Following is the speech delivered by the Secretary for Justice, Ms Elsie Leung, on Professional Services in Hong Kong, at the "Qingdao - Hong Kong Day 2002" in Qingdao today (July 26):
The Honourable Mayor Du Shicheng, Leaders of various provinces and cities, Director Leung Po-wing, Distinguished Guests, Ladies and Gentlemen,
It is a great pleasure for me to be here in Qingdao to attend the Qingdao __ Hong Kong Day 2002: Seminar on Professional Services organized by the Qingdao Municipal People's Government and the Office of the Government of the Hong Kong Special Administrative Region (HKSAR) in Beijing. This occasion gives me an opportunity to exchange views with all of you on promoting professional services and economic cooperation between Qingdao and Hong Kong.
Richly endowed by nature, Qingdao possesses a natural deep-water channel as well as a natural and good harbour rarely found in the Mainland. Being one of Mainland's five major ports for external trade, Qingdao is a mutlifunctional, modern and international port with a cargo throughput of a hundred million tons. In addition, Qingdao has achieved tremendous developments in economy and trade. In recent years, the setting up of "Qingdao High-Tech Industrial Park" and "Qingdao Technology Development Zone" in Qingdao has quickened the pace of economic and technological development. Apart from having good economic foundations and development potentials, Qingdao also abounds with natural resources, picturesque scenery, and talented people. As this remarkable city is going to assist in staging the 2008 Beijing Olympics, we believe that economic growth will be further stimulated and its leading economic position in the region of Bohai Wan will be further strengthened.
China's accession to the World Trade Organization (WTO) marks the further opening of the economic and trade market in the Mainland and the integration of its economy with the global economy. On the one hand, trade obstacles encountered by Mainland enterprises in entering the market will gradually be removed, thereby creating more rooms and opportunities for development. On the other hand, Mainland enterprises will have to face direct competition with imported products and goods and services in the domestic market, and many of the competitors are multinational enterprises with a large capital. Given the rich resources and favourable economic conditions of Qingdao, the potentials of Qingdao can be developed to the fullest with the support of the relevant professional services. Moreover, in recent years, the focus of global competition has gradually shifted from goods and prices to production and services. Hong Kong economy is the most service-oriented in the world, with local services accounting for more than 85% of its gross domestic product. As a service centre, Hong Kong is able to provide a full range of services to meet various business needs. Besides, various environments and practices of the international market are in operation. Hong Kong is thus at a relative advantage.
Therefore, Qingdao and Hong Kong are long-term economic partners. We aim at complementing and reinforcing each other by exploring our area of cooperation, upgrading the level of cooperation, furthering the results of cooperation and integrating the advantages of the two places. Through this seminar, we attempt to explore together new channels of cooperation between the two places in the area of professional services. We welcome any valuable opinion from all of you.
Today, I am going to give a brief account of four types of professional services in Hong Kong. First, I would like to talk about the legal professional services in Hong Kong with which I am most familiar.
The legal profession in Hong Kong is made up of barristers and solicitors. The wide-ranging professional services offered by the two branches of the legal profession could be broadly classified into litigation and non-litigation. Customers for legal services are of two major types, viz enterprises or organizations and individuals. While solicitors in Hong Kong generally provide a full range of legal services, including providing advisory services, drafting documents and executing contracts, barristers are more specialized in litigations.
As far as finance, securities, loans, investment, international trade, information technology, intellectual property and commercial contracts are concerned, the laws of Hong Kong have all along been in line with international practices, and courts in Hong Kong have wide experience in handling this kind of cases. At present, there are approximately 6 000 solicitors and barristers in Hong Kong, including 60 Senior Counsel and around 300 Government Counsel of the Department of Justice. In Hong Kong, there are some 600 registered foreign lawyers from 19 jurisdictions, and among them, more than 250 lawyers are practising in registered foreign law firms while the rest are practising in local law firms.
