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Following is the full text of a speech by the Secretary for Commerce, Industry and Technology, Mr Henry Tang, at the APEC Business Advisory Council (ABAC) luncheon today (August 8): (English only)
Distinguished guests, ladies and gentlemen,
Thank you Gordon for those kind words of introduction. It is a delight to welcome Chairman Prieto and all ABAC delegates to Hong Kong for this important series of meetings.
I am especially glad for this opportunity to share with you some of my thoughts about Hong Kong. This is my first opportunity as Hong Kong's new Secretary for Commerce, Industry and Technology to address such an influential and wide cross-section of the international business community. As some of you may know, our Chief Executive Mr Tung Chee Hwa has introduced a new accountability system for the senior officials in his government. The new system will make the top echelon of our administration more accessible and accountable to the public. And I am honoured to have been asked to play a role in Mr Tung's new cabinet and to contribute to Hong Kong's ongoing development through my work in this portfolio.
From an APEC and ABAC perspective, I suppose you could say I am just like a new kid on the block. But that doesn't mean I am unfamiliar with the neighbourhood. In my former capacity as a businessmen in the textiles and electronic sectors, I am abundantly aware of how tariffs and quotas and government red tape impede APEC's free trade creed.
From my personal perspective, and as one whose businesses have benefited from trade liberalisation, APEC means a lot to Hong Kong. This family of 21 member economies includes many of our major trading partners. Hong Kong's trade in goods with APEC members last year topped US$320 billion - that's about 82 per cent of our total trade. But APEC's importance to Hong Kong goes beyond tangible benefits.
Hong Kong's continued participation in APEC helps us to maintain our status as a world city. Not only that, it is a testimony to the successful implementation of the 'One Country, Two Systems' principle that has allowed us to continue charting our own economic, social and political course following our reunification with the Mainland of China in 1997. So, APEC is good for Hong Kong. And I hope that Hong Kong's participation is good for APEC. I shall certainly do what I can, in my capacity as Hong Kong trade minister, to build on the excellent rapport we have established with the other members of the APEC family.
Today, I would like to talk about one subject that is crucial to Hong Kong's long-term future. And that is, how we are positioning ourselves following China's accession to the WTO.
I know that all of you understand the enormous importance of this watershed in world trade history. China is now the world's fourth-largest trading entity. The World Bank estimates that, within the next three years, China's share in world exports will have risen from 3.9 per cent in 2000, to 6.3 per cent by 2005 - that's an increase of over 60 per cent. China is tipped to become the world's second or third largest economy within the next two decades. Obviously such a huge jump in trade volumes will present great opportunities, but also challenges to those economies competing for a slice of the export action.
For Hong Kong the opportunities and challenges are magnified because of the symbiotic economic relationship between our two economies. The Mainland is Hong Kong's largest trading partner, while we are China's third-largest after the US and Japan. Total merchandise trade between Hong Kong and the Mainland reached US$157 billion last year. Hong Kong is also the largest external investor in the Mainland, accounting for almost half - or about US$187 billion - the equivalent of about US$25,000 for every person in Hong Kong.
Ever since China adopted its open door policy in 1978, Hong Kong has been the prime gateway connecting the Mainland and the rest of the world. Now, people are asking whether that role will diminish following China's WTO entry.
I can answer that in one word: No. On the contrary, I believe that Hong Kong's role as a window for China will be enhanced.
Let me explain why. First, the 'bigger cake' theory. The bigger the cake, the bigger the portion, at least in absolute terms. The trade growth figures I have just mentioned illustrate that point well.
Second, is our fundamental strength, to use a real estate term, of location. We have the best deep-water port on the southern China coast. We are strategically located within a four-hour flying radius of all the key business centres in Asia, not to mention all of the major cities in China. No other city in China provides the same access for international and national businesses.
In addition, we are bolstering our transportation links with the burgeoning Pearl River Delta (PRD) region to enhance our economic interdependence and further strengthen the competitiveness of both Hong Kong and Guangdong businesses. The adjoining province of Guangdong is a major market in itself, with a population of about 70 million. The PRD has the highest per capita GDP in China. This prosperity has, in part, been fuelled by the relocation and expansion of Hong Kong's manufacturing base to the Pearl River Delta where about 36000 Hong Kong-lined enterprises employ some 5 million people - the equivalent of 1.5 times the Hong Kong workforce, or 21 times our manufacturing workforce.
To better focus our liaison work in the Pearl River Delta area, and to facilitate even closer business co-operation, the Hong Kong government has just last month established an Economic and Trade Office in Guangzhou. One of the office's first tasks will be to help Hong Kong businesses better understand the opportunities arising in Guangdong following China's WTO accession.
