Following is a speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at a fundraising dinner for the Chinese Progressive Association (CPA) in Boston, Massachusetts, USA on June 8 (Boston time) (English only):
Ladies and Gentlemen,
It is wonderful to be back in Boston Chinatown and it is doubly delightful that I can still recognise so many familiar faces in the audience. I probably spent some of the happiest years of my life going to school in the greater Boston area and raising a young family. The kids are now adults, and we still harbour a great deal of fondness for Beantown.
Of course, a lot has changed since I left Boston over two decades ago and returned to Hong Kong to take up a career in the civil service, and more recently as a political appointee. For one thing, when I left Boston, Dr Frasier Crane had not yet started hanging out at the 'Cheers' bar; and last month, he wrapped up 11 years in his own series. And who would have dreamed that the Patriots would win two Super Bowls in three years? Unfortunately, my all-time favourite team the Celtics came nowhere near the post season games this year. Some things just don't change. Not yet, anyway. Red Sox fans are still saying: "This is the year." Well, let's hope that this is the year.
Before I go any further, I would like to thank the CPA for the opportunity to speak with you tonight. In fact, I grew up with the CPA in Boston in its formative years, and I watched the association move from strength to strength, servicing the greater Chinatown community. I wish you all the best with this fundraising campaign, and I commend the CPA for your many years of selfless community service. It is organisations like this one that make the transition to a new life smoother for Chinese immigrants. It is organisations like this one that look out for the benefits of the vulnerable in our community. And it is organisations like this one that seek to build bridges between communities in the city fostering a spirit of cooperation and oneness among the people.
Tonight, I would like to give you an update of what is happening in my new hometown, Hong Kong. I want to talk about the opportunities available in Hong Kong for American enterprises, and about Hong Kong's unique role as the leading two-way platform for companies to do business with Asia in general and China in particular.
Our recent economic figures have been encouraging, but these belie what was actually a very tough year for Hong Kong in 2003. A year ago, we were under siege by SARS. Those were dark days, with people getting sick and dying; medical researchers desperately searching for clues to stop a mysterious new virus; and a whole city not knowing whether the worst was past or yet to come. The tourists stopped coming. Businesses were put on hold. The city came to a virtual stand still.
But we prevailed. In fact, last month Hong Kong took home a first-place trophy from the Stockholm Challenge awards for tracing the contacts of confirmed and suspected SARS patients. It was an innovative marriage of three separate databases, including the Police Force's system for tracking down criminals. It helped us contain the outbreak in a timely fashion.
We prepared ourselves diligently for a possible return of SARS last winter. But what Asia got, instead, was avian influenza. But not in Hong Kong. While a host of Asian countries were hit by bird flu this past winter, Hong Kong made it through unscathed. The reason: our vigilance, preparations and hard work after our first major outbreak in 1997. Our preparations included a comprehensive vaccination programme for all our poultry, the results of which were seen in the fact that Hong Kong was the notable exception in the spread of infections throughout East Asia.
Our ability to control SARS and bird flu has clearly demonstrated not only the resolve of our community, not only the professionalism and quality of our civil service and medical staff, but also the commitment to uphold our obligations as a responsible member of the global community. It also means that Hong Kong remains one of the safest cities in the world.
On top of that, Hong Kong is one of the safest places to invest. Our philosophy, by many different names, has always been, and still is: "Big market, small government". The government's job is not to pick winners or protect struggling industries. We simply provide a level playing field for all businesses, whether local or international, and let them compete fairly on a level playing field. Our free market economy is supported by the rule of law, which is administered by an independent judiciary. There's a free flow of information; no foreign exchange controls or trade barriers; a low and simple tax regime; effective intellectual property protection; and minimal interference from government.
Our freedoms - of the press, expression, assembly and religion - are still as strong as they ever were under British colonial rule. 'One Country, Two Systems' is a highly innovative concept that has never been attempted before. There are bound to be a few bumps here and there along the way, but as long as we remain true to our constitutional roadmap, the Basic Law, I know that we will make the systems work, and work well.
As a result, Hong Kong is far from being 'just another Chinese city'. We enjoy separate economic, social and political systems, and separate immigration, customs, police and anti-corruption authorities and jurisdictions.
Having said that, the bottom line remains that Hong Kong is an essential part of China, and our future economic prosperity is closely tied to that of the Mainland.
Everyone should be so lucky. China is the fastest-growing large economy in the world. As the Mainland continues to open up under its World Trade Organisation (WTO) commitments, it is driving an increasing share of the world's economic growth.
And there is nowhere else in China that is better positioned to help feed that growth than Hong Kong. We possess a depth and breadth of high-value-added services and expertise that is unmatched in the region, and that the Mainland needs as its impressive growth continues. Naturally, Hong Kong will benefit from this process.
The WTO had predicted that by 2020, China would be the world's second-largest exporter. But as WTO figures over the past few years have shown, China could well reach that landmark a decade earlier.
Last year, China's imports grew by an astounding 40% in dollar terms, while its exports expanded by 35%. As the WTO notes, these are remarkable levels of growth for a country with such a substantial volume of trade.
China is now number three among the world's merchandise importers, after the US and Germany, leapfrogging France, Britain and Japan in the space of one year. As for merchandise exports, China is catching up quickly on Japan for the third spot. It is estimated that China became the largest exporter of commercial services among developing countries in 2003. It was already the largest developing-country importer of services, and its imports of commercial services continued to exceed its exports in 2003.
All of this confirms the fact that China has, indeed, become the 'factory of the world'. But, it also demonstrates even more dramatically what a relentless consumer of goods and services China has become.
