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Following is the speech by the Financial Secretary, Mr John C Tsang, at the conference on “Hong Kong: Your Ideal Fund-Raising Centre” in Moscow, Russia today (June 2, Moscow time):
Distinguished Guests, Ladies and Gentlemen,
Dobry den.
It is a great pleasure for me to be here in the great city of Moscow.
This is my first visit to Russia. I am also delighted to share the experience with a delegation of some of Hong Kong’s leading figures in business and finance who are here with me today. Also, “thank you” to our hosts for your warm hospitality.
I have been to many magnificent cities around the world, but to tell you the truth, I do not get to see too much of these places because I am usually shuffled from place to place in really engagement packed days. Even then, I take every chance to get a close-up fell of the economy, geography, history, culture and people so that I can try to identify opportunities to expand Hong Kong’s potential as an international business and financial centre.
Russia is, indeed, a fascinating and attractive destination that is full of opportunity for the Hong Kong people.
In April, we signed a mutual visa-free access agreement between Hong Kong and Russia. This will encourage more Hong Kong people to come to Russia once the arrangements come into force this summer. Of course, we also welcome more Russian visitors to come to Hong Kong to experience our own unique city lifestyle, one that carries a unique blend of the East and the West; one that is simply cosmopolitan.
Including Russia, Hong Kong SAR passport holders enjoy visa-free access to 138 destinations around the world. It is an example of how we have maintained our global connectivity since our reunification with the Mainland of China in 1997.
Since reunification, Hong Kong people continue to run Hong Kong in much the same way as we have always done. Our high degree of autonomy is guaranteed by the Basic Law, which is our constitutional document, and guided by the principle of “One Country, Two Systems”.
At the same time, we have become more closely integrated with the Mainland over the past 13 years. Hong Kong both benefits from and contributes to our nation’s economic success. Hong Kong is a base for more Mainland companies than ever before, and our banks offer a range of services using the Mainland currency, the Renminbi. We even have a free trade agreement with the Mainland which is made possible by the “One Country, Two Systems” concept.
Of course, it hasn’t all been plain sailing. The Asian financial crisis a decade ago took the wind out of our sails. It was also followed by a long period of deflation. Just as we were getting back on our feet, the outbreak of SARS in 2003 dealt another blow to our economy.
Nevertheless, we have managed to bounce back from each setback stronger than before.
These days we all have to deal with a deep global financial crisis. Just last week, we announced a new package of stimulus measures to help our recovery. This package continued our strategy of timely and targeted intervention to maintain economic stability, preserve jobs and assist people in need. So far, we have provided some US$11 billion to tackle the economic downturn. In addition, we have guaranteed bank deposits and provided US$13 billion in loan guarantees to businesses.
Although we have forecast our GDP to contract by between minus 5.5 per cent and minus 6.5 per cent, our economy remains stable, none of our banks have failed and our financial sector is sound.
Throughout the good times and not so good times, Hong Kong has remained committed to the principles of open markets and free trade. This has underpinned our success over the years and is key to our future prosperity. The Fraser Institute in Canada has ranked Hong Kong number one in the world for economic freedom for the past three decades, and the US-based Heritage Foundation has named Hong Kong as the world’s freest economy for each of the past 15 years.
This highlights our commitment to a transparent, stable and open economy. It also explains why Hong Kong remains a location of choice for overseas companies in Asia.
More than 6,600 Mainland and overseas companies run their regional operations from Hong Kong. These include some of the largest Russian companies in aviation, shipping, metals and precious stones. I can assure you that there is plenty of room for more companies to join us.
Hong Kong’s business-friendly environment is built on strong legal foundations, on a clean and efficient government and on a low and simple tax regime. Last year, we lowered salaries tax to 15 per cent and profits tax to 16.5 per cent. We have no inheritance tax, no capital gains tax, no VAT and no GST. Only income sourced in Hong Kong is taxable in Hong Kong.
Earlier, I mentioned our free trade agreement with the Mainland, what we call the Closer Economic Partnership Arrangement, or CEPA for short. The great thing about CEPA is that it is nationality-neutral, and foreign firms incorporated in Hong Kong, including Russian firms, can enjoy the full benefits of CEPA.
Last month, we signed a new supplement to CEPA. This increased the number of services areas covered to 42 – further breaking down barriers to trade, services and investment with the Mainland.
New initiatives this year will make it easier for banks to expand their services on the Mainland, and enable local securities companies to participate in the development of the securities market across the boundary. These are in addition to measures that are already included under CEPA and cover banking, insurance, accountancy and securities as well as a range of other key services areas.
There is also a proposal to establish an “open-end index-tracking exchange-traded fund” in the Mainland. This would be backed by portfolios of Hong Kong listed stock and offer Mainland investors another avenue to buy shares in Hong Kong companies.
The new measures will strengthen Hong Kong’s position as an international financial centre and as our nation’s most important city for global finance.
Even though our stock market has taken its share of hits lately, it remains the 3rd largest bourse in Asia and 7th largest in the world by market capitalisation. Market cap at end-April was almost US$1.5 trillion. In terms of initial public offerings (IPOs) raised in 2008, Hong Kong ranked 5th globally and 2nd in Asia.
More than 470 Mainland companies are listed on our stock market. Last month, China Zhongwang Holdings – the country’s largest producer of aluminium products – listed in Hong Kong. The company raised US$1.3 billion in the world’s largest initial public offering (IPO) so far this year. You may recall that Hong Kong staged the world’s largest IPO of all time when Industrial and Commercial Bank of China (ICBC) raised more than US$19 billion in 2006.
This has provided us with valuable experience and expertise in handling mega IPOs. We also have world-class financial, insurance and legal services to make sure everything goes smoothly. By giving companies confidence and peace of mind, we aim to attract more international firms to list on our stock market.
With our prime location in the heart of East Asia and strong links to the Mainland, Hong Kong is an ideal fund-raising platform for Russian companies.
Last year, we introduced a framework for issuers to list in Hong Kong through depository receipts, or HDRs. This has opened the door to more companies, including Russian enterprises, to tap the enormous capital-raising potential in our part of the world.
No doubt, my good friend Mr Ronald Arculli, the Chairman of the Hong Kong Stock Exchange, will talk more about the listing opportunities in Hong Kong for Russian firms in a few minutes’ time.
My final point is an important one regarding Hong Kong’s development as our nation’s global financial centre. Hong Kong is ready to fulfill a new role as a Renminbi clearing centre.
The Central Government in Beijing recently gave the go ahead for a pilot programme to settle cross-boundary trade using the Renminbi. This scheme will give companies more flexibility, and an opportunity to counter the risks of exchange rate fluctuations in settling trade. This is also the first major step towards promoting the Renminbi as an international currency. Under the programme, our banks will be able to expand their range of Renminbi services to include enterprises as well as individuals.
Ladies and Gentlemen, it has been my pleasure speaking with you about Hong Kong’s potential as a fund raising centre for Russian companies.
Naturally, our bilateral relations go beyond business and finance. As well as visa-free travel, we are also working on new legal and customs arrangements between Hong Kong and Russia. On the cultural front, Russian artists and musicians are familiar to people in Hong Kong. Last September, the Bolshoi Theatre delighted local audiences, including yours truly, with its performance of Spartacus.
All this has helped to whet our appetite for closer business and cultural ties between Russia and Hong Kong.
Once again, thank you for your warm hospitality, and I wish you all enjoyable Russia Day celebrations next week.
Spasibo.
Ends/Tuesday, June 2, 2009
Issued at HKT 19:27
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