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Following is the translation of the opening remarks by the Chief Executive, Mr Donald Tsang, at the Question and Answer Session in the Legislative Council today (May 18):
Madam President,
Thank you for giving me an opportunity to meet Members again, especially on a blue-sky afternoon.
Before taking questions from Members, I would like to talk about the economic development of Hong Kong. Sustaining economic growth is indeed a subject of much concern to the Government and the community at large.
The overall economy of Hong Kong has recovered and is now in the best shape it has been in for years. Given this more favourable environment, we must look to the way forward to improve the well-being of the community, to maintain our competitiveness and to map out plans for our long-term development. Hong Kong is a highly open economy. We must be responsive to external economic changes and adjust ourselves to harness the challenges and opportunities brought about by globalisation, regional integration and the rapid development on the Mainland of China.
The country has achieved remarkable results in modernisation from its reform and opening up policy, emerging to become a great economic force in the global economy. Over the past 25 years, China has sustained a stunning average annual growth of 9%, lifting 220 million people out of poverty between 1978 and 2005. This is hailed as a world economic miracle.
The country implements the 11th Five-Year Plan this year to keep the macro-economy on a fast and steady course. Its GDP is expected to grow at an annual average rate of 7.5% to reach 26.1 trillion renminbi (about US$3.2 trillion) by 2010. The total volume will make China rank third in the world. China's import and export value totalled at US$1.4 trillion in 2005, is estimated to rise to US$2.7 trillion by 2010. Few people in the world now remain sceptical about China's ability to realise this growth in the coming five years. In fact, this growth rate is relatively conservative and its growth momentum is beyond doubt. The Plan also outlines the new modes, new targets and objectives of the national development, bringing significant changes to the environment that we have known well over these two decades. A whole new situation will arise.
When I last came here in March, many Members asked about how the Plan would impact on Hong Kong. Meetings of the Commission on Strategic Development have also included discussions on the Plan. We regard the principles and contents of the Plan very highly. The HKSAR Government gave its views to the Central Government last year while the Plan was being formulated. I have been thinking a lot about the Plan over these weeks after the release of the Budget and reckon its realisation would have a great impact on our prevailing economic development track and strategies. We should reconsider our follow-up actions to the Plan.
First, the Plan spells out the improvement of the existing floating exchange rate system and the gradual realisation of full convertibility of renminbi transaction of capital items. Comprehensive reforms will be conducted in financial institutions, banks and insurance companies, while capital markets of equities and bonds will be actively developed. Naturally, the fast economic growth within the period of the Plan will involve a huge capital flow and entail a surging demand for financing services. The renminbi is becoming more influential in global markets, while our national foreign reserve now amounts to over US$800 billion. All sides of the international financial community are eyeing the China market, and competition is fierce in this new area.
Second, the transition period after China's accession to WTO will end this year. The Plan emphasises the objective to drive growth by expansion of domestic demand, in particular, consumption demand, and policies will be improved to create a favourable environment for consumers. The increasingly affluent society on the Mainland has become a priority market for many products and services, presenting a huge market potential of 1.3 billion people.
Third, the Plan outlines a fundamental change in the mode of economic growth, from being driven by resources input to being driven by improvement of resources utilisation efficiency, and relying more on science and technology and independent innovation capability to upgrade industries and speed up the growth of service sectors. It marks a new era in development for the Mainland in technology and overall competitiveness.
Fourth, the Plan sets out binding goals in terms of resource conservation and environmental protection to steer the country to sustainable development. Environmental pollution knows no boundary and the Hong Kong community has shown much concern about environmental issues recently. We are so glad to see that our neighbouring province Guangdong has devised a provincial-level "11th Five-year Plan" in accordance with the national plan, stipulating the construction of a "green Guangdong". It sets out that all fuel-burning power plants of over 125,000 kW within the province will adopt desulphurisation measures by 2008 and that more stringent vehicle emission standards will be implemented to regulate air pollution. According to the binding targets, total emission of major pollutants in Guangdong will be reduced by 10% by 2010.
Fifth, coordinated developments of the eastern, central and western regions of China will be pursued to make sound regional progress. The Plan aims for better defined social functions of the city groups of the PRD, Changjiang Delta and Beijing-Tianjin-Hebei Region to complement each other's strengths to enhance the competitiveness of each region and to boost development of the wider surrounding region. At the same time, Special Administrative Regions, Shanghai Pudong New Area, Tianjin Binhai New Area and the Economic Zone on the Western Coast of the Taiwan Strait will continue to give full play to their distinctive regional functions. The Plan breaks the confines of administrative boundaries, epitomising the new strategic thinking to achieve all-round development for the whole country.
Hong Kong's media is well aware that specific references to Hong Kong's functions and our interaction with the Mainland have been included in this new Plan, which states that "cooperation with Hong Kong and Macao in infrastructure construction, industrial development, resource utilisation and environmental protection will be strengthened", and that "support will be given to Hong Kong's development on fronts such as financial services, logistics, tourism and information services, and to maintain Hong Kong's status as an international hub on financial services, trade and shipping". These specific references to Hong Kong reaffirm the Central Government's recognition of our significant role in the development of the country.
Though the Plan clearly spells out our distinct position, we should be aware that, as the Mainland cities blossom and globalisation intensifies, we will face fierce competition in maintaining our status as a leading international centre. We will never rest on our laurels. As China's international financial centre, Hong Kong is unique in that the Hong Kong dollar is fully convertible, while our national currency the renminbi is yet to be so. Hong Kong is different from New York, London or Tokyo in this respect.
