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Follows is a speech by the Chief Executive, Mr Donald Tsang, at a Luncheon at the Waldorf Astoria Hotel in New York today (October 25, New York time):
Distinguished guests, ladies and gentlemen,
Good afternoon. Thank you for inviting me today. It's wonderful to be here in the famous Waldorf-Astoria again, in front of an audience with so much interest in Hong Kong and China. And it's great to be back in this dynamic and fast-paced city known as the Big Apple - or what our marketing people might call America's world city.
Today, I want to update you on some of the exciting developments taking place in Hong Kong, brief you on the progress of our increasing economic co-operation with the Mainland of China, and give you a taste of the many outstanding opportunities that are sprouting up in Hong Kong for American business people.
People in New York City, of all places, will understand Hong Kong's aspirations to be 'Asia's world city'. As New York is for the Americas, Hong Kong is Asia's premier international financial and business centre. We are an externally oriented city, with an international outlook and constant engagement with the world for over one-and-a-half centuries. Like New York, Hong Kong provides leadership in the fields of trade, finance, legal and business services, education, health care, research, advertising and retailing. We have Asia's Wall Street, Asia's Madison Avenue and Asia's Fifth Avenue. And if we haven't quite made it to Broadway yet, we're taking big strides towards being Asia's cultural capital, too.
Hong Kong's success is built on four pillars: the rule of law upheld by an independent judiciary, a clean administration, a level playing field for business, and the free flow of news and information. These unique advantages are the foundations of our development, our stability and our prosperity. They also give us the tools to help our country further along the path of economic reform and opening up. They are our most important advantages as Asia's world city, and as the pre-eminent two-way platform for doing business in China.
Hong Kong is leading the economic evolution of Asia from manufacturing to high-value services. Indeed, we have always been quick to adapt to changes in the global economy. When China began opening up in the late 1970s, Hong Kong enterprises seized the opportunity to move their manufacturing processes across the boundary to the Pearl River Delta. As a result, our businesses have been channelling huge investments, management skills, technical know-how and international best practices into the Mainland for more than 25 years. The Pearl River Delta is the fastest-growing part of China. Every day in the PRD, tens of thousands of factories produce well over US$300 million worth of goods. About 7 500 multinationals are active in the Delta, including plenty of investors from the US.
As for our own pioneering entrepreneurs, there are now some 53,000 Hong Kong-invested manufacturers in Guangdong Province, employing over 10 million workers - more than the population of either Hong Kong or New York City. One example of such a company is Peace Mark, a Hong Kong-listed watchmaker and retailer with its main manufacturing plants in the PRD, along with upscale assembly lines in Switzerland and Hong Kong. It's the largest exporter of timepieces from Hong Kong to the US, and it was the first Hong Kong timepiece company to ship watches under CEPA, which I will get to later on. As I said, Peace Mark is just one among tens of thousands to take advantage of the PRD's manufacturing muscle.
As the PRD developed, so did the clustering of industries. The pillar industries of Guangzhou, for instance, are IT and software development, automobiles and petrochemicals. Shenzhen has a concentration of high-tech industries. Dongguan is not only the world's leading producer and exporter of electronics and computer products, it also has strong industry clusters in IT products, toys, footwear, plastics and furniture. Foshan, home to entrenched Mainland brands such as Midea, is a fertile sourcing ground for the world's leading household electrical appliance manufacturers. Zhuhai, an important supply hub for the western parts of the Delta, is strong in pharmaceuticals and aquatic farming.
While all this was developing in the PRD, Hong Kong's economy was able to restructure and move up the value chain. The process continues today, even though we already derive almost 90% of our GDP from the services sector. Today Hong Kong clearly emerges as the services hub for business in Asia. All kinds of businesses, from entrepreneurs making the most of our lifestyle and world-class infrastructure, to multi-national corporations serving the region concentrate in Hong Kong. There are now nearly 3 800 overseas companies with regional operations in Hong Kong, which is a record high, and American firms are the largest group among them, with 868. Since 1997, the number of overseas companies with regional operations has grown by over 50%, confirming Hong Kong as the most popular place in Asia to establish a base. These companies recognise Hong Kong's value as the best platform for doing business, not only in the Mainland, but in the Asia-Pacific region as a whole.
We are also the principal services hub for Chinese companies looking to expand their customer base on the world stage. Mainland enterprises have raised over US$120 billion on the Hong Kong stock exchange, and increasingly they are using Hong Kong and its international know-how to venture into global markets.
Hong Kong has become a supercharged turbine for international finance, commerce and trade. We are the world's sixth-largest foreign exchange centre, with a Forex clearance system that is unparalleled. We have Asia's second-largest stock market, which last year surpassed London and Tokyo to be the fourth-largest fund-raising centre in the world - and the largest in Asia. Hong Kong was Asia's second-largest destination for foreign direct investment in 2004, behind only the Chinese Mainland.
We have the world's busiest container port, and our airport is the world's busiest international air cargo hub. Thanks to closer collaboration between Mainland and Hong Kong authorities, we are building new bridges, rail links and other cross-boundary infrastructure to further accelerate the flows of goods and people.
Hong Kong has the world's freest economy, according to the Heritage Foundation and other public policy institutes. We take pride in offering a business-friendly environment. Let me give you an illustration. The first company was incorporated in Hong Kong in 1865. By 1994, the number of companies incorporated had grown to half a million. Just 11 years later - this month, in fact - the one-millionth company was incorporated in Hong Kong. Not bad for what used to be called 'a barren rock' and is a city now of 7 million.
