Following is the speech (English only) delivered today (October 28, Berlin time) by the Chief Secretary for Administration, Mr Donald Tsang, at a HKTDC/HKETO business luncheon in Berlin.
Hong Kong -- Asia's world city
A new era of opportunity
Distinguished guests, ladies and gentlemen,
Good afternoon. I'm delighted to be in Berlin for the very first time -- and hopefully not the last. I wish I could stay longer. Nonetheless, I see today's luncheon as a golden opportunity for us to build on an increasingly important friendship.
Germany is one of Hong Kong's key trading partners -- our biggest in Europe last year, when our trade grew by a robust 19 per cent. Some 3,000 German nationals live and work in Hong Kong, and over 500 German companies operate there, involved in everything from banking and shipping to chemicals and underwear. Escada has just opened its 17th outlet in Hong Kong; it is targeting newly affluent Mainland shoppers as much as local ones. Siemens has armed countless Hong Kong and Mainland people with mobile phones. There are far too many companies to name here. But of course I have to mention that, in Hong Kong, driving a German car is one of the ultimate status symbols.
We also enjoy excellent political and cultural relations. There has been a steady stream of high-level delegations and academic exchanges between us, and a year ago former President Rau and his wife honoured Hong Kong with a visit. Last year, Jackie Chan was filming "Around the World in 80 Days" here in Berlin. He was inspired by the Buddy Bear sculptures he saw in the street, carrying a message of peace and tolerance. He visited the Buddy Bear workshop, and this year he brought the Bears to Hong Kong to raise money for charity. The exhibition proved to be a huge success with the Hong Kong public.
Germany and Hong Kong also share some of the same challenges, such as an ageing population, and the need to upgrade our educational efforts and attract talent from outside. So, there are many ways we can help each other. I hope my visit to Berlin can make a contribution.
Today I'd like to bring you up to date on Hong Kong's development in the seven years since we returned to China, and in the process to give you a taste of the exciting new opportunities that are available to German investors in Asia's world city.
Under the Basic Law, our constitutional document, Hong Kong was guaranteed a high degree of autonomy under the principle of "One Country, Two Systems". This was something that had never been tried before. Inevitably there have been a few bumps in the road, but the concept has been remarkably successful. All of the social freedoms that Hong Kong enjoyed before the handover remain intact today: the freedom of speech, of the press, of assembly, of religion, of travel. We are home to a large foreign community, who enjoy these same freedoms and who operate their businesses on a level playing field, under the rule of law. In short, Hong Kong is as vibrant and dynamic as it's ever been. And just as free.
In terms of political development, we are making steady progress. Just last month, we held the most democratic election in our history. Hong Kong people returned all its legislators by elections, half by direct elections, the other half through functional constituencies, something that had never been done under any previous administration. Naturally, there have been disagreements over the pace of political reform in Hong Kong. But there is full agreement on the final destination, which is universal suffrage, as spelled out in the Basic Law. And the path we will take to get there is paved with rational debate.
The most striking aspect of the Hong Kong story has been our recent economic success. Like most economies in our region, we were hit hard by the Asian financial crisis, which burst our asset price bubble and put a big dent in corporate balance sheets. Then, early last year, just as we were getting back on our feet, we were blind-sided by SARS.
Ladies and gentlemen, I'm delighted to report that Hong Kong is back in fighting form. The long spell of deflation and economic restructuring that we endured has reduced our costs and made the Hong Kong economy more lean and competitive. Deflation is over, the property market has bounced back, the unemployment rate is slowly but surely coming down to a manageable level, tourists are arriving in record numbers, our exports continue to flourish, and consumer confidence is once again strong. The result is that we expect GDP growth of 7.5 per cent for 2004. There may be a perception in some parts of the world that Hong Kong's best days are behind it. Well, 7 to 8 per cent GDP growth by a developed economy says otherwise.
Hong Kong has always been a leading financial and business hub in Asia. The main thrust of our recovery plan was to leverage that position to take advantage of -- and to support -- China's rapid economic growth. We knew we had to foster greater economic interactivity with the Mainland. We pursued this goal in many different ways, and the results have been quite dramatic.
Hong Kong companies were the first in the world to move their manufacturing operations across the boundary to the Pearl River Delta, or PRD, when China opened its economy 25 years ago. Today, the PRD is a manufacturing and export powerhouse, the fastest-growing region of China, which is the fastest-growing large economy in the world. Tens of thousands of foreign-invested factories are churning out well over US$300 million worth of goods every day in the PRD. Hong Kong companies are the largest investors there, as they are in the whole of the Mainland. In fact, there are over 50,000 Hong Kong-invested factories in Guangdong Province, employing 10 million workers -- more than the population of Hong Kong, and three times the population of Berlin.
