Following is the speech by the Chief Secretary for Administration, Mr Donald Tsang, at a seminar entitled, "The Chinese World: Moving Forward", organised by the French Chamber of Commerce and Industry of Hong Kong, at the Island Shangri-La Hotel this morning (November 21)(English Only):
Mr Michaud, distinguished guests, ladies and gentlemen,
Thank you for that kind introduction. Let me personally, and on behalf of the SAR government, welcome you all to Hong Kong. To Minister Loos I extend a special welcome for your second visit to Hong Kong in the space of a few months. We are delighted to see you.
I am honoured to be invited to address this important symposium dealing with a topic that is crucial not just to the continued development of Hong Kong, but also because it reaches way beyond our shores. The Chinese world is developing and with it the doors of opportunity are opening in just about every corner of the globe. There is no stopping this momentum.
When the first of this symposium was held a decade ago, Hong Kong was a far different place. The Hong Kong Stock Exchange's Hang Seng Index had soared through the mythical 10,000 point barrier for the first time. The platform for our new international airport at Chek Lap Kok was only just beginning to take shape. The West Kowloon reclamation was mainly lines drawn on a planning map. Britain and China were locked in serious discussions over Hong Kong's future with the handover still some four years away. And China's economic influence on the world stage was beginning to come into focus.
Less than five years later, a World Bank Report predicted that by 2020, China would be the world's second largest exporter, it was then the 10th; its per capita income could well equal that of Portugal's or South Korea's; the rest of the world would gain considerably more with China's vast and largely untapped markets. The report concluded that China's rapid growth and liberalisation should be seen as an opportunity for the world economy, not a threat.
This year, China is well on the way to fulfilling those predictions. Its economy is expected to grow between 7 and 8%; the country, as a member of the World Trade Organisation, will continue to be the magnet for foreign direct investment. The East Asian region as a whole is on the march again. The half yearly economic report of the World Bank released just last month predicts that growth in 2004 will reach 5.7% - an impressive rebound from a year in which many economies were hurt by the financial impact of SARS and lingering uncertainty about the strength of the global economy.
I mention these facts now, to illustrate more graphically, just how rapidly the 'Chinese World is moving forward' as the new Mainland leadership continues with the country's reform policies. So, where and how, does Hong Kong fit into this picture?
Obviously, as a Special Administrative Region of China, we are an integral part of the one country, but we have the added advantages of retaining our separate systems: the institutional strengths that have been the cornerstone of our success: the rule of law backed by an independent judiciary, a level playing field for business, a simple tax regime with low tax rate, a clean and efficient administration, the free flow of news and information and the other freedoms all of us here today enjoy. These freedoms are sacrosanct. But, as noted by the World Bank, economic integration has become a necessity for all regions to cope with the challenges of the world economy. And that is precisely the strategy Hong Kong is following.
Gone are the days when a small city like Hong Kong could compete effectively on its own. The era of globalisation has rung the changes. We have to reach out to integrate our resources with those of other regional economies in order to hone our competitive edge. For Hong Kong, this has been a process built up over the years, first, with our nearest neighbour, Guangdong Province and especially the Pearl River Delta. Since the start of the economic reforms in China nearly a quarter of a century ago, Hong Kong manufacturers have been gradually relocating their operations across the border. As a result of this migration of manufacturing, Hong Kong has been transformed from an economy that made things, to one that makes things happen.
Today, services account for 87% of Hong Kong's GDP. We have become the premier financial centre of the region, the major capital raising hub for China, Asia's most popular city tourist destination and a growing logistics and communications centre.
The Greater PRD now has the highest per capita income of anywhere in the Mainland and is becoming an increasingly attractive consumer market in its own right with a population approaching 50 million - that's about 10 million fewer than the whole of France. The region boasts a GDP of US$282 billion in 2002, more than that of advanced economies like Switzerland and Sweden. Taken as a separate entity, the Greater PRD would rank the 22nd largest economy in the world.
Nevertheless, as one who has grown up here and watched, as one who has been intimately involved in our development, I can attest to the fact Hong Kong has never shied away from seizing opportunities. As an integral part of our great nation, we have been able to leverage that position to negotiate what amounts to a landmark free trade agreement with the Mainland this year.
The Closer Economic Partnership Arrangement, or CEPA, creates a win-win situation for both of us. By way of a simple example, our container port has been the world's busiest for nine of the past 10 years; and our airport the busiest for international air cargo since 1996. It is no exaggeration when I say that our belief in free trade and free and open markets has been our raison d'etre. It has made Hong Kong a staunch supporter and leading advocate for these principles within the WTO.