I have mentioned Hong Kong's increasing co-operation with the booming Mainland economy. Perhaps the best and most recent examples of how the 'One Country, Two Systems' experiment is working are the Closer Economic Partnership Arrangement - known as CEPA - and the Pan-PRD initiative, which is also called '9+2', meaning nine southern Chinese provinces plus Hong Kong and Macao, the two Special Administrative Regions of China. CEPA shows us how the 'two systems' can work to our mutual advantage; Pan-PRD shows us the benefits of pooling our talent and resources within 'one country'.
CEPA is, in essence, a free trade pact. It was possible because, under the Basic Law, Hong Kong remains a World Trade Organisation member and a separate customs territory in its own right. What some might view as an anomaly has actually been turned into an advantage for Hong Kong and the Mainland. For Hong Kong, it has given companies early, and in some sectors enhanced, access to the Mainland market ahead of its WTO commitments. It has provided our service industries with a head start, and given a great boost to our tourism sector. It has allowed Hong Kong companies - already the largest investors in China - to become even more entrenched and diversified in the world's most exciting emerging market.
For the Mainland, CEPA has provided a testing ground for the opening-up process that goes hand-in-hand with WTO accession. Rather than having to open up to the rest of the world in one 'big bang', CEPA has helped the Mainland economy to ease into this process. By so doing, the likely impact of these ongoing reforms can be assessed at a more measured pace. CEPA helps to identify early the challenges facing the Mainland economy as it becomes more open to the world. At the same time, it allows the Mainland to upgrade its own services capabilities ahead of the WTO deadline.
By allowing Hong Kong products to enter the Mainland tariff free, Chinese consumers now have more choices. It is good for Hong Kong, it is good for the country. And it is good for American companies that want to gain a fast track into the burgeoning Mainland market. American companies can anchor their Asian operations in Hong Kong, tapping the vast experience of Hong Kong businesses and enjoying free trade status with the Mainland. CEPA offers tremendous opportunities for American and other overseas companies to enter the Mainland market by setting up in Hong Kong, or by investing in, partnering with or acquiring a Hong Kong company.
The Pan-PRD initiative, launched last year, is a visionary undertaking designed to unleash the potential of a south China common market with a population of 460 million. That's a market as big as the European Union, and bigger than NAFTA. The thinking behind the Pan-PRD concept is to take the economic blueprint that has been honed over the past 25 years in the Pearl River Delta and apply it on a much larger and more ambitious scale.
This development has the full backing of the Central leadership. China wants Pan-PRD to succeed because it provides a role model for the rest of the country. While CEPA takes advantage of the two different international trading systems in Hong Kong and the Mainland, the Pan-PRD initiative is meant to break down domestic barriers to the entire spectrum of trade in goods and services.
Replicating the PRD growth model in the Pan-PRD will add momentum for the sustained economic growth of the nation. The future growth of China's manufacturing capability and economy will require a strong international financial infrastructure to sustain it. For the foreseeable future, that must and will be provided by Hong Kong. We have much to offer in terms of financial services, the security and liquidity of our market, our corporate governance rules, our global standards, our convertible currency, the integrity of our highly developed legal system, our logistics and communications network, our modern knowledge and management skills, our tourism expertise and our global connectivity. The growth of the Pan-PRD will revolve around Hong Kong in terms of financial and technical support, and it's a perfect platform for Mainland enterprises wanting to go into the world market. In this crucial role, Hong Kong will never be just another Chinese city.
As Asia's world city, one of our defining characteristics is our engagement with the world. The thousands of international companies based in Hong Kong are an integral part of that. So are the overseas media organisations based there - big names like the New York Times, Wall Street Journal, Financial Times, International Herald Tribune, Time, Newsweek, BusinessWeek, Variety, CNN, the Voice of America, AP, UPI, and of course Bloomberg, to name just a few familiar ones. Why are they there? Besides all the other reasons why companies set up there, it's because Hong Kong has the freest press in Asia, according to Reporters Without Borders. Because Hong Kong has a state-of-the-art communications network. And because Hong Kong is at the centre of the action.
The many international chambers of commerce in Hong Kong, the consulates and foreign missions, the international schools, the huge variety of international cuisine, the world-famous brand names and the large expatriate community - all reflect our global outlook. In fact, the American Chamber of Commerce in Hong Kong is the largest chamber outside the United States.
We share many of the same values - freedom, fairness, respect and tolerance. We believe in a system of clearly defined laws and rules, where everyone has redress to the courts. As a place with great respect for the rule of law, Hong Kong provides protection for brand names and intellectual property at a level second to none in Asia. In fact, I'll cite you an example - just yesterday we became the first place in the world to convict a person for using BitTorrent [to distribute copyright protected material on the Internet]. This shows the world that we take the protection of intellectual property rights very seriously. Our law and order is among the finest in the world. Hong Kong is a very safe city. And our hosting of the WTO meeting in December demonstrates our staunch support for open trade in global markets, our strong desire to promote the multi-lateral trading system, and our colours as Asia's world city.
There is clearly a buzz, ladies and gentlemen, in the town of Hong Kong. Last year our GDP grew by over 8% and this year we are forecast to grow by 4.5 - 5.5%, on top of a mature economy with a per capita GDP of US$24,000. All economic indicators are pointing up.
So, ladies and gentlemen, this is the dawn of a new era of opportunity in China and Asia. Yet, for foreign businesses, many of these opportunities can only be harnessed or realised through their familiar trading post in Hong Kong, the easiest and safest route to the Mainland market. We invite you to take advantage of this emerging economic miracle in China with us.
Thank you very much.
Ends/Wednesday, October 26, 2005
Issued at HKT 02:47
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