Up to July, 38 local law firms have established offices in the Mainland, offering professional services about Hong Kong legal affairs in major areas such as financing, listing, international trade, infrastructure projects, intellectual property, etc. Some law firms in Hong Kong have been working closely with law firms in the Mainland. I am extremely delighted with the efforts made by the two legal professional bodies in actively enhancing their professional exchange and liaison with the legal profession in the Mainland.
In order to provide Hong Kong and the Mainland with a more favourable environment for dispute resolution, the HKSAR Government has, upon reunification, implemented an arrangement for reciprocal enforcement of arbitral awards between the Mainland and Hong Kong. Since 1 July 1997, although the New York Convention continues to apply to Hong Kong, this international convention is no longer applicable to arbitral awards between the Mainland and the HKSAR. An agreement was reached by Hong Kong and the Mainland authorities in June 1999 to put in place a mechanism by which arbitral awards made in the Mainland and the HKSAR would be mutually enforceable in their respective courts. This arrangement aims to reflect the spirit and the principles of the New York Convention. Along this line, the HKSAR Government amended the Arbitration Ordinance in January 2000 for implementation of the arrangement. The arrangement is well received and widely welcomed by investors and the legal profession since operation.
Hong Kong, with its many attributes including the following, is well equipped to be one of the leading legal services centres in the Asian-Pacific region-
1. we have a sound legal system;
2. we have adopted the common law principles which are widely recognized and known by the international business sector;
3. we have a common language and shared cultural background with the Mainland, our very essence being a blend of the best of the east and west, and there is no communication barrier between the Hong Kong legal profession and their clients and counterparts in the Mainland;
4. we have a wealth of English-speaking legal practitioners and internationally renowned arbitrators specializing in litigation and arbitration services; as well as Chinese-speaking ones with knowledge of China, market operation in the Mainland and China law who are experienced in handling the negotiation, drafting and signing of contracts and ancillary instruments such as letters of guarantee and security required for transactions in the Mainland;
5. Hong Kong is a world centre of expertise in commerce, finance, information technology, shipping and construction, with an enormous pool of experienced professionals, including financial consultants, bankers, accountants, architects, engineers and insurance experts offering specialist advice and assistance in dispute resolution;
6. we have an ideal geographic location. It is convenient as Hong Kong lawyers and Mainland investors would not be required to travel a long distance to China or Hong Kong to conduct business;
7. we have a combination of superb infrastructure, first rate communication and transport systems and excellent choices of accommodation;
8. we have a judiciary which is widely recognized to be judicially independent and of internationally-accepted standard and we have established a solid foundation of the rule of law; and
9. we have put in place a well operated and successful Hong Kong International Arbitration Centre; the some 300 awards made annually by the Centre are mutually recognized and executed in both the Mainland and all contracting parties to the New York Convention.
I would like to point out specifically that Hong Kong companies can be used by foreign as well as Mainland investors as an investment vehicle; and that in joint venture agreements and contracts, a clause for the settlement of disputes can be included to stipulate that Hong Kong law be used as the applicable law and that Hong Kong courts and arbitral institution be used as the forum for dispute resolution. For these purposes, the HKSAR Government is presently actively participating in the following negotiations-
1. the Hague's negotiation for a new multilateral treaty on jurisdiction of civil and commercial cases and on mutual enforcement of judgments with other countries;
2. negotiation for the setting up of a mechanism on the mutual enforcement of court judgments between the Mainland and the HKSAR;
3. discussion with Mainland authorities on arrangements to facilitate the setting up of offices in the Mainland by Hong Kong legal practitioners; and
4. discussion with the Mainland to forge a closer economic partnership arrangement (like the setting up of a free trade area under the WTO rules) in which the provision of legal services is included.
In a moment, the Chairman of the Hong Kong Bar Association and the President of the Law Society of Hong Kong would deliver talks on the work of the lawyers in Hong Kong. With the joint effort of the Hong Kong legal profession and the SAR Government, I hope we can provide a more wide-ranging and professional legal service to meet the challenge of the 21st century. Now, let me introduce another professional service: the accounting service of Hong Kong.