In the past couple of years, we have focused on expanding our presence in other ways. We are working closely with Guangdong and the Central Government to smooth and enhance the two-way flows of people, goods, services and capital across our boundary. New bridges, highways and rail links are under construction or in the planning stage. The Central Government introduced the Individual Visit Scheme, which allows travellers from several big cities to visit Hong Kong on an individual basis. Hong Kong banks were given the green light to handle personal renminbi business.
On the 1st of January this year, we implemented the Mainland and Hong Kong Closer Economic Partnership Arrangement, or CEPA. This is a free-trade arrangement that gives Hong Kong manufacturers and service industries "first mover advantage" into the Mainland market, ahead of China's World Trade Organisation commitments. Foreign companies can take advantage of CEPA, too, by setting up in Hong Kong, or by partnering with or investing in Hong Kong firms. You can get all the details from the Trade Development Council or representatives of our Economic & Trade Office who are here today.
So now we have CEPA, and we have ever-greater flows of people, goods, services and capital between Hong Kong and the Mainland. Hong Kong is the premier financial and trade services platform for both international companies entering the Mainland and for Mainland companies seeking to explore external markets. It's a pretty exciting scenario, but we haven't stopped there.
A new initiative was launched a few months ago, called the Pan-Pearl River Delta Regional Co-operation and Development Forum. That's quite a mouthful, so we call it 'Pan-PRD' or simply '9+2'. It's an initiative that brings together the nine provinces of southern China and the two Special Administrative Regions of Hong Kong and Macau.
9+2 has been described as "a budding European Union" within China. It may be budding, but it's certainly not small. The Pan-PRD encompasses 457 million people, which is one-third of China's population. To put that into perspective, that's the same population as the entire 25-nation EU. And the Pan-PRD region's combined GDP in 2003 was 510 billion euros [US$634 billion], accounting for 40 per cent of China's total economic output.
With 9+2, Hong Kong's economic catchment area expands more than five-fold, from the PRD to cities like Fuzhou in Fujian Province, Changsha in Hunan and Chengdu in Sichuan. These cities will become increasingly important manufacturing and consumer centres as the PRD moves up the value chain. Highways and railways are coming online to carry more goods and people, more quickly. Hong Kong is already the world's busiest container port and the world's busiest international air cargo hub. Hong Kong is already the biggest investor in this region, and the preferred place for Mainland companies to raise funds. Undoubtedly, Hong Kong will be the leading financial and services hub for this huge and rapidly developing region of 9+2.
All of this activity in our part of the world creates a new era of opportunity for German companies. You can take advantage of CEPA to enter the Mainland market. You can use Hong Kong as your base for doing business in the Pan-PRD, or indeed anywhere in the Asia-Pacific region.
More and more international companies are doing just that. As of June this year, a record 3,600 overseas firms had set up regional headquarters or regional offices in Hong Kong, including 202 German ones. Another 2,300-plus overseas companies have established local offices there. These numbers are growing every year as more and more businesses, large and small, come to realise the advantages that Hong Kong has to offer. We expect this trend to continue as more foreign investors set up or expand their Hong Kong operations to enjoy preferential treatment under CEPA.
Why do they choose Hong Kong? They appreciate our low and simple tax system, our corruption-free government, the absence of exchange controls and the free flow of information. They like the fact that Hong Kong law protects their intellectual property. They make full use of our modern communication and transportation infrastructure and our world-class business and professional support services. They know that Hong Kong is the world's freest economy and a leading international financial hub -- the world's sixth-largest foreign-exchange centre and Asia's second-biggest stock exchange, with three-quarters of the world's top 100 banks operating there.
They use Hong Kong as their platform for business in China, because we can help them achieve their goals in the Mainland. And they know that from Hong Kong's award-winning airport, they are within five hours' flying time of half the world's population.
Another encouraging trend is the increasing number of Mainland enterprises that are setting up operations in Hong Kong as a springboard to expand overseas. They come to Hong Kong to source capital, to make use of the sophisticated supply-chain and professional services on offer, and to take advantage of Hong Kong's long experience in international markets.
There are other Chinese cities that welcome foreign corporations, of course, but none of them offer Hong Kong's unique combination of legal protection, sophisticated financial and trade services, convertible currency, international mindset and decades of business experience. In any case, the vastness of China and the pace of its economic development offer the chance for cities like Hong Kong, Shanghai, Beijing and Guangzhou to complement each other as much as compete.
Executives who settle in Hong Kong find it a safe and highly liveable city. It's vibrant, cosmopolitan and affluent, with a per capita GDP of over US$25,000. It's an intriguing mix of Eastern and Western influences, and there's plenty of culture on offer from both traditions. Perhaps some of you had a chance to hear the Hong Kong Chinese Orchestra Ensemble when it performed last night at the gala dinner at the China Club Berlin.
Ladies and gentlemen, I have a feeling that the people of Berlin and Hong Kong will be getting to know each other much better. I invite you to advance this process and to come visit Hong Kong, Asia's world city, to see for yourselves the opportunities we have to offer.
Danke schon. [Thank you very much.]
Ends/Thursday, October 28, 2004