The following is the full text of speech (English only) by the Financial Secretary, Mr Antony Leung, at the business luncheon organised by the Hong Kong Economic and Trade Office (Canada), the Hong Kong-Canada Business Association and the Canadian Club at the Metro Toronto Convention Centre today (September 30, Toronto time):-
Good afternoon, ladies and gentlemen,
It's a great pleasure to be here today. Although I've been to Toronto many times, this is my first visit in my capacity as Financial Secretary. As always, I'm delighted to be back among so many friends of Hong Kong.
I've just come from the Annual Meetings of the International Monetary Fund and the World Bank in Washington DC, so I'd like to talk a bit about the world economy and China's accession to the World Trade Organisation. More specifically, I want to tell you about Hong Kong's role in the dramatic transformation now taking place in China, and about what we can offer Canadian companies in this new economic environment.
Hong Kong and Canada have a long history of working together. Canadians have invested 4.8 billion Canadian dollars in Hong Kong. Our bilateral trade amounts to 6.4 billion Canadian dollars a year, and there are some 200,000 Canadian citizens living in our city. Many of Canada's engineers, academics and other leading figures in their fields have roots in Hong Kong.
Hong Kong is small - one of the most densely populated places on earth. Canada is a vast land of wide-open spaces. Yet we have more in common than you might think. We each live next door to a huge economic power that also happens to be our largest trading partner. We both have to deal with the challenges of border management, and the efficient movement of people and goods across those borders. Remarkably, in both places, small and medium-size enterprises represent 98 per cent of all registered companies and employ 60 per cent of the work force.
Another thing we both share, along with the rest of the world is that when the US economy slows down, we feel it too. At the IMF and World Bank meetings, finance ministers and central bankers from around the globe discussed the risks and vulnerabilities of the US and the world economy, the turmoil in Latin America, and Japan's struggles with structural reform. But while we must keep a close watch on how these troubles affect us, we should look beyond the current possible downturn to promote further development and growth.
Development continues apace in Asia, despite the financial crisis from mid-1997 through 1999 - and in part, because of it. The crisis forced Asian governments and businesses to bring in banking and structural reforms to strengthen our systems and to re-climb the ladder to growth. While some countries have done better than others, the region as a whole is now more robust than ever.
And no Asian country is more robust than China. Its economy continues to grow consistently at seven to eight per cent a year. It has a stable currency, a booming manufacturing base and a blossoming domestic market. China has been steadily opening up to the outside world for nearly 25 years. But, its accession to the World Trade Organisation last year means that this process will accelerate.
The progressive integration of China into the global economy will have major implications for all of us. The World Bank estimates that China will become the world's second-largest trading entity within 20 years, ahead of Germany and Japan. WTO rules, discipline, and dispute-settlement mechanism will add certainty to China's trading environment. This certainty, together with wider market access and a commitment to transforming the economy in line with internationally recognized trading rules, will without doubt encourage foreign investment. In particular, the opening up of the services sector will offer huge investment potential.
So how does Hong Kong fit into this new picture? The answer is - just as prominently as ever. We are still the most important entrepot for China, handling about 30 per cent of the Mainland's foreign trade. We are the market of choice for Mainland companies seeking to raise capital, and the service centre for a lot of foreign companies doing business in China.
Nobody knows more about doing business in China than we do. Hong Kong is the largest single source of external investment in the Mainland, with cumulative investments of 290 billion Canadian dollars - nearly half of all external investment in the country. Wherever you go in China to do business, there will be someone from Hong Kong.
Yet, Hong Kong does face some difficulties in the near term, despite a positive medium to long-term outlook. After all, as an open and externally oriented economy, we are greatly affected by the economic performance of our trading partners. Our GDP growth has remained virtually flat since we posted an impressive 10 per cent increase in 2000. We are experiencing heavy deflationary pressure. Most worrying has been a sharp rise in unemployment, which now stands at 7.6 per cent.
All this has put considerable stress on the confidence of Hong Kong people, and presented challenges to the government. But economic restructuring has also highlighted the resilience and flexibility of our economy. Our banking system continues to be healthy, even though property prices have dropped by 60 per cent since 1997.
Painful as it is, restructuring is essential to improve our competitiveness. Hong Kong possesses a number of fundamental advantages in China trade - geographic proximity, cultural and linguistic links, extensive business networks. But what we need to do is further strengthen these advantages, especially in the Pearl River Delta.
The Pearl River Delta is the fastest-growing and most affluent part of China. It is smaller than Nova Scotia, but with a population approaching 50 million - about 50 per cent more than all of Canada. Within this triangle of prosperity are Hong Kong, Macau, Guangzhou, Shenzhen, Dongguan, and several lesser-known but booming cities. The PRD has an overall GDP of 400 billion Canadian dollars, which would place it among the world's top 25 economies. And its GDP is growing in double digits. They can't build shopping malls and factories fast enough.
So you can see the potential of the Pearl River Delta as a manufacturing base, as a huge market for consumer goods and services, as a trading hub, as well as a destination for investment.
If you wonder what happened to Hong Kong's factories when we transformed ourselves into a services-based economy, they didn't disappear; they migrated over the boundary in search of cheaper land and labour. There are more than 36,000 Hong Kong-linked companies employing over 5 million people in Guangdong province - the equivalent of 1.5 times the Hong Kong work force.