At present, there are about 3 062 certified public accountants with practising certificates in Hong Kong. Of the members of the Hong Kong Society of Accountants, about 30% are engaged in audit-related jobs, 48% work in industrial and commercial enterprises and 9% are employed by the government. The remaining 13% are engaged in other trades.
Regarding the accounting establishments in Hong Kong, there are a total of
1058 accounting firms and 106 corporate practices. While these accounting firms include the top four international accounting firms and some other international accounting firms, the majority are small and medium local accounting firms. Currently, over 95% of the accounting firms and corporate practices in Hong Kong have less than five partners.
Apart from the Hong Kong Society of Accountants, there are many other accountancy bodies in Hong Kong, including local branches of overseas professional bodies. For example, both the Association of Chartered Certified Accountants and the CPA Australia have founded branches in Hong Kong. Many local professional accountants have obtained the required qualifications to be members of these overseas accountancy bodies. They are well versed in the accounting standards of these countries and enjoy good connections with their overseas counterparts.
Accountants are indispensable in the commercial activities in both Hong Kong and the Mainland and a sound accounting system can ensure good management of enterprises.
At present, the role of Hong Kong accounting firms is no longer confined to providing accounting and auditing services. They also play an important part in the financial market. Their services range widely: from capital financing, capital formation, management consultancy, taxation, receivership to IT application, gathering information on overseas markets, takeover and merger, business restructuring, design of finance and internal audit systems and staff training. Hong Kong accountants are familiar with the legal standards and practices of international businesses. In fact, the accounting and auditing guidelines issued by the HK Society of Accountants follow closely the recognized international standards. Hong Kong accountants are conversant with the rules of the games in the international financial market and are very experienced in this respect. Thus, they are well placed to contribute to the development of the financial market in the Mainland.
Mainland accountants are familiar with the laws and practices of the accountancy and businesses in the Mainland. They have good connections with the enterprises too. The accountancy profession in Hong Kong and its Mainland counterpart can collaborate to create more business opportunities to their mutual advantage.
Hong Kong accountants can serve as a bridge between the international capital market and the Mainland enterprises. They can help to introduce sophisticated accounting and financial management system, enhance management quality of the Mainland businesses and boost the investors' confidence. Furthermore, they can assist the Mainland enterprises in entering the international financing market, financing development projects through public listing and to enhance the strength of enterprises for further development.
More than 30 accounting firms in Hong Kong have forged links with their counterparts in the Mainland. Some of them have either set up branch offices in the Mainland or formed joint ventures with their Mainland counterparts. In addition, Hong Kong accountants have assisted the successful listings of many large scale Mainland enterprises in Hong Kong, including China Mobile, Shanghai Petrochemical Co. Ltd. and China Petroleum and Chemical Corporation. In a moment, the President of the Hong Kong Society of Accountants would give a talk on the kind of assistance offered by the accounting sector regarding financing and investment promotion.
Construction Works Services
In respect of construction works, the HKSAR Government has always placed high priority on infrastructural development and poured in heavy investment every year. For the year 2001 alone, the completed development projects were worth a total of HK$110 billion. Other large scale infrastructural projects being built or in the planning stage include Science Park, South East Kowloon Development, Cyberport, Hong Kong Disneyland and Shenzhen Western Corridor.
Recently completed major infrastructural projects have won many international awards. For instance, the Hong Kong Convention and Exhibition Centre has been voted "one of the world's ten best convention and exhibition centres" for successive years. In addition to setting the record as the world's longest suspension bridge of its kind, Tsing Ma Bridge, together with the new Hong Kong Chek Lap Kok Airport, was voted one of the Top Ten Construction Achievements in the 20th Century by an influential group of US construction industry executives and editors. The passenger terminal of the new Hong Kong Airport was also awarded the 1999 Structural Steel Design Award in London. In 2000, the Hong Kong Garden at Kunming International Horticultural Exposition won the British Institute of Architectural Technologists Open Award for Technical Excellence in Architectural Technology.
