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Following is the speech by the Financial Secretary, Mr John C Tsang, in Washington, DC, on October 22 (Washington, DC time) at the 10th Anniversary Conference: Hong Kong on the Move:
Distinguished Guests, Ladies and Gentlemen,
Good morning.
It is a great honour and privilege for me to speak with such a distinguished audience here at this nation's capital. There is always something special about being in Washington, DC. Even though I have been here many times, it still gives me a sense of awe and excitement to see and feel the buzz of so many things happening all at once - the shaping of political, economic, and other events that have such a bearing on the rest of us.
I am awed also by the wonderful museums and monuments you have here, and the history behind them. And it's great that you can get in for free, although as a Financial Secretary, I have to wonder a little about that! In any event, they are good examples of what we could do for our M+ at the West Kowloon Cultural District which will be built.
Today I would like to share my thoughts with you on how we in Hong Kong have fared since we became a Special Administrative Region of China. As you know, Hong Kong celebrated a very important event recently -- the 10th Anniversary of the establishment of the Special Administrative Region. I am happy to report we are still very much alive and kicking, the prediction of our imminent demise in Fortune Magazine notwithstanding!
Those who truly know Hong Kong knew at the time the dire predictions would not come to pass. Many were rightly concerned but also confident that the sovereignty change would not cause Hong Kong to simply fade from the stage as a financial centre. No one's interest would have been served to allow the fading away of one of Asia's top economic hubs that acted as a window on an emerging China that was rapidly opening up to the world.
Don't get me wrong. The past 10 years have not exactly been a piece of cake. We've had difficult times, plenty of them. But the point to make is that the many challenges that we faced, and overcame, in the past 10 years had everything to do with a combination of fate and exceptional circumstances, and little to do with the sovereignty transfer itself.
A further point to be made, and I can't emphasise this enough, is the resilience of the "One Country, Two Systems" concept which was put to the test practically from birth. You can say it had a baptism by fire.
Barely had we finished celebrating the birth of the Special Administrative Region on July 1, 1997, the first gusts were already whipping from the powerful and destructive storm that came to be known as the Asian Financial Crisis. The eye of that storm sent many of the economies in our region into a tailspin.
The fall-out was wide, deep and prolonged for us in Hong Kong and for the region as a whole. Add to that the mix of the dot com bubble burst, the global turmoil following the 9/11 attacks against this country, SARS, and the avian flu, you have in Hong Kong what you might call a perfect storm.
The Asian Financial Crisis - worsened by the tragic consequences of SARS - shook our confidence, caused asset prices to plunge, and brought about more than five years of deflation. It put us at a crossroad where the fledgling Special Administrative Region had to choose between defeatism and hope.
For us the choice was clear. Hong Kong remained true to its penchant for succeeding against the odds. The community has shown time and again that it is able to fight the odds and re-emerge stronger and more confident of itself. If there is a silver lining in the many tough challenges we had faced over the past decade, it is that the "One Country, Two Systems" concept has been tried and tested so rigorously that there can be little doubt about its effectiveness. Our core values that some at home and abroad - including some in this country - feared would be undermined by the Reunification, held fast through the many challenges we faced. The rule of law, which is so cherished by our community, continues to be fiercely upheld by an independent judiciary, the Government remains clean and open, business enjoys a level playing field, the information flow remains unhindered, taxes are low and getting lower, and our currency continues to be freely convertible.
We survived the perfect storm to deal with the new challenges that we now face and others to come, for there will always be challenges, but along with these challenges, there are also opportunities.
At this time, I would like to take this opportunity to bring you up to date on where Hong Kong is 10 years after reunification. The rough ride we have had is, thankfully, behind us. We are now sailing through much calmer waters, with a stable economy, a booming stock market, falling unemployment, rising assets, a strong property sector, a good balance sheet, and manageable inflation.
Real GDP growth was 6.9% last year compared to 5.1% in 1997, the year of reunification. The growth in the three years between 2004-06 was 7.7% compared to 4.4% in the three years up to 1997. The per capita GDP was US$27,700 last year compared to US$26,900 in 1997. Consumer price inflation was 2% last year compared to 5.8% in 1997. We had 25.3 million incoming visitors last year compared to 11.3 million in 1997. We had 3,845 regional headquarters and regional offices in Hong Kong last year compared to 2,514 in 1997. Just one more set of numbers! We had 9.4 million cell-phone subscribers last year, ranked among the top in the world, compared to 2.1 million in 1997. That means we have today about 1.4 phones for every man, woman and child in Hong Kong. I guess we like to be in touch.
