Following is a speech by the Financial Secretary, Mr Antony Leung at a luncheon organised by the HKETO/HKTDC at Prince de Galles Hotel in Paris, France today (November 28, Paris time):
Distinguished guests, ladies and gentlemen,
Bonjour! I am very happy to join you today. I always love visiting Paris. It is truly one of the world's great cities.
France and Hong Kong most certainly have a strong relationship on which to build. We have the largest French community in Asia - about 6,000 French people live in Hong Kong. We have more than 500 French companies. We have a good presence of French banks and insurers, serving both the Asia-Pacific and China. About 140,000 Hong Kong citizens have studied French, and we have about 20 schools offering French language courses.
Hong Kong people have had a long love affair with Paris and French products - fashion and accessories, perfume, champagne, brandy and wine, designer goods, and zippy French cars. All are highly regarded in Hong Kong. And I might add that, among the more affluent consumers in China, French products are also in great demand.
I am sure Airbus Industries knows what I am talking about. This morning I was fortunate enough to help our home carrier Cathay Pacific take delivery of a new aircraft, hot off the production line at Toulouse. Cathay will be the first airline in Asia to operate the new 'ultra-long range' A340-600 aircraft. Cathay is expanding its fleet to cope with an increase in passenger and air cargo traffic through Hong Kong.
As China's economy continues to open up and reform, our airport will become even busier. Our air cargo throughput was up more than 26% in September year-on-year. We have also recently signed a new air services agreement with the US, which will further increase air traffic between Hong Kong and North America. And on top of that our Airport Authority recently inked a deal with DHL to develop, construct and operate a 100 million Euro express cargo terminal. So, there is a good chance we will need even more aircraft soon!
To make it more interesting for the French exporters, the retail market of Hong Kong is providing you with huge opportunities. This year Hong Kong is heading for a record 15 million visitor arrivals. More than one-third are from the Mainland of China. On average, our Mainland visitors spend more than 740 Euros during their stay. This is actually higher than what is spent by visitors from Europe, Japan and America. Many of our Mainland visitors come to Hong Kong for high-end shopping, which means that premium French products are in big demand. And as China becomes even more prosperous, you can expect the demand for quality products to increase even further.
The facts that I just mentioned are only bits and pieces of the bigger picture, but it is important to know them because what I have to say today relates directly to the huge potential of the market of the Mainland of China. More specifically, what we in Hong Kong can do to help French companies do business in China, whether to manufacture goods, to source products, or to tap the enormous opportunities of the Mainland's consumer market. This is what I want to reinforce with you today.
For those of you who might not have come to Southern China in the past ten years, the Pearl River Delta, or PRD, as we call it, is China's most important export basin today. With almost 50 million people, it has the highest per capita GDP in the country. It is about the same size as the Aquitaine [pronounce: Aki-tan] Region, but with 17 times the population. Transforming itself from a quiet agricultural region, it is now a manufacturing powerhouse.
Every major city in the PRD has its own special strengths. Guangzhou is a domestic transportation hub. Its pillar industries are IT and software development, automobiles and petrochemicals. Shenzhen is the PRD's largest manufacturing and export basin, with a concentration of high-tech industries. Dongguan is the world's leading producer and exporter of electronics and computer products. It also has strong industry clusters in toys, footwear, plastics and furniture. Foshan is home to entrenched Mainland brands such as Midea, Kelon and Rongshen. It is a fertile sourcing ground for the world's leading household electrical appliance manufacturers. Zhuhai is an important supply hub for the western parts of the Delta, and is strong in pharmaceuticals and aquatic farming.
All of these cities now have a strong international presence, and a mix of multi-national companies and small and medium enterprises. Corporations from around the world, big and small, are relocating their manufacturing or sourcing operations to China, where there is an abundance of cheap land and good quality labour. They are drawn to the PRD for several reasons: clustering of light manufacturing enterprises, stable and low labour costs, low-cost suppliers close to production lines, good transport links that are getting better, world-class science, industrial and technology parks with all the required infrastructure in place.
The Delta is now the destination of about 30% of all Foreign Direct Investment into China. About 7,500 large foreign manufacturing enterprises are based there, as well as tens of thousands of smaller and medium-sized establishments. For example, there are 65,000 Hong Kong-linked enterprises employing some six million people in Guangdong province, with most of them concentrated in the PRD.
French and other European enterprises are no exception. Carrefour, Thomson and Framatome are there. So are Philips and Nokia, Nestle, ICI and Swire. Japanese companies have a sizeable presence - Sanyo, Hitachi, Nikon, NEC to name just a very few. There are corporations from the US, Canada, the Asia-Pacific and Latin America. It is a United Nations of fabrication.