These awards signified the brilliant achievements of Hong Kong construction works sector in infrastructural development. The accolades they won should be credited to various professionals in the construction sector who have worked together to bring about the successful completion of these projects. They are the engineers, architects, surveyors, planners and landscape designers of contractors and consultants. With the rapid development over the past few decades, the professionals in the Hong Kong construction industry have acquired much international experience, sophisticated technology and trained many excellent talents for the industry. Both Hong Kong and the Mainland can benefit from closer cooperation across the border. In the process of implementing infrastructural projects, Hong Kong construction professionals can, through practical interaction with Mainland enterprises and by taking advantage of quality construction staff and low construction cost in the Mainland, promote the long term development of the construction industry in the Mainland. In particular, they can make important contribution to the integration of the Mainland construction industry with the international construction market. In a moment, a representative from Hong Kong construction sector will give a talk on the role they can play in tendering and other related business, and a representative from Hong Kong Coalition of Professional Services will brief on the structure and function of their organization.
Finally, I would like to turn to the financial services in Hong Kong. With its sophisticated telecommunications network, favourable geographical location, sound financial system, free capital flow and transparent investment environment, Hong Kong has developed into a major international financial centre and made many achievements. For instance, Hong Kong is the ninth largest banking centre and the eighth largest stock market in the world. It ranks second as one of the top syndicated loan centres in the region. It is also the most intensive market for approved insurance companies and the premiere centre for venture capital in Asia next to Japan.
Hong Kong has a sound financial system and has weathered through the Asian financial turmoil with its solid foundation intact. The Political and Economic Risk Consultancy's survey report on the global banking system released in February 1998 after the Asian financial turmoil rated Hong Kong as the first among the regional banking systems in terms of overall performance in the aftermath of the financial crisis. Thus, it can be seen that Hong Kong financial sector is built upon a very sound foundation.
Hong Kong comes second after Japan as the source of foreign banks that open branches in the Mainland. Banks operating in Hong Kong also provide various offshore services for Mainland enterprises, including various lending and insurance services. They also help to raise capital for projects that range from major infrastructural projects to hi-tech and high risk ventures.
Of the four largest commercial banks in China, the Industrial and Commercial Bank of China, the China Construction Bank and the Agricultural Bank of China have followed the Bank of China to open branches in Hong Kong. This enables them to capitalize on the advantage of Hong Kong as a financial centre to expand their business network and promote closer cooperation between Hong Kong and the Mainland in the banking industry.
The securities market of Hong Kong is the Asian hub for global capital. Throughout the process of modernization of infrastructure and reform of state-owned enterprises in China, Hong Kong has played an important role in raising capital. Over the past decade, the number of companies listed in the Stock Exchange of Hong Kong has increased from less than 300 to over 700 with a total market value of nearly US$ 500 billion. More than 40 Mainland's state-owned enterprises have listed and raised capital on the Main Board of the Hong Kong Stock Market.
In late 1999, the Stock Exchange of Hong Kong went further to introduce the "Growth Enterprise Market" (GEM). The purpose was to attract companies lacking long term profit-making records but having unique business concepts and good development potentials to raise funds in Hong Kong, thereby encouraging enterprises to develop and invest in new hi-tech businesses. This undoubtedly provided emerging enterprises in the Mainland with more flexible means to raise funds.
In 1996, for the first time, an enterprise in the Mainland issued convertible bonds in the total value of US$200 million in Hong Kong, setting a precedent for Mainland enterprises to raise funds in Hong Kong by means of bond issue. In addition to offering channels for the raising of funds such as listing and bond issue, Hong Kong is also the largest venture capital fund centre in Asia next to Japan, with as many as 600 professionals in venture capital managing more than 30% of the venture capital fund in the region.
Hong Kong's financial institutions are apt at providing a basket of excellent services covering every corner of the world. They are, indeed, Mainland enterprises' best doorway to the international capital market and the most favourable business partners to cooperate with. Quality services need the input of the experts and the Chairman of the Hong Kong Professional Consultants Association would brief you on the services they provide.
