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Speech by SFST at Canada-Hong Kong Business Forum 2007 (with photos) (English only)

    Following is a luncheon speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at the Canada-Hong Kong Business Forum 2007 today (April 23, Toronto Time):(English only)

Hong Kong: Gateway to Opportunities in China

Ambassador Lu, Mayor McCallion, Councillors, distinguished guests, ladies and gentlemen,

     Good afternoon. Thank you for inviting me to speak at the Canada-Hong Kong Business Forum, which coincides with the first Hong Kong-Fujian joint initiative in Canada. I am always glad to be back in Toronto. It is a pleasure visiting this beautiful country, which is like a second home to me ever since I spent six years working here in Toronto in the eighties for a Canadian securities firm.  I was fortunate to have made a lot of good friends during those days, and I am delighted to see some of them here today.

     This year, we are celebrating the 10th anniversary of Hong Kong's reunification with China.  I am happy to be here to share with you what Hong Kong offers as a gateway to opportunities in China.  I also want to tell you about the huge business opportunities for Canadian companies in Fujian, which is a fast-growing province in the Mainland of China.

Hong Kong/Canada relationship

     Hong Kong and Canada have long enjoyed very close socio-economic relationship.   The bond goes far beyond trade and commerce, and is deeply rooted in people-to-people ties. There is a large Hong Kong population in Canada, notably in Toronto and Vancouver, including tens of thousands of Hong Kong students.  At the same time, some 250,000 Canadian citizens reside in Hong Kong. Indeed, the Canadian Chamber of Commerce in Hong Kong, with over 1,200 members, is the largest outside Canada. The Canadian international schools in Hong Kong, with an ever-growing number of students also help to strengthen the links between Canadians and Hong Kong people.

     On economic partnership, Hong Kong's trade with Canada is significant, reaching C$5.6 billion in 2006. Some 160 Canadian companies are operating in Hong Kong.  Another 600 Canadian companies are also represented in Hong Kong by distributors, agents or joint venture partners, forming the largest Canadian overseas business community in Asia.

China's economy

     As you all know, Hong Kong is part of China, operating under "One Country Two Systems". And the Chinese economy is doing very well. Since the start of her opening-up process in the late 1970s, China's GDP has soared over 46 times. In 2006, China's GDP reached US$2.6 trillion, securing her position as the world's 4th largest economy.  China continues to be Asia's major destination for foreign direct investment.

     There is every reason for Canadian companies and investors to tap into this remarkable market: a market of 1.3 billion people attaining an average annual economic growth rate of 9.2% in the past 10 years, with GDP in 2006 hitting 10.7%.

     So, what is the best way to tap the opportunities in this huge economic powerhouse? Hong Kong is the answer.

Hong Kong as Asia's World City and IFC

     But what makes Hong Kong unique? My colleague, Mike Rowse, spoke this morning on Hong Kong's fundamental strengths as Asia's World City.  So, I need not repeat here.

     Premised on our fundamental strengths, Hong Kong has developed into one of the most vibrant international financial centres in the region.  From 1970 to the present, the Fraser Institute in Vancouver has ranked Hong Kong as the freest economy in the world. We have also been recognised as the world's freest economy for 13 years straight by the Heritage Foundation. The Global Financial Centres Index published by the City of London ranked Hong Kong just behind London and New York in terms of financial centre competitiveness.

     Our stock market now ranks amongst the largest in the world and second largest in Asia after Tokyo in terms of market capitalisation. Last year, Hong Kong topped the table in Asia for IPOs, and was second globally, ahead of New York and after London.  The world's largest equity IPO was launched in Hong Kong last year, and our financial markets have attracted a huge amount of overseas funds.  We are now the sixth largest foreign exchange market in the world, and Asia's 3rd largest international banking centre, with about 70 of the world's top 100 banks operating in Hong Kong, including all major Canadian banks.

     Hong Kong's private equity sector has developed strong expertise in investing in Asia, China in particular, and is vital for those growing and innovative businesses in the Mainland of China.  In fact, latest figures as at mid-2006 revealed that Hong Kong was the largest venture capital centre in Asia, home to about US$40 billion in funds or 29% of the total Asian private equity pool.

Hong Kong as a gateway to the Mainland of China

     What has enabled such a small city to evolve into an unrivalled gateway to China?

     The answer is simple: with more than 94% of Hong Kong's population being ethnic Chinese, we share language and cultural affinity with the Chinese Mainland and understand their way of thinking and doing business. Furthermore, our manufacturers were the first to go and invest in the Mainland of China, in particular the Pearl River Delta region.  Today, in Guangdong Province, there are more than 60,000 Hong Kong-owned factories, employing some 10 million workers.

