Following is the speech by the Financial Secretary, Mr John C Tsang, titled “Hong Kong as an Investment Destination” at the opening ceremony of 2nd MIPIM Asia at Hong Kong Convention and Exhibition Centre this morning (November 28):
 
Paul (Paul Zilk), Distinguished Guests, Ladies and Gentlemen,

     It's my great pleasure to be here this morning.

     First of all, I would like to congratulate MIPIM Asia for establishing itself as a major force in the dynamic property development and investment sector.

     This year, more than 3,000 people from 50 countries are here in Hong Kong to get the inside track on the latest opportunities, to network and to strike deals.

WHY HONG KONG?

     It comes as no surprise to us that MIPIM chose Hong Kong to hold this event - and this, despite a number of excellent cities and conference locations across the Asia Pacific.

     This event highlights one of our city's enduring strengths. Hong Kong is a place that lives and breathes business.  Billions of dollars are traded and invested every day - via our stock market, via private equity deals, via our trade flows, and, of course, via large-scale property investment projects.

     Hong Kong's edge, I believe, comes from the whole package that it offers - to the organisers of this event and, most importantly, to the delegates who take valuable time out of their working schedules to come here.

     As the title of my remarks suggest, I would like today to elaborate on "Hong Kong as an Investment Destination".

     What is Hong Kong's edge?  What has made - and continues to make - Hong Kong such a successful city for investment?

HONG KONG ADVANTAGES

     First up - let me give you a snapshot of where Hong Kong stands today.  Indeed, with the celebrations of our 10th Anniversary year since our reunification with Mainland China, we've had many opportunities to reflect on how this ambitious change has affected Hong Kong.

     Ladies and Gentlemen, I'd like to look at this question through the eyes of the thousands of foreign companies that choose Hong Kong for their regional offices or headquarters.

     These are the companies that, before making any investment, look at a number of potential locations across Asia.  As with all capital investments, they undertake some of the most stringent due diligence before putting their hands in their pockets.

     And what they're seeing is that the graphs are overwhelmingly up.  A decade on, Hong Kong is stronger than ever.

     Most importantly, the social, political and commercial freedoms that allow companies to flourish here remain unchanged: our rule of law, our civil rights, our vibrant and vocal media, our free flow of capital, people and goods, and our multi-cultural, multi-religion and multi-national community.

     It's an achievement recognised by companies and organisations the world over.  Hong Kong, for example, remains the 'World's Freest Economy' according to the Wall Street Journal/Heritage Foundation annual survey - a title we have held, unbroken, for the past 13 years.

ADAPTABILITY AND ENTREPRENEURSHIP

     Hong Kong's success - both now and in the past - has been firmly rooted in its ability to adapt -- not only to regional and global challenges, but also to its new role as the premier international city of China.

     It is popular to see winners and losers in China's staggering economic development.  However, the reality is that, far from being sidelined in the international scrum to get into Mainland China, Hong Kong has benefited massively from its unique relationship with its Motherland.

     Since reunification, Hong Kong's economy is larger than ever, buoyed by its dual role as China and Asia's most international city.

     GDP has been stronger over the past three years than what we have seen since the boom years of the mid-1980s.

     Hong Kong is currently the world's 11th largest trading economy, ahead of economic powerhouses like South Korea and India.

     We've built on our geographical advantages, which have us at the epicenter of some of Asia's highest potential economies.  With the help of our award winning airport, we sit within a five-hour radius of half the world's population.  We have multiple connections to more than 150 cities worldwide and some 40 in Mainland China.  This is an essential competitive advantage for companies based here, who want to be able to oversee projects in several cities across the region.

     The efficiency of our transport infrastructure is mirrored in the efficiency of our business infrastructure.  All the things modern business relies on - the latest technology, a business-friendly government, financial and legal transparency, a stable political and social environment, a freely exchangeable currency and zero tolerance to corruption - Hong Kong excels in them all.

     The net result is clear. In Asia, Hong Kong is second only to Mainland China in attracting foreign direct investment.  Last year, our inward FDI totalled just under US$42 billion - and in the first half of 2007, we have already reached more than US$27 billion.

     On top of this, Hong Kong remains Asia's most popular city for international business.  At last count, almost 4,000 foreign or Mainland companies had set up their regional offices or headquarters in Hong Kong.  And most importantly, these companies all enjoy exactly the same privileges and the same level playing field as our local companies.

KEY SECTORS

(i) Financial/professional services

     A key growth sector has been financial services. Hong Kong now has the world's sixth largest stock market - with a market cap more than four times larger than a decade ago.

     Our stock market is rated as the third most important global financial centre, after London and New York.  For ease of access to capital - a key ingredient in any property deal - Hong Kong ranks first in the world.

     Looking to the future, Hong Kong has emerged as the city of choice for Mainland companies looking to raise capital : up to August 2007, more than US$213 billion has been raised.  The number of Mainland firms listed on our Stock Exchange has risen fourfold in less than 10 years, and now accounts for over half of our total market cap.

     These companies come to Hong Kong - despite thriving markets in Shanghai and Shenzhen - because of the maturity, security and transparency of our financial market.