Besides being a manufacturing powerhouse, the PRD is also becoming an important consumer market. The per capita GDP of the region excluding Hong Kong and Macau is over 2,700 Euros. In Shenzhen it is over 5,800 Euros, which is about six times the national average and 15% higher than in Shanghai. Retails sales in the PRD topped 42 billion Euros in 2001 and are growing fast. An increasingly affluent population, and the emergence of a middle class of millions, will create strong demand for quality lifestyle and high-end products. French companies, renowned for their excellent quality, can fit this niche perfectly.
Having listened to my introduction about the strengths of the PRD, you may wonder about the role of Hong Kong in this big picture. As the premier international financial and business centre, serving both China and the Asia region, Hong Kong is the best base from which to integrate the strengths of different players - the innovative, creative and technical excellence of international companies; the manufacturing excellence of PRD; the logistics, information, management and financial services excellence of Hong Kong. These are the reasons why we have seen the over 30% surge since 1997 in the number of international companies using Hong Kong for their regional operations. At last count, there were more than 3,100.
Hong Kong is where it call comes together - a hub, an integrator, a facilitator, a risk manager, and a supply-chain manager. We are your one-stop window to source products from the Pearl River Delta. We will find you a strategic partner to set up a business in the Pearl River Delta. We have the local and cultural knowledge to help you market and sell your products in the Pearl River Delta. We provide unrivalled transport and logistics facilities to take your products to the global market. Our laws will protect your ideas and intellectual capital. Our currency is fully convertible.
For the French entrepreneur or expatriate, Hong Kong provides all the comforts of home. We have one of the world's safest cities. We offer excellent medical facilities, international schools for children, as well as cultural and leisure opportunities. And all these come with a maximum salaries tax rate of just 15%. We welcome companies of all sizes. As a matter of fact, 98% of Hong Kong's companies are SMEs. You can set up a company in one day, and start work the next. Invest Hong Kong, our investment promotion department, will help you set up business, while our Trade Development Council will find you a business partner.
But we also know we can't rest on these laurels. That is why we are working hard, as a matter of priority, to smooth the flows of people, goods and capital between Hong Kong and the Pearl River Delta. We have successfully lobbied the Central Government to make it more convenient for foreign business people to enter the Mainland. We are working with Mainland authorities to co-locate Customs and Immigration facilities, as well as streamline procedures to eliminate unnecessary cargo checks. We are stepping up co-operation and co-ordination on major infrastructure projects that will greatly improve access to and from Hong Kong and the PRD. For instance, we are expanding our rail network, and building new road and bridge links. French companies have long played an active role in our infrastructure projects and there will be many big projects coming on line over the next five to 10 years.
All of this is designed to smooth access to and from the PRD; to make the movement of people, goods and capital as efficient as possible. But at the same time, we will ensure that all of our unique advantages as a Special Administrative Region of China are protected. French business people know and understand what they are: a legal system you can understand; the free flow of information; a level playing field for business; a clean government; low and predictable taxes; a fully convertible currency. This is the 'two systems' part of the 'One Country, Two Systems' that we have successfully implemented since 1997.
We are also spreading the word, proactively marketing the combined strengths of Hong Kong and the PRD region. I'm here in Paris as part of a nine-day visit that also takes in Holland, Belgium, the UK and Ireland. Our trade, economic, investment and tourism offices are criss-crossing the Continent marketing and promoting the advantages of the Hong Kong and PRD synergy.
We have recently established our first Economic and Trade Office in Guangzhou - in fact, our first economic and trade office in the Mainland - to provide a focal point for business exchanges between Hong Kong and the Pearl River Delta. French companies in Hong Kong, or indeed French companies wishing to access the PRD market, are most welcome to make use of this resource.
Hong Kong is not just a business centre for the PRD, but for the entire Asia. Most of the foreign banks have their Asian headquarters based in Hong Kong, so are multi-national corporations in many other industries.
Ladies and gentlemen, our message to you is simple and straightforward - we want to see more French companies in Hong Kong. Particularly, small and medium sized enterprises that are keen to enter the Mainland market but don't know how to go about it. Hong Kong, the premier international financial and business centre serving China and Asia, provides you with all the answers. French companies should be in Hong Kong - taking advantage of our special position as a financial services and management hub, and combining that with your know-how and product excellence, and the PRD's ample resources.
Hong Kong stands ready, willing and able to help French companies achieve their goals in Asia, but particularly in China, one of the largest and fastest-growing markets of the 21st Century.
Thank you very much.
End/Thursday, November 28, 2002