As you are aware, Hong Kong and the Mainland share the same culture and language and their people are of the same race. Owing to cultural and geographical reasons, Hong Kong is in a more advantageous position. We hope that, with the joint effort of the Qingdao City and the HKSAR Government, Hong Kong's professional service sectors could have the opportunity to take an active part in the development of the economy and the professional services market of Qingdao City on a mutually beneficial and complementary basis. This includes the Olympic Games project, which is a major undertaking of our nation. We hope that we could work harder for the development of our country and Qingdao City as well as for a better future of Hong Kong.
The HKSAR Government is in consultation with the Ministry of Foreign Trade and Economic Cooperation on the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland. Subject to the overarching principle of complying with the WTO rules, the proposed arrangement would promote cooperation between the Mainland and Hong Kong in the context of two different customs territories, eliminate the existing trade barriers and facilitate the flow of goods and services across the border. The arrangement must comply with Article 24 of the General Agreement on Tariffs and Trade (GATT) and Article 5 of General Agreement on Trade in Services (GATS). Both governments agree to adopt the approach of resolving the easy issues before tackling the difficult ones and to set up an expert group to study on the best way to capitalize on the one country feature in working out an economic partnership to our mutual advantage.
The Central Government has responded positively towards the CEPA proposed by the HKSAR. This is very encouraging. I must point out that while Hong Kong seeks the support of the Central Government for our proposal, we will definitely not ask the Central Government to contravene WTO rules and give Hong Kong special treatment. After all, the Mainland and Hong Kong are two different customs territories under the WTO. If we ask the Central Government to contravene the rules, this will render its accession to the WTO meaningless. In this respect, the attitude of the Central Government is not ambiguous at all. On the one hand, the Central Government gives staunch support to the SAR Government by encouraging the SAR to promote its services in the Mainland and to pursue actively the negotiation for the CEPA arrangement. On the other hand, the Central Government has also made it clear that it would strictly comply with the obligations for accession to the WTO. We intend to promote Hong Kong's professional services through cooperation with expert groups (including non-government organizations) and agencies such as overseas economic and trade offices and Hong Kong Trade Development Council. Such promotion activities include seminar like the one we have today. Our objective is to enable the commercial and various other sectors to have better understanding of Hong Kong's professional services, and to identify opportunities for cooperation that would be of mutual advantage. I am sure that when the CEPA arrangement is implemented, it will make all three parties winners: the foreign investors, the Mainland and Hong Kong which aims at establishing itself as a financial and trade centre in Asia.
I would like to point out here that the professionals from Hong Kong will not be engaged in vicious competition with their Mainland counterparts in any way. As stated in the agreement for China's accession to the WTO, China has made her reservation not to open the legal services market. Should there be disputes to be resolved in either the Mainland or Hong Kong, time-consuming travel can be avoided if lawyers from the two places can cooperate. By doing so, it would also be easier to ascertain where the crux of the issue lies while procedural delays could be avoided and the relevant legal issues could be fully argued. Actually, lawyers from the Mainland and Hong Kong could complement each other and help enhance each other's knowledge on the law of the two places so as to raise their service standard up to international level. As regards the other professional services, cooperation between the two places will surely result in more successful and more effective transfer of expertise than what we can get from foreign experts.
As a Special Administrative Region of the People's Republic of China, Hong Kong's role should not be limited to capitalize on China's accession to the WTO as this would only enable a handful of people to get rich. More importantly, we should make use of this opportunity to sharpen our competitive edge and re-vitalize our economy with the support of our motherland during the current economic downturn. By successfully restructuring our economy, we could walk out of our present predicament, and by joining hands with our fellow countrymen, we could make contribution towards the continuous development of our country, the well-being of the people and our country's leading role in the world's economic growth. We as Chinese people are proud to achieve all these.
Last but not the least, may I wish this seminar a great success. Thank you.
End/Friday, July 26, 2002