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Following is a speech by the Chief Executive, Mr Donald Tsang, at a business luncheon organised by HKETO Brussels and HKTDC today (November 9 Paris time):
Minister Lagarde, distinguished guests, ladies and gentlemen,
Good afternoon. I am delighted to be back in Paris after five years. Times change, but one thing that never changes is the eternal attraction of Paris, the City of Light.
First of all, I would like to thank all of you for your interest in Hong Kong. France and Hong Kong have a close economic and trade relationship, and it is a relationship that has been getting stronger. Hong Kong is home to the largest French community in East Asia - about 6 000 native French-speakers. We have the highest concentration of French companies in Asia - about 570 - of which about one-third are regional operations. French companies in Hong Kong are involved in banking, insurance, transport, construction, environmental services and, of course, the high-profile luxury goods industry.
French businesses have been in Hong Kong for more than 110 years. And there's a reason for it. Hong Kong offers the best platform for international business in Asia. But, equally enticing, is the role we have been developing as a business platform for the rapidly developing China market. In this regard, there have been important and exciting developments since Hong Kong's reunification with China in 1997 and the implementation of 'One Country, Two Systems'. I would like to share with you these developments today.
Since 1997, Hong Kong has retained all its freedoms and its capitalist way of life under the unique concept of 'One Country, Two Systems'. We remain a progressive, free and stable society. We have retained our fundamental advantages - the rule of law upheld by an independent judiciary; a level playing field for business; a clean, efficient government; free flow of news and information; a freely convertible and trusted currency; the free flow of goods and capital; low taxes; superb infrastructure and world-class communications. Our unwavering commitment to these pillars of our success has been well recognised by international public policy think tanks such as the Heritage Foundation and the Cato Institute, which have consistently rated Hong Kong as the world's freest economy.
We remain a very cosmopolitan and international city - we like to call ourselves Asia's world city. We are home to 3 800 international companies with regional operations - an increase of 50% since 1997. We play an active role in international fora such as the World Trade Organization (WTO) and APEC. We have a network of economic and trade offices throughout the world to ensure that we maintain close links with our major - and emerging - trading partners. And we are home to more than 500 000 foreign passport holders. So, we are very much a globalised city, in a globalised world.
We are also very much a Chinese city - but a unique one with a special role in our country's development. About 95% of the population is ethnic Chinese. We share the same language and culture. We are the premier trade and investment hub for the Mainland of China, its closest economic partner, and by far its biggest external investor, with total investment of ?212 billion (US$270 billion). About 80 000 enterprises with Hong Kong connections employ more than 11 million workers in the adjoining Guangdong Province alone. Closer to home, the Pearl River Delta has become the Mainland's economic engine, known as the 'factory of the world'. The Greater Pearl River Delta, including Hong Kong and Macau, is one of the most prosperous and vigorous economic centres in the world, with Hong Kong being a major international services centre and Guangdong a dynamic manufacturing base.
The Central Government certainly understands Hong Kong's crucial role in China's growth. Our country's Eleventh Five-Year Plan recognises our pillar industries - financial services, logistics, tourism and information services - and upholds Hong Kong's status as an international centre for finance, trade and shipping. From a national perspective, Hong Kong is not just another Chinese city, but a Chinese city with a unique and irreplaceable role in our country's development.
Just two months ago, I convened an economic summit to study the opportunities and challenges presented by our country's Eleventh Five-Year Plan. In collaboration with leaders in our business, labour and professional sectors as well as eminent scholars in local universities, we are working on an action agenda, to be ready by early next year, to chart an economic path forward in the key sectors of financial services; professional services, information and technology and tourism; trade and business; and, maritime services, logistics and infrastructure.
While we react and re-adjust to the domestic developments within our country, we also have to react and re-adjust to the effects of globalisation on our country. For more than two decades after China implemented its opening up policy, Hong Kong has enjoyed an almost exclusive franchise as the gateway to overseas trade and investment in the Mainland - and we have prospered as a result.
But, since China joined the WTO at the end of 2001, the economic landscape has changed. Nowadays, more companies are exploring the direct route into the Mainland market. Within a month or so, China's 5-year window to fully implement its WTO commitments will come to a close.
The new situation of a China fully plugged into the rules-based global trading system will present an unprecedented challenge to Hong Kong's position - as well as unprecedented opportunities. We are no longer just a gateway into the Mainland. We now act more like a revolving door that ushers in trade and investment into China from Hong Kong and abroad, while on the return spin takes trade and investment from China out to Hong Kong and abroad.