     In the 10 years since Hong Kong's reunification with the motherland, the "One Country, Two Systems" principle has been successfully put into practice.  Our ties with the Mainland have been greatly strengthened while all our fundamental strengths are well maintained.  This has made Hong Kong a unique city within China and an irreplaceable platform for overseas enterprises and investors to access business and investment opportunities there.

     Hong Kong is, therefore, a supreme choice for setting up offices for investing in China.  That is why more than 6,300 companies have already set up regional headquarters, and regional or local offices in Hong Kong.

     Hong Kong is also frequently chosen by Chinese Mainland enterprises as a channel for raising equity capital to finance their business projects. The ongoing restructuring of state-owned enterprises and the flourishing of private enterprises have generated substantial financing needs.  Our highly liquid, long-established and well-regulated stock market has provided an excellent platform to serve as China's premier international capital formation centre, helping to channel capital to the Chinese Mainland market and at the same time offering a chance for international investors to invest in those enterprises.

     Some 370 Chinese Mainland companies are now listed on our stock exchange, having raised a total of some US$193 billion since 1993. They contribute 50% of our market capitalisation and 65% of market turnover.

     But access to capital is not the only reason for Chinese Mainland enterprises to list in Hong Kong.  Hong Kong listing could facilitate these enterprises in enhancing corporate governance and accounting standards in line with international benchmarks and bringing them recognition by international investors.

     Hong Kong is in the best position to serve as a bridge for connecting investors, fund-raisers and financial institutions in the Mainland of China with the global market. The measures implemented by the Mainland to allow local funds to invest in overseas financial markets through qualified domestic institutional investors, or commonly known as QDII, have paved the way for Hong Kong to further develop as the Mainland's global investment platform.  Canadian financial institutions are encouraged to use Hong Kong as a base to offer investment products and services to Chinese investors .

     Hong Kong remains the largest source of foreign direct investments (FDI) into China. We contributed about 41% of the cumulative FDI into the Mainland in 2006.  Hong Kong is also China's third largest trading partner, just after US and Japan, in handling about 9% of the Mainland's foreign trade.  If you look at the bilateral trade between Canada and China, you will find around 16% of the total trade between the two countries is actually routed through Hong Kong.

     Hong Kong is the first place outside the Mainland of China that can operate Renminbi business.  Our banks currently provide Renminbi deposit-taking, exchange and remittance services, and debit and credit card services. This broadens the business opportunities for Hong Kong's financial services sector, and facilitates cross-boundary spending and economic integration between Hong Kong and China's Mainland.

     Many investors are very bullish on the future of Renminbi. You would be interested to learn that recently, the Central People's Government has agreed to further expand Renminbi business in Hong Kong by allowing financial institutions in the Mainland of China, upon obtaining approval, to issue Renminbi denominated financial bonds in Hong Kong.  Investors world-wide will be able to have Renminbi exposure through this channel.

     As I mentioned to you earlier, the natural process of economic integration between Hong Kong and the Mainland of China, in particular the Guangdong Province and nearby region, collectively known as the Pearl River Delta (PRD) region, began decades ago.  A broader and more structured cooperation framework, known as the Pan-PRD Regional Cooperation and Development Forum was formally launched in 2004.  It provides an excellent platform for the nine provinces plus Hong Kong and Macau in the Pan-PRD region to enhance co-operation in various areas, including investment, financial services, commerce and trade, infrastructure, tourism, etc.  Fujian is the first province I visited under this co-operation framework, together with a 70-member Hong Kong financial services delegation.  Hong Kong, Fujian and other parts of the Pan-PRD region will continue to work hand in hand to promote economic development in the region and build trading and business links with other parts of the world, like Canada.

Concluding remarks

     Ladies and gentlemen, Hong Kong has been serving as a premier international financial intermediation platform for Mainland companies and investors to connect with their foreign counterparts and vice versa.  In the course of China's economic development, we see our role gaining more significance, in particular in contributing to the financial services development of our Motherland, thanks to our fundamental strengths built over the years and the successful implementation of "One Country, Two Systems". Hong Kong's unique role is further reaffirmed by the Central People's Government in her 11th Five-Year Plan that staunchly supported the "development of financial services in Hong Kong" and Premier Wen Jiabao, at a press conference last month in Beijing, reiterated that Hong Kong's role as a financial, shipping and trade centre is irreplaceable.

     The opportunities ahead for Canadian businessmen and investors are abundant and wide-ranging if you make use of Hong Kong as your base for expanding into the Mainland Chinese market.  The outcome will certainly be a win-win-win situation for you, China and Hong Kong.

     Finally, if you have not visited Hong Kong lately, I cordially invite you to this Asia's World City and join us for our 10th anniversary celebrations.

     In closing, I wish the Forum a success and all of you a fruitful and enjoyable afternoon. Thank you.

Ends/Tuesday, April 24, 2007
Issued at HKT 11:46


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