As our manufacturing sector moved across the boundary, our services sector grew. Services now account for 86 per cent of our GDP. In order to serve foreign investors as well as Mainland enterprises, to fulfil our strategic positioning as 'Asia's world city', we need to improve the quality, speed and creativity of the services we provide. We've identified four areas, which have large potentials for development - financial services, logistics, tourism and professional and producer services.
We've already begun work to enhance two-way flows of people, cargo, capital, information and service with the Mainland of China. We are upgrading and expanding our existing boundary crossings, and building new ones. It's now easier for foreign residents of Hong Kong to enter the Mainland, and for Mainland business people to come to Hong Kong. We are examining new passenger and cargo rail links into the Pearl River Delta and we're connecting our airport by ferry with 20 ports in the Pearl River Delta. China's national highway system will be completed over the next five years, and we'll be linking into that grid, too.
One of the hottest topics of conversation in Hong Kong these days is a proposed bridge that would stretch 29 kilometres to the western part of Pearl River Delta at a cost of about three billion Canadian dollars. It is too early to say when this project might go ahead. But it gives you an idea of how big the thinking remains in Hong Kong.
But I have to stress that whatever we do will be within the framework of 'One Country, Two Systems'. We understand the importance of maintaining Hong Kong's own identity and our international systems and standards. One of our greatest strengths is our difference from other Chinese cities - not our similarity. So I'm not talking about submerging Hong Kong's identity. On the contrary, I mean to enhance it.
One way we can do that is to leverage on the aggregate strengths of the Pearl River Delta in terms of manpower and the depth and breadth of its economic activities, production capacity, market size, expertise, technology, infrastructure, telecommunications and transport.
Now where does Canada fit into all of this? There are about 150 Canadian companies in Hong Kong. Some have been there for over a century. They come to Hong Kong to take advantage of our free market, our pro-business climate and our strategic location. Besides being on China's doorstep, Hong Kong is within a few hours of all the Southeast Asian capitals as well as Korea and Japan. That's why we are a popular choice for regional offices and operations.
To underline how important we consider our trade and investment relationship with Canada, I'm joining you today just three weeks after my colleague, the Secretary for Commerce, Industry and Technology, led a Hong Kong delegation here. And we're just whetting your appetite. You can see for yourself what we're talking about by joining the Hong Kong-Canada trade mission in early November. The theme of the mission is "Hong Kong - Your Fast Track to China", and it will include a visit to Hong Kong-owned factories in the Pearl River Delta. It's aimed at any Canadian companies looking for opportunities in Hong Kong and the Mainland of China, particularly companies in the communications and biotech sectors, as well as those in financial services, tourism, entertainment, and education. If you're interested in joining this trade mission, please talk to my colleagues in the Hong Kong Economic and Trade Office here.
Just last month, we received a different kind of Canadian trade mission in Hong Kong. Junior Team Canada comprised 32 young people, in their late teens and early 20s, who each had to get an SME to sponsor their trip. They also visited China and the Philippines. But according to our friends at the Canadian Chamber of Commerce in Hong Kong - which, by the way, is the largest Canadian Chamber outside Canada - the students were most excited by the energy of Hong Kong. So much so that some of them inquired about getting work there. The Chamber advised them to return to Canada and gain some experience in change management and project management - two skills that are needed in Hong Kong and China. I certainly look forward to collecting salary taxes from some of these young Canadians in the future - albeit at a rate that is only 15 per cent max.
You'll also be interested to know that we have infrastructure projects worth 120 billion Canadian dollars ongoing or in the pipeline. As usual, Canadian companies are welcome to bid for these contracts. Hong Kong's international airport, which opened in 1998, was named as the world's best airport last year in a survey by Skytrax Research. Several Canadian companies featured prominently in making that project a reality. For example, wind-loading analysis for the airport was the responsibility of RWDI, while Delcan, IBI Group, and EIS looked after traffic control and surveillance systems on the bridges and highways leading to it.
I've described how Hong Kong is an enabler and facilitator of business in China. Maybe you're thinking, why can't we cut out the middleman and go directly to the Mainland? Well, you can, but don't imagine that it will be easy. Doing business in China is still quite different from doing business in the west. Hong Kong businessmen, on the other hand, have decades of experience successfully dealing with business in China and the rest of the world. A tripartite alliance among companies in the west, the Mainland and Hong Kong is a sure way to capture the vast opportunities in China.
Hong Kong is the world's freest economy, perched on China's doorstep and offering numerous advantages for Canadian companies seeking to do business there. Probably the most important of these advantages is our long tradition of adherence to the rule of law. In addition, we have one of the most sophisticated financial centres in the world. We provide a level playing field for business. We allow an unfettered flow of information. We share the language and culture of the Mainland of China. And we host helpful organizations like the Chamber of Commerce, the Canadian Trade Commissioner Service and our own Trade Development Council, all of which are dedicated to matching up companies with business opportunities.
Ladies and gentlemen, my message to you today is that China is one intensely bright spot amid the economic gloom. One of the brightest part of China, in turn, is the Pearl River Delta. And at the heart of the Pearl River Delta is Hong Kong. If you decide you want to be where the action is, Hong Kong is the best platform, bar none, for jumping into that market.
Thank you very much.
End/Tuesday, October 1, 2002