CEPA has brought our relationship with the Mainland even closer. It is a major force in furthering mutual economic benefits for both the Mainland and Hong Kong, and through Hong Kong to international businesses established here. Over 270 items, or some 90% of Hong Kong's exports to China, will be able to enter the Mainland market free of tariffs; there will be faster and easier market access for 18 services sectors, ranging from telecommunications, advertising, legal and management consultant services to banking, tourism and transport; and 100% ownership of many China ventures.
You may not be aware yet, that not only 'local' companies benefit from this new arrangement with China. All companies incorporated in Hong Kong, have substantive business in Hong Kong and have a proportion of staff employed here can also gain from CEPA. I won't go into details now, suffice to say that from January the 1st next year, the agreement will provide a new platform, and new impetus, for businesses wishing to tap the vast potential of the Mainland market.
However, it is not something that has been handed to Hong Kong on a platter. It will require a lot of hard work by the private sector; and a lot of hard work by the Hong Kong government, in conjunction with the Central and provincial governments. We are already seeing provincial and municipal governments, such as Shanghai and Suzhou, proactively coming to Hong Kong and seeking out business to take advantage of CEPA in their own location. We have already identified the areas for further co-operation with Shanghai where we can work together to our mutual benefit.
And harnessing the business opportunities rendered under CEPA, we are embarking on a comprehensive cooperation agenda with our Guangdong counterpart. There are 15 expert groups under the Hong Kong/ Guangdong Cooperation Joint Conference, each covering a different aspect such as technology and intellectual property cooperation, infrastructural planning, environmental protection, and tourism cooperation. I personally have been making trips to individual PRD cities to foster cooperation between Hong Kong and these municipalities. What's more, our conspicuous efforts in partnering with PRD cities to conduct overseas investment promotion should now be well known. We will be rolling out these successful joint promotions to target European, US and Asian markets before long.
So, that's where we are today. Hong Kong's future is looking brighter. These initiatives are lifting the spirits of our people and confidence is returning as the economy begins to turn the corner. By June 2003, the number of regional headquarters and regional offices set up by overseas companies in Hong Kong surged to 3 200, more than doubled the number a decade ago. We are becoming more attractive as an investment destination and as a place in which to establish a base - as a strategic two-way platform for enterprises, big and small, to enter the Mainland market.
In this regard, I am delighted that French companies are continuing to make a success of their operations here, from major developers such as Dragages et Travaux Publics, which has been part of Hong Kong since 1955 when it built the runway at Kai Tak, to other famous French companies like AXA, BNP Paribas, Credit Lyonnaise, Hermes and the many top brands in fashion, cars and food. And my apologies for not being able to name all of the 450 companies that are members of the French Chamber of Commerce and Industry in Hong Kong!
Many of you will be able to build on your existing links with us to make the most of what will come with CEPA and China's WTO membership. Indeed, I strongly encourage all of you to capitalise on the opportunities brought by the arrangement, by either setting up your business in Hong Kong or process part of your products here. We are here to help you through the process.
And I am sure it has not escaped your notice that there is a growing demand for top quality foreign goods by the increasingly affluent Chinese consumers visiting Hong Kong under the Individual Visitor Scheme. These consumers know they can buy their luxury goods cheaper in Hong Kong and our strictly enforced intellectual property regime means they are buying the GENUINE product. They also know that they have recourse to our courts and consumer complaints system if there is any dispute.
As a result of the booming Mainland tourism, we see an increasingly large amount of RMB in circulation in Hong Kong. The Chief Executive has announced a few days ago that the People's Bank of China had agreed to provide clearing arrangements for banks in Hong Kong to conduct personal Renminbi business on a trial basis. The scope of service includes deposit-taking, exchange, remittances, and Renminbi debit and credit cards. This will not only facilitate consumption by people touring across the border, but will also reinforce the status of Hong Kong as an international financial centre.
Ladies and gentlemen, Hong Kong has gone through some tough times, yet provided that the recovery in the developed world continues to pick up, combined with the strong growth in China, I believe our policies have put us on the right track for a brighter future. And with the support the French business community, Hong Kong and China will become even more significant players on the global scene, in a manifestation of 'Le Monde Chinois - L'Avenir en Marche'.
Ends/Friday, November 21, 2003