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Following is the speech by the Financial Secretary, Mr John C Tsang, at a luncheon of the HKCBA National Canada-Hong Kong Business Forum 2009 in Vancouver, Canada today (May 4, Vancouver time):
Distinguished Guests, Ladies and Gentlemen,
Good afternoon.
I am delighted to be back here in the beautiful city of Vancouver. It is always a pleasure to meet up with old friends and make new ones, especially when you are surrounded by great scenery and treated to the wonderful Canadian hospitality.
The relationship between Hong Kong and Canada is unique in many ways. British Columbia alone is home to a 400 000-strong Chinese community, the vast majority of whom have strong ties to Hong Kong.
On the flip side of the coin, Hong Kong is the location of choice for Canada's business community in Asia. So we must be doing something right too!
Relations between Hong Kong and Canada extend well beyond business to include culture, education, entertainment and more. Hong Kong even has a celebrity hockey coach. Vancouver-born Barry Beck came to Hong Kong through our Quality Migrant Admission Scheme, or QMAS, in 2007. The former NHL star is helping to develop the sport at rinks across our city.
Naturally, Mr Beck is receiving some enthusiastic support from members of our vibrant Canadian community who are passionate about their national sport.
Of course, you don't have to be a hockey star to take advantage of the QMAS. Hundreds of people with sought-after talents have successfully applied to live and work in our city under the scheme. I assure you there is plenty of room for more talented individuals.
If ice hockey in Hong Kong seems a little out of the ordinary, consider another scenario - wine with a "Made in Hong Kong" label - with a Vancouver twist.
The 8th Estate Winery on Hong Kong Island is a first for our city. The company produces wine from grapes imported from around the world. The winery is a Hong Kong-Canada partnership inspired by Lysanne Tusar, who is from Vancouver. The Tusar family has a long history in the wine business in British Columbia. And Ms Tusar's Hong Kong venture is more than simply a happy coincidence.
She and her team saw a business opportunity in Hong Kong as we establish the city as a regional wine trading and distribution centre. We already have world-class infrastructure, well-developed logistics and a sophisticated society appreciative of fine wine.
In my 2008 Budget, I eliminated wine duties totally to enhance our status as a wine centre in Asia. Last year, the total value of our wine imports almost doubled year-on-year to more than CA$400 million (CA$405 million). The value of imports from Canada rose almost 250 per cent to nearly CA$1 million (CA$910,000). At the same time, renowned auction houses have staged a series of successful and lucrative sales in Hong Kong. We have tailored customs procedures to meet the needs of the wine trade, and identified buildings of historical interest, which may be used for wine-related activities.
Last year, our Trade Development Council organised the first Hong Kong International Wine and Spirits Fair. Of the almost 250 exhibitors, 16 were from Canada. One of them won the "Most Appealing Wine Label for Mainland Market Competition". I mention this because the industry predicts that the wine market in the Mainland of China - as well as throughout Asia - will boom in the next decade or so.
By taking advantage of Hong Kong's status as a free wine port, Canadian traders in Ontario, British Columbia and beyond can explore the opportunities in the Mainland and across Asia.
If hockey and wine can take off in our city, just imagine the potential for closer ties between Hong Kong and Canada in other, more established areas.
Last year, in response to the global financial crisis, we set up a Task Force to help Hong Kong respond to the economic turmoil. Part of the Task Force's job is to identify new opportunities for our economy during these uncertain economic times. This is helping us prepare for the economic recovery when it comes.
Last month, the Task Force members identified six areas of our economy where Hong Kong enjoys a clear advantage. The areas are testing and certification, medical services, innovation and technology, cultural and creative, environmental and educational services industries.
Allow me to talk about a couple of these areas.
On the environment, Hong Kong is determined to become a green example in our part of the world. We have strengthened co-operation with our neighbouring province of Guangdong to provide a cleaner environment and develop a green economy.
We are working together to improve the quality of our air, and devise new techniques and technologies that will help to make our corner of the globe an even more appealing place to live and work, and to visit. We are also examining the use of electric vehicles in our overall strategy to promote a green economy.
We welcome Canadian expertise in environmental innovation.
One way to get involved is through the "Shenzhen-Hong Kong Innovation Circle" which was launched in 2007. Under this collaborative framework, DuPont opened a new Solar Energy Research and Industrial platform at the Hong Kong Science Park earlier this year. Production will take place in nearby Shenzhen.
Canada and Hong Kong already have strong relations in the sphere of science and technology. I encourage more companies from British Columbia and across Canada to make use of our modern facilities, high-quality research talent and robust protection of intellectual property. Not only does the "Innovation Circle" framework help to develop and commercialise new products in Hong Kong but also across the boundary in the Mainland of China.