One of the best examples of how this interplay works - Hong Kong the international city and Hong Kong the Chinese city - is our Closer Economic Partnership Arrangement with the Mainland. This arrangement is akin to a free trade agreement, providing tariff-free access to the Mainland for all Hong Kong goods, as well as enhanced access in 27 services sectors. CEPA offers Hong Kong companies access to the Mainland market above and beyond China's WTO commitments. CEPA is possible because under 'One Country, Two Systems', both Hong Kong and China are members of the WTO in our own right.
With CEPA, any locally incorporated subsidiary of an overseas company is treated the same as a local company. Since CEPA was implemented in 2004, more than 1 000 companies have secured service supplier certificates in sectors such as transport and logistics, distribution, advertising, construction professional services and management consulting. About half of these certificates are held by foreign-linked companies, and 12 percent by EU-linked companies. These firms have thus secured an edge in the Mainland market.
Hong Kong and the Mainland are continuously updating CEPA to make it broader, deeper and more responsive to the business community. The result is an ever more favourable business platform for international companies to enter the Mainland market via their Hong Kong operations, or by teaming up with Hong Kong companies.
Another example of opportunities arising from enhanced Mainland-Hong Kong co-operation is the Pan-Pearl River Delta initiative, known as Pan-PRD or '9+2'. Pan-PRD brings together the nine southern provinces of China plus the two Special Administrative Regions of Hong Kong and Macau. Working together, we seek to unleash the economic potential of a huge, integrated economy in southern China - a market of more than 470 million people, about the same population as the EU's. Our main aim is to break down the non-tariff barriers to trade and investment within this vast region, and enhance the flow of talent, capital, goods and services. While our Pan-PRD partners provide abundant land and labour, local market know-how and enhanced market access, Hong Kong supplies the capital, the professional expertise and the international connections. We play different but complementary roles.
Significantly, co-operation between Hong Kong and our Pan-PRD partners extends beyond trade, commerce and investment. It also embraces cooperation in diverse areas ranging from infrastructure, education and culture, IT, environmental protection, tourism, to public health and prevention of infectious disease. So Hong Kong is not only helping our country to engage the world on the economic front. We are also deepening our own relationship with our country across a wide range of important sectors. Government-to-government contacts have expanded significantly. As a result, the Mainland understands much better what underpins Hong Kong's success as a world city. For our part, Hong Kong appreciates more deeply the relative strengths of the Pan-PRD provinces. This economic partnership has also enhanced cultural, tourism and professional exchanges. We believe that the Pan-PRD initiative can serve as a model for ongoing economic liberalisation and opening up in the rest of the country.
It is not difficult, then, to imagine Hong Kong a few years hence as the hub of a vast and prosperous regional economy. Or to imagine the many new opportunities this will present for international companies, for French companies, wishing to get a foothold in Asia, and especially China.
On the other side of the coin, Mainland companies find Hong Kong the ideal location for reaching out to international markets or raising capital. Mainland enterprises have raised nearly ?142 billion (US$180 billion) on the Hong Kong stock market since 1993. The latest big Mainland company to go public in Hong Kong was the Industrial and Commercial Bank of China, which raised about ?11 billion (US$14 billion) in the Hong Kong market last month, setting a world IPO record.
Whether we are talking about a small company taking its first steps in Asia, or a multinational corporation looking for a premium business location in Asia, or a Chinese company wishing to make its mark on the world - Hong Kong has the perfect combination of attributes to service them and meet all of their varied requirements.
Hong Kong is now poised to enter a new phase of development that is firmly underpinned by competitive advantages second to none in Asia. We have the adaptive prowess, the international connections, the experience and the global outlook to continue to occupy the position of the premier international business hub in Asia for the foreseeable future. We have CEPA, which gives us enhanced access to the China market for our goods and services. We have the Pan-PRD initiative, which will unlock the huge economic potential of a vast market - with Hong Kong providing the high-end business services and the management of capital flows. And, we have a clearly defined role in our nation's development blueprint for at least the next five years.
Ladies and gentlemen, the implementation of 'One Country, Two Systems' since 1997 has added another dimension to our recipe for our success. We are succeeding in our role as Asia's world city. We are also succeeding in our role as the most open, free and international city in China. 'One city, two roles'. We have come a long way, and achieved much since 1997. I am most certain of one thing - that this first decade as a Special Administrative Region of China has laid the foundations for the growth of Hong Kong. Our golden era is about to come in the next decade. I warmly Invite French business to come to Hong Kong to be part of that success story.
Thank you very much.
Ends/Thursday, November 9, 2006
Issued at HKT 21:00
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