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Following is the speech by the Financial Secretary, Mr John C Tsang, at the welcome dinner for EU-HK and HK-EU Business Co-operation Committees in Stockholm, Sweden today (June 8, Stockholm time):
Your Royal Highness (Princess Birgitta), Lena (Ilk, member of European Parliament), ambassador Chen (Mingming), Michael (Treschow), Raymond (Ch'ien), Distinguished Guests, Ladies and Gentlemen,
Good evening.
I'm delighted to join you for this Welcome Dinner. It is also my great pleasure to visit this incredible museum.
This year marks the 10th Plenary Session of the Business Co-operation Committees. Since the committees were established in 1998, they have witnessed periods of strong growth, as well as economic downturns. In good times and in bad times, the committees continue to be an important platform for communication and information sharing between our two business communities.
In Hong Kong, we also welcome the new European Union Business Information Programme, which was launched in February this year. The programme provides information to Hong Kong enterprises and individuals interested in doing business in the EU. Raising awareness of the benefits of doing business in the EU will be mutually beneficial, especially during these fragile economic times.
Virtually all economies are navigating choppy waters during the current global financial crisis.
In the next few minutes, I shall update you on the situation in Hong Kong and talk a bit about the impact of the financial storm on our city. I will also tell you about some of the things that we are doing to bolster our economy.
And tomorrow, during the Plenary Session, I shall speak again in greater detail about how we intend to take advantage of some exciting opportunities that are emerging from the current downturn.
So what is the current state of play in Hong Kong?
The first quarter of 2009 was a difficult period for our city. Our GDP contracted 7.8% compared to the same period in 2008. Our full-year GDP forecast for 2009 is between minus 5.5 and minus 6.5%. Unemployment rose to 5.2% in the first three months of the year and currently stands at 5.3%.
On the trade front, Hong Kong's exports faced the double blow from a sharp plunge in global demand and an acute fall-off in regional trade. Total exports of goods dropped by almost 23% in real terms in the first quarter compared to the same period last year. This is the largest decline since 1954.
As a small externally-oriented economy, Hong Kong is feeling the full force of the global economic storm.
In response to the weaker than expected performance in the first quarter, we have introduced a new economic stimulus package. Less than two weeks ago, we provided an additional Euros 1.5 billion to kick start the economy, provide jobs and ease the pain for members of the community who are most affected by the downturn. These include homeowners, low-income families and the unemployed.
Together with my last two Budgets and the package of measures we announced last July, we have provided some Euros 8 billion to lessen the impact of the economic crisis and accelerate our recovery. In addition, we have provided more than 9 billion Euros in loan guarantees to businesses. We have also guaranteed bank deposits and set aside additional capital for banks should they require it. None of our banks have required rescuing and our financial sector remains sound.
Amid the economic difficulties, Europe remains a vitally important trading partner for Hong Kong. Over the past five years, our bilateral trade with the EU has grown at an average annual rate of almost 8%. Last year, total trade amounted to almost US$80 billion, or 57 billion Euros. This represents a healthy 8.2% growth year-on-year. As much as 12% of total trade between the EU and the Mainland of China is routed through Hong Kong.
We continue to place a great deal of emphasis on our role as a gateway to the Mainland for trade, services and investment.
Earlier this year, our free trade agreement with the Mainland, the Closer Economic Partnership Arrangement, or CEPA, was expanded for the fifth time since its launch in 2004. CEPA remains an important instrument for breaking down barriers to trade and investment with the Mainland. European companies incorporated in Hong Kong can enjoy the full benefits of CEPA, which is nationality neutral and which covers all the key services areas, including legal, financial, logistics, tourism and professional services.
Hong