Continued trade expansion in the Mainland will generate a greater need for timely, efficient and advanced transport and logistics services. Hong Kong has thrived in these areas. Indeed, this is now the talk of the town about these new bridges and new ways to connect Hong Kong better with the Pearl River Delta. And Gordon is a very strong advocate of that. He has been buttonholing me all lunch about this new Lingding Yang Bridge to connect Macau and Zhuhai. And I must say I share his view. With minimum turn-around time, we operate the world's busiest and most efficient container port and we lead the world in international air cargo throughput. Our service providers are continually upgrading their services to provide even greater value for their customers by focusing on speed, cost, efficiency, sophistication, and tailor-made logistics solutions required by an increasingly complex and demanding market.
The growth in these services has mirrored the growth in manufacturing by Hong Kong-linked companies in the Mainland, notably those in the PRD that I have just mentioned. Hong Kong entrepreneurs were practicing 'globalisation' long before it became a buzz word. Raw materials have been sourced from around the globe and turned into products at manufacturing bases in the Mainland for almost two decades. Hong Kong concerns have become adept at cross-border, cross-cultural and trans-continental supply chain management. At the same time, Hong Kong has remained the nerve centre for the higher value services such as R&D, design, marketing, legal services, insurance and financing.
In regards to financing, China's entry into the WTO will undoubtedly lead to greater capital flows into and out of the Mainland. More overseas enterprises will be looking to establish a foothold in the Mainland market. Similarly, more Mainland enterprises will be looking to raise funds in the international market. We are well prepared to play a major role in this area, and the recent Bank of China listing on the Hong Kong Stock Exchange is a prime example.
Indeed, since the middle of 1993, an increasing number of large state-owned enterprises in the Mainland have issued H shares in Hong Kong's stock market. By March this year, 50 such enterprises were listed on the Main Board, while nine have listed on our second board, the Growth Enterprise Market, since it was established in November 1999. In total, these companies raised more than US$16.5 billion in capital through Hong Kong. In addition, another 69 China-related companies we refer to as Red chips have listed on the Main Board since 1986. And they have raised more than US$68 billion in capital.
A freely convertible currency, no restrictions on capital flows, low and predictable taxes, the rule of law upheld by an independent judiciary and high standards of corporate governance are the prime ingredients that Hong Kong brings to the table as the premier international financial centre for China. I cannot overstate the importance of these factors. It is a system that overseas companies are familiar with; a system that they can comfortably rely on.
In addition, we have other advantages that attract international business: a broad, deep pool of professional talent; a hard-working and entrepreneurial people; a free press and the free flow of information; a level playing field for business; world-class infrastructure, the latest communications technology and a corruption-free government.
We provide even more value because Hong Kong is still the biggest receptacle of know-how and experience in the Mainland market. We share the same language and culture as the Mainland. We have in place strong bonds of family and friend. We understand how to make money in what can still be a tricky market; we also know, sometimes from bitter experience, how not to lose money. There is no better place than Hong Kong to access and understand the Mainland market.
That is certainly the view of the more than 3 200 international companies with regional operations in Hong Kong. The majority of these companies are wholly or partly engaged in China-related business. They have voted in Hong Kong's future with their capital. And we continue to welcome an average of one international company a week setting up regional operations in Hong Kong.
And while business will always lead the charge into any market there is a crucial role for the government to play. We must maintain an institutional framework that is conducive to market development. We must provide the infrastructure in which the private sector will not invest. We must provide an appropriate environment and the resources needed to boost the quality of our human capital. And, through fora such as APEC, we must secure more favourable market access for our enterprises. In Hong Kong, the government is constantly looking for ways to make business easier. And ABAC is one of the groups to which we look in this area.
In ABAC, the voice of business comes through loud and clear. You understand better than anyone else the profound and irrevocable trend of globalisation as well as the challenges it imposes on businesses. Any successful business, irrespective of size and location, has to look beyond its home production base and market to remain successful. Opportunities not seized in a timely manner are often opportunities lost.
China's accession to the WTO has changed the face of world trade forever. It will change the face of Hong Kong forever, too. But, as I have explained, I believe our gateway role will become more important thanks to our prime location; our business, economic and cultural links with the Mainland; our international outlook and our solid foundations based on the rule of law. Hong Kong businesses are strengthening their role as business facilitators for our international partners, as well as our fast-developing, rapidly expanding contacts and partners in the Mainland.
Hong Kong itself is a small market of just under seven million people. But what we offer is the key to business success in a market that comprises 1.2 billion people.
Ladies and gentlemen, I'd be delighted to take any questions you may have.
Thank you very much.
End/Thursday, August 8, 2002
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