While the renminbi becomes increasingly integrated into the global economy, we in Hong Kong have ample opportunity. With our unique advantages, our sound institutions and infrastructure in place to provide a full array of financial services, we will have much to do for the country. We have started, and will further develop, renminbi business. No doubt we will see this trend of integration continue. The further enhancement of Hong Kong's position as an international financial centre will also be linked closely to this process of integration. Our robust systems, our good grasp of business know-how and our expertise will ensure sufficient safeguards for the national financial security in this process of integration. How should we plan to expand the renminbi business? As a market of effective risk management, how should we design the derivative products and gain valuable experience from the operation? How should we use it? These are subjects to be explored.
As an international trade centre, Hong Kong has long been a successful intermediary between Mainland production bases and overseas markets. The Plan outlines the strategic objective as driving development by expansion of domestic demand, so the Mainland consumer market will be of growing importance to us. Endowed with the advantages of CEPA and Pan-PRD regional cooperation mechanisms, our products and services are better positioned to secure the huge market of a wide region. But how can we adapt to increase our competitiveness on the Mainland? In particular, can we maintain our competitiveness when the effects of CEPA and the WTO transition period end? Used to the traditional operation mode of "large imports and large exports", many Hong Kong-invested enterprises on the Mainland might now face immense pressure to upgrade to fulfil the requirements on environmental protection, energy saving and independent innovation. They are going to have to meet the challenges. Can we do it? As for our strong service sectors, they will find much room for expansion on the Mainland, but also fierce competition from newcomers. How can we move up the value chain to sustain our leading position and reap the fruits of success? All these call for new thinking on the part of our trade services sector and supply chain management industry.
As regards Hong Kong's status as a shipping centre, there are even more pressing needs to upgrade. The Mainland is our major source of goods. The Plan sets out a number of transport infrastructure projects, including the construction of 17,000 km of new railway and 2.3 million km of highway to facilitate access between provinces. Ports in Shanghai, Ningbo, Fuzhou, Shenzhen and Guangzhou will continue to expand, exerting heavy pressure on us to compete for sources of goods. In air transportation, undeniably our international airport is at the forefront of the air cargo industry, but airports in Shenzhen, Guangzhou, Shanghai and Chengdu will be expanded under the Plan. We must work out ways to complement each other's strengths to promote mutual development.
The Plan stresses sustainable development, aiming to build a "resource-conserving" and "environment-friendly" society by setting out binding goals in terms of resource conservation and environmental protection. We welcome this new direction that serves the interests of Hong Kong. We must strengthen cooperation with neighbouring provinces and regions to bolster environmental planning. We must do our utmost to bring people in Hong Kong and the Mainland the clear skies and water that they enjoyed before.
Implementation of the Plan has started across the country. The issues I just mentioned would have an important and far-reaching influence on Hong Kong's long-term development. We must be quick in launching wide discussion in the community to form a consensus to formulate policies and strategies. After discussions with the Financial Secretary, therefore, I have decided to call an economic summit on the Plan to put all our best heads together to deliberate on these issues and our next step.
Representatives of the public sector, business leaders, economics experts, academics and labour leaders will be invited to join me, the Financial Secretary and other government officials to explore the subject of how Hong Kong should respond to the Plan. Topics will include: What initiatives should be taken to give full play to our position as an international financial centre while the renminbi gradually becomes fully convertible? What should be done to facilitate exchanges of factors of production and cooperation in industries while Mainland and Hong Kong businesses are operating separately under different systems? How can we cater to the Mainland's policy of enhancing independent innovation capability with our existing technological infrastructure and sound institutions? How can we improve our own industries while the Mainland focuses on quality enhancement in all industries? What sort of enlightenment can we find in the Plan to reinforce our status as international financial, trade and shipping centres? What specific challenges will emerge and what measures should be taken to tackle them? For instance, in the five years of the Plan, about 45 million people will move from the rural areas to the cities. Their consumer habits, the demands for commodities, raw materials and energy will drive the country to seek resources on the global market. Who can play the intermediary role? Can Hong Kong take a share of this? Can we contribute more to it? I hope these issues can be studied in the economic summit.
The economic summit is expected to be held before September this year. We will start off with the above topics, thoroughly deliberate on each item and conclude on matters to be followed up by policy bureaus, departments, advisory bodies, business organisations and other stakeholders. A working strategy with clear objectives and practical actions will be drawn up. The SAR Government will seek to discuss the recommendations of the summit with the Central Government, ministries and commissions, Pan-PRD Regional Co-operation and Development Forum, Hong Kong-Guangdong Co-operation Joint Conference and various provincial governments. The summit participants are expected to complete all work by the end of the second quarter of 2007.
This will be a working meeting, initiated by the Financial Secretary and I, to pool our wisdom. However, its scope of work and line of vision are different from those of the Policy Address and the Budget. The summit will be a "pragmatic" expert meeting to deliberate on specific topics and will be dissolved on finalising an action agenda. Its terms of reference will not overlap with those of the Commission on Strategic Development, which is formed to devise macro strategies and advise on our long-term development goals. The two complement each other's functions.
We must act right now to harness the strong momentum from the Mainland to drive our own development, to improve the lives and earning capacity of the general public and to make our unique contribution to the modernisation of the country. The prime task now is to form within the territory a general consensus on the goals and strategies of our economic development. Needless to say, all strategies will of course need the Members' support to achieve results.
Madam President, I am happy to take questions from Members.
(Please also refer to the Chinese portion of the opening remarks.)
Ends/Thursday, May 18, 2006
Issued at HKT 21:32
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