Another area we have identified as having strong potential is healthcare services. High-quality healthcare professionals who have the most advanced medical technology at their fingertips staff our hospitals and clinics. The Government has reserved four sites for private hospital development and we are working out strategies to make the best use of them. Our aim is to establish Hong Kong as a preferred location for medical services in Asia.
Establishing a Task Force to identify new opportunities for our economy is only one of our initiatives for battling the worst global financial crisis in a generation.
In the past 15 months, the Government has responded to the economic turmoil on five separate occasions. This includes my last two Budgets as well as stimulus measures announced by our Chief Executive last year. So far we have provided some CA$11 billion (HK$70 billion), which is equivalent to about 4.2 per cent of our GDP, to tackle the financial crisis. Our priority has been to preserve and create jobs and training opportunities as well as to lessen the impact of the financial tsunami on our community.
Our small and medium sized enterprises, or SMEs, are particularly vulnerable to the economic downturn and the drop in demand for exports around the world. We have provided CA$15 billion (HK$100 billion) in loan guarantees to local businesses to help them weather the storm.
To restore confidence in our financial markets, we have guaranteed deposits at local banks and provided additional capital to our banks should they require it. Our financial services sector remains in good shape and none of our banks needs rescuing.
Last month, the Milken Institute in the US placed Hong Kong second - behind only Canada - in its annual Capital Access Index.
Despite the difficult economic situation, our stock market has remained the 7th largest in the world and 3rd largest in Asia by market capitalisation. Last year, total equity funds raised in Hong Kong amounted to CA$63 billion (US$52 billion), the highest in Asia and fourth highest in the world.
We are also seizing new opportunities to deepen and broaden our role as an international financial centre and as our nation's most important city for global finance.
Last month, the Central Government in Beijing gave the all clear for a pilot programme to settle cross-boundary trade using Renminbi. With our experience in Renminbi banking, Hong Kong is ready to become the first place outside the Mainland to benefit from the scheme. Currently, cross-boundary trade is settled mostly in Hong Kong Dollars or US Dollars.
Last year, the value of exports to the Mainland from Hong Kong amounted to US$175 billion and imports from the Mainland exceeded US$180 billion. Renminbi settlement will give companies greater flexibility in countering risks of exchange rate fluctuations.
And while it is still unclear how many of our traders will opt for the new Renminbi settlement arrangements, it is clear the pilot scheme offers a glimpse of the enormous financial services potential of such transactions.
This pilot programme is the first major step towards promoting Renminbi as an international currency. It also gives strong impetus for Hong Kong to become a regional Renminbi clearing centre, strengthening our role as an international financial hub.
Ladies and Gentlemen, Hong Kong has been ranked number one in the world for economic freedom by the Fraser Institute here in Canada for the past three decades. Under the "One Country, Two Systems" formula for our reunification with the Mainland, we have retained the common law legal system. Last month, Hong Kong hosted the Commonwealth Law Conference. We are the first non-commonwealth jurisdiction to have had this privilege. Our staging of the event recognised the successful implementation of the "One Country, Two Systems" principle, and underlined the importance we place on maintaining an independent judiciary and independent legal system.
We also have a low and simple tax system with maximum salaries tax capped at 15 per cent and profits tax at 16.5 per cent. We have no sales tax, no death duties and no capital gains tax. Our civil service is clean and efficient and our Independent Commission Against Corruption is highly regarded around the world.
These are some of the reasons why more than 160 Canadian companies have established a regional base in Hong Kong. They include relatively small firms, such as the 8th Estate Winery as well as some of the biggest names in financial services, aviation, real estate and telecommunications.
We welcome more Canadian companies - large and small - to come to Hong Kong and test the water in our neck of the woods.
Earlier this year, the Central Government set a goal of establishing the Pearl River Delta, including the Special Administrative Regions of Hong Kong and Macao and the Province of Guangdong as one of the most competitive regions in the world by 2020.
The framework supports a more flexible approach to cross-boundary engagement in areas, such as infrastructure development and environmental strategies as well as trade and logistics. Under the framework, Hong Kong's financial services sector will continue working to dovetail our two financial systems.
The aim is to accelerate the opening up of markets across the boundary and further break down barriers to trade and investment. And that is precisely what the world's freest economy enjoys doing most.
Ladies and Gentlemen, no one knows for sure when the global economy will rebound. But when it does recover, Hong Kong will be ready to make the most of the opportunities that will surely come our way.
I wish to thank the Hong Kong-Canada Business Association for organising this Forum, and giving me the opportunity to speak with you today. I look forward to even stronger relations between Hong Kong and Canada for many years to come.
Thank you.
Ends/Tuesday, May 5, 2009
Issued at HKT 12:00
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