One of the ways we are taking advantage of China's growing thirst for goods and services is with the new Hong Kong-Mainland free trade agreement, which is known as the Closer Economic Partnership Arrangement, or CEPA. It was brought into force on January 1 this year.
Very briefly, Hong Kong products covered by 374 mainland tariff codes can now enjoy zero tariffs when exported to the Mainland. CEPA also gives Hong Kong companies greater access to the Mainland in 18 services sectors, including banking, distribution and telecommunications. CEPA offers tremendous opportunities for American and other overseas companies to set up in Hong Kong, partner with Hong Kong companies, or even acquire a company in Hong Kong. All the information is available on our CEPA website or from our Economic and Trade Office in the United States. So I won't go into the details here.
But I think you'll be interested in these numbers. CEPA is just over five months old, but already there have been some 1,000 successful applications made for the Certificates of Hong Kong Origin that allow goods to be exported tariff-free to the Mainland. Nearly 40% have been for textiles and clothing, about 25% have been for pharmaceutical products. Also in demand are certificates for exporting plastics and plastic articles; electrical and electronic products; and 'colouring matters', which include dyes, paints and printing inks.
On the services side, some 300 companies have successfully received Certificates of Hong Kong Service Supplier required to take advantage of the enhanced access under CEPA. Most demand - in fact about three quarters - has been in the transport and logistics and distribution sectors. The next three most in-demand sectors are advertising, value-added telecommunications and management consulting and convention and exhibition services.
These figures clearly show that when new opportunities arise, companies in Hong Kong are quick off the mark in making sure they seize those opportunities, particularly when they can enhance the economic interplay between Hong Kong and the Mainland.
There are plenty of other ways we are co-operating. My responsibilities include the area of technology. Last month I signed an agreement with the Mainland Ministry of Science and Technology to establish a joint committee to increase co-operation in the area of science and technology. Many mainland enterprises are striving to add value to their products and build their own brand names. Hong Kong's business sector has already established an extensive production network in the Mainland, which has strengthened demand for new technology as the manufacturing processes move up the value chain. Combining the Mainland's rich human resources and research strengths with Hong Kong's capability and experience in applied research and commercialisation will improve the competitiveness of the entire industry.
Just across the boundary from Hong Kong is the Pearl River Delta (PRD), which produces about US$300 million worth of goods every day, thanks in large part to the 60,000 Hong Kong-invested factories in the Guangdong Province employing over 10 million mainland workers. That number is even larger than the entire population of Hong Kong. As a manufacturing powerhouse, the PRD has a voracious appetite for raw materials, semi-manufactures and machinery. And, with its increasingly affluent population, it is also a burgeoning consumer market.
At the centre of this dynamic region is Hong Kong, which has been described as the world's quintessential business city. The Heritage Foundation has rated Hong Kong the world's freest economy for the past 10 years, and other think tanks have consistently come to the same conclusion.
Hong Kong is a leading international financial centre. Our stock market is Asia's second largest, after Tokyo, with market capitalisation of US$740 billion. Last year, companies raised more than US$27 billion through IPOs and secondary offerings on the Hong Kong exchange. And Hong Kong is the most important fundraising centre for mainland enterprises, which have raised over US$100 billion in the past decade or so. The biggest share offer in the world last year, the $3 billion IPO by China Life, took place in Hong Kong.
We are the world's busiest container port and the world's busiest international air cargo hub. And the value of Hong Kong's exports rose by 11.7 per cent in 2003 - continued healthy growth that will help us secure our number one position.
Hong Kong's GDP is projected to grow by 6% this year. With a 6.8% growth in the first quarter, we should be able to achieve our target with little difficulty. Funds continue to flow into Hong Kong, which is the second-largest recipient of Foreign Direct Investment in Asia, after the Mainland.
Tourist arrivals are up, especially mainland visitors, thanks to the Individual Visit Scheme, the Mainland's continued strong economic growth, additional airline capacity and the added convenience of visitors being able to use renminbi credit cards in Hong Kong.
Hong Kong possesses long-standing institutional advantages, which stem from the rule of law under the 'One Country, Two Systems' principle, a fully convertible currency, high standards of corporate governance, etc. On this foundation, we have developed a concentration of value-added services, such as financial, logistics, transport, distribution, marketing, packaging, design, management, accounting and legal services.
We have also established a solid base of new technology infrastructure, including the Cyberport and Science Park, to attract companies interested in commercialising technology and introducing it to the Mainland and the rest of Asia. We have also established a Wireless Development Centre and a Digital Media Centre to provide infrastructural support to our small and medium-sized enterprises.
At last count, the number of overseas companies using Hong Kong as their regional headquarters had reached 966, an all-time high. In fact, more multinational companies have set up regional headquarters and offices in Hong Kong than in any other city in the Asia-Pacific region.
Many American companies have been in Hong Kong for decades, and new ones keep coming. Just a few weeks ago, BlackPearl Inc, a software solutions provider for the financial services industry, opened its Asia-Pacific headquarters in Hong Kong. The same week, Ace Hardware announced the opening of its first international buying office there.
A lot of companies use Hong Kong not only as their China base, but as their regional headquarters as well, since we are conveniently situated within a five-hour flight of half the world's population. And we do have over 4,500 international flights to 140 destinations every week that would take you to every corner of the world. It is proof that Hong Kong is the ideal place for international companies doing business in the Asia-Pacific region, particularly China.
Ladies and gentlemen, Hong Kong is laying the foundation for a new cycle of economic growth. If you haven't been to visit us lately, I urge you to do so and see for yourselves how we're positioning Asia's World City for a prosperous future. I'm sure you won't be disappointed.
Thank you very much.
Ends/Wednesday, June 9, 2004