As you can see, Hong Kong did not lose its nerve or simply throw its hands in the air and give up when the going got tough. It has continued to grow and prosper after overcoming the many obstacles thrown our way over the past decade. As a matter of fact, the obstacles have made us more sure-footed as we continue to re-define and re-invent our role in the global community to benefit from the opportunities being created by a prospering world. Our relationship with Mainland China is stronger, deeper, and broader than it has ever been. There are obvious benefits to this, coming at a time when China is the world's fastest-growing economy. Our long-held asset as China's window on the world has enabled us to further develop our role as our nation's global financial centre. China needs such a centre to link it to the outside world because of its rise as a global force. Hong Kong's many decades of experience as an international city makes us the natural choice to fill this role. Indeed, our role was confirmed just recently in China's latest economic blueprint, the 11th Five-Year Plan, which spells out the part we play as an international financial centre serving the nation's growing needs.
In this role we will service the inflows from around the world into China, and the outflows from China and the region. To do that efficiently, we need to expand our tried and trusted financial institutions on the Mainland, and the best way to do that is through our free trade agreement with the Mainland, known as the Closer Economic Partnership Arrangement or CEPA which will be expanded from 27 service sectors to 38 at the start of next year.
We also need to play a bigger role in the outflow of funds from the Mainland. Our stock market is the perfect channel for the Mainland's domestic liquidity. A recently-announced pilot scheme allows Mainland individuals to directly buy Hong Kong stocks, and the final details are being worked out. Hong Kong must also further develop our handling of transactions in Renminbi, China's currency, which is fast gaining in stature as the nation's importance grows. Thirty-eight Hong Kong banks now offer Renminbi services under a scheme that began in 2004. In June, Hong Kong also became the first and only place outside the Mainland to operate a Renminbi bond market, and in the last three months, we have successfully launched three issues, totalling 10 billion yuan.
All this does not, of course, mean our eyes are focused only on the Mainland. While we must carve out an irreplaceable role in China's development, we have always been international in nature, and that will not change. Even as we maximise our benefits as a Special Administrative Region of China, we fully intend to live up to our role as Asia's World City. We will not lose sight of the new frontiers that are being constantly created by the ever growing global economy. Hong Kong needs the world, and I do believe the world cannot afford to do without Hong Kong.
The Special Administrative Region is blessed in that it is celebrating its 10th anniversary at a time when the global situation is relatively stable. The Mainland is, of course, booming, and our other trading partners are also enjoying good economic growth.
But that doesn't mean we can take our eye off the ball. The global economy is becoming crowded with new competitors even as it throws up new opportunities. There is much talk Hong Kong is becoming marginalised. I won't deny things are getting tougher, but we remain on top of our game and indispensable in China's development. But to stay in the game, we must continue to hone our strength as a service-based economy that offers added-value. We must be vigilant of protectionist sentiments caused by the hiccups in the China's trade relationships over such things as the ballooning trade surplus in China's favour, and the recent troubles involving the "Made in China" brand. We believe these issues should be dealt with through proper trade channels, such as the WTO rather than through unilateral protectionist policies.
Domestically, inflation is creeping up in Hong Kong. It is still at a moderate level, given the overall growth of our economy, but it remains a worry, and we are mindful of it.
Many of you have probably heard stories, some rather exaggerated ones, about Hong Kong's air pollution. It is caused by a combination of industrial activity in the Pearl River Delta Region and power plants and vehicular emissions in Hong Kong. It is a top priority for us, and the Special Administrative Region Government has taken every measure possible to deal with it.
On the political front, we have consulted the public on the direction of political reforms and these views are now being assessed. Our intention has always been to follow a path that wins the support of the community, the legislature and the Central Government in accordance with our Basic Law.
Ladies and Gentlemen, the story of Hong Kong is no longer about how we would fare as a Special Administrative Region of China under the "One Country, Two Systems" concept. We are now in the 10th year of reunification. These past ten years have shown we have done well despite the many challenges thrown our way. The "One Country, Two Systems" concept has lived up to the task that it was set to do. Early doubts have now been put to rest. The new story of Hong Kong is about how this city of seven million people would fare in the 21st century in fulfilling its role as China's global financial centre and Asia's World City.
I have no doubt in my mind that Hong Kong will live up to its record of rising to the challenge and overcoming the odds.
Have a good day.
Ends/Tuesday, October 23, 2007
Issued at HKT 14:30
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