     Equally, Hong Kong-based financial service companies are playing a key role in facilitating the huge capital flows into - as well as out of - China.  These companies have come to Hong Kong to use this business friendly city as their springboard into the international market.

     Hong Kong banks are unique in being able to provide a range of RMB banking services outside China proper. A pilot scheme - to allow individual Mainland investors to buy stocks listed in Hong Kong - is also being explored. I understand the scheme will start when all the risk management measures have been put in place.

      Hong Kong is playing a substantial role - providing expertise and best practices - as China gradually liberalises its financial markets. The net result is that Hong Kong's exports of financial and professional services to China - including property deals -have enjoyed double digit growth for the past five years.

(ii) Trade services and investment into China

     But the spoils are not all for the bankers, property financiers, fund managers and private equity brokers.  Another pillar of Hong Kong's economy - trade - is flourishing.  In fact, trade with Mainland China has more than doubled since the handover.

     Another thing that has more than doubled is Hong Kong investment into Mainland China.  Some 40% of total investment currently operating in China has come from, or through, Hong Kong.

     Today, Hong Kong is the largest investor in all of China's major cities, including Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu.  So while these cities prosper, so too would our substantial business interests.

(iii) Leisure and business visitors

     Another significant change is in the number of Mainland business and leisure visitors. A decade ago, 2.4 million came to Hong Kong. Last year it was 13.6 million - an almost six-fold increase. If you add the rest of the world - Hong Kong welcomed more than 25.2 million visitors - almost 500,000 a week.

     In 2007, we've already topped this, and we're looking at more than 27 million before the year's out.

     This has, understandably, brought smiles to the faces of Hong Kong's famous retail sector, as well as our restaurants, bars and hotels.  It has also attracted huge interest from international retail, hotel and restaurant brands keen to raise awareness and test their products with affluent Asian shoppers.

     It takes no leap of faith to see how this surge in visitors is pushing up demand for premium retail and hotel developments.

HONG KONG: NOW & FUTURE

     Ladies and Gentlemen, while anniversaries provide us with an enjoyable opportunity to look back and reflect - on the ground in Hong Kong you'll find that our local and international business community already has their sights firmly set on the future.

     Despite having experienced one of the most eventful decades in our history, the next chapter looks to be just as lively.

     The major story of the past decade has been China's phenomenal rise as a manufacturing powerhouse and the wealth that it has brought. But looking forward, we see the tide turning as China continues to grow as a major consumer market for international products and services. Increased wealth and massive urbanisation projects are fuelling demand for superior quality residential and commercial developments.

     It's a business opportunity to which Hong Kong-based companies have been quick to respond, assisted by bilateral free trade deals and double taxation agreements which have smoothed the economic integration between our two economies.

     You'll see many of these projects showcased at MIPIM this year - and we in Hong Kong look forward to playing our key role in their success.

PROPERTY INVESTMENT

     Ladies and Gentlemen, I've given you today a general overview of what Hong Kong has to offer foreign or Mainland companies looking for a regional base in Asia.

     Let me turn briefly to the subject on most of your minds: property investment.

     I will leave the precise forecasts, trends and opportunities to the expert speakers you will hear over the coming days.

     Let me instead focus on Hong Kong as a hub in Asia for property deals.

     It comes down to Hong Kong's established dual role - both as a gateway to China deals, and as a business coordination centre in Asia.

     Put simply, if a major deal is going down in Asia, you can be sure that Hong Kong will - in some ways - be involved.  Be it design, project management, financing, legal issues, construction or facilities management - Hong Kong has a pool of expertise, supported by its pro-free market business environment, that attracts people here.

     Most of the major property developers and property management agencies have their Asia head offices in Hong Kong because they understand that when it comes to developing, selling and managing a property deal, Hong Kong is the place to be.

     Let me give you a small example. If you look at some of the best residential and commercial developments in China's major cities, you will find a Hong Kong designer, developer, finance company or law firm behind it.

     Take a look at Macau - and the incredible development taking place there - and you'll see the hand of Hong Kong, from those offering legal advice to those bending the steel rods on the construction sites.

     On the ground here in Hong Kong, property remains a major economic driver.  Almost 10 per cent of our vibrant Hang Seng Index is made up of property shares.

     Rentals in our office, retail and luxury residential sector continue to offer strong returns. The massive interest in Hong Kong by business and leisure visitors from China has caused much of the upward momentum.

     Hong Kong-based property giants offer another advantage.  They are rarely solely responsible for property investment.  Many have achieved phenomenal successes in other businesses and expanded into property, or vice versa.  So when you make a deal here in Hong Kong, it has the potential to offer access to many other investment opportunities.

WRAP UP

     Ladies and Gentlemen, over the coming three days, you'll hear from a lot of experts.  For us in Government, our aim is simple - to provide the best free market and competitive business environment.

     It's what our companies tell us what they want that is important - and it's a formula that has served us well.  We believe in the lightest touch possible - allowing companies to do what they do best.

     Events such as MIPIM showcase the best of Hong Kong - and we look forward to helping to make your stay here as profitable and enjoyable as possible.

     Have a great time.  Thank you.

Ends/Wednesday, November 28, 2007
Issued at HKT 11:18

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