremost, China's accession to the World Trade Organisation will strengthen Hong Kong's intermediary role, not diminish it as some people think. Hong Kong is, and will continue to be, a conduit for trade, investment and communications between the Mainland of China and partners around the globe. A friend summed up the position of Hong Kong very aptly, when he said that, "Hong Kong is the best place in the world for China to enter the world market, as well as the best place in China for the world to enter the China market."
A more liberal and rules-based trading regime in China will spur a greater number of enterprises, especially small and medium-sized companies, to engage in foreign trade. These companies with little or no international experience will look to Hong Kong for intermediary services. Why? Because over the past two decades Hong Kong's entrepreneurs and businesses have built up an enormous amount of knowledge and contacts in China. They can help facilitate foreign direct investment and also help take Mainland products and companies onto the world stage. The same will happen to companies coming from the other direction to trade and do business with an ever-burgeoning China market.
China's WTO membership also holds out the potential of large-scale investment in the services sector. As the China market becomes more mature and sophisticated, the demand for professional services will continue to rise. Hong Kong is well positioned to capture opportunities in areas such as the legal profession, accounting and auditing, finance, advertising and marketing, education, healthcare, architecture, construction and management - virtually the full spectrum of professional services.
Another trend will be the greater flow of funds into and out of the Mainland. This will include Chinese enterprises wanting to raise funds in the international market. Hong Kong's advanced banking and securities markets are set to play a major role in this area because we offer a unique product - a freely convertible and stable currency, with no restrictions on capital movement, low taxes, high standards of corporate governance, and a tried and trusted legal infrastructure.
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. That's why we are determined to facilitate the flows of people, cargo, capital, information and services between Hong Kong and the Mainland.
We are taking initiatives to expedite travel across the boundary and pushing ahead with plans to smooth the flow of talented people into Hong Kong to maintain a top quality workforce. In doing all this, we will carefully protect the advantages and strengths we enjoy under 'One Country, Two Systems'. And we are doing more to link the Mainland with the world by making even better use of our excellent transportation facilities and the high productivity in the Pearl River Delta - the engine-driver of southern China with a combined population close to 50 million and annual GDP growth of over 10% for the past decade.
Taking this a step further, we are exploring a Closer Economic Partnership Arrangement with the Mainland. This is an exciting proposal but, as you can imagine, a complex one that will require many more meetings like the one I had in Beijing just last week. Such an arrangement, under the relevant WTO rules and the 'One Country, Two Systems' principle, would further promote trade, investment and service flows. I believe it would be a win-win situation for Hong Kong and the Mainland and help sustain our economic growth. We will work actively with our Mainland counterparts, starting with the less difficult areas, with a view to achieving continuous progress.
So, does this mean we are putting all our efforts into closer economic ties with the Mainland to the exclusion of our traditional links with the rest of the world? The short and firm answer is: 'No'.
Obviously we need to ride the wave of opportunities stemming from China's WTO membership. But Hong Kong has always been an outward-looking community. Our small size and lack of any natural resources have dictated that we have had to trade with the world to survive. We have done this very successfully over the decades while developing a service economy that has pushed Hong Kong into the top 10 of world trading entities.
We continue to be the city of choice for companies wanting to set up regional headquarters or offices, with over 3,200 of them as at mid-2001. We are becoming more competitive as costs, particularly those for housing and office rents, become lower. And we have the most stable currency in the region - a Hong Kong Dollar that has operated under a linked exchange rate with the US dollar since 1983. A link we have no intention of changing.
Our position as a Special Administrative Region of China gives us tremendous leverage as a facilitator between China and the West. We have an important role to play in the development of our nation. We can do this by drawing on our much-cherished institutional strengths of a civil society - the rule of law, the free flow of information, a level playing field for business, a low and simple tax regime, a clean administration. On top of this, we will be adding more value to what we are doing in a number of key areas such as financial services, logistics, business services, design and tourism.
We know that human capital is the most precious resources in Hong Kong, and the most important asset in a knowledge-based economy. Thanks to our liberal immigration policy and our low tax rates - employees pay a maximum of just 15 per cent salaries tax - we have been able to attract highly-qualified professionals from all over the world. We will strive to attract more in future. At the same time we are also increasing our investment in education which has increased by 46% in the past five years.
These will be the cornerstones of our future. We are determined that Hong Kong will benefit substantially from the continued opening up of the China market. We will continue to nurture and promote our role as a regional player in Asia, a location where international corporations naturally look for the expertise, infrastructure, facilities and policies required for the efficient transaction of global trade and investment.
In other words, the best place to do business. Hong Kong is that city.
Thank you.
End/Friday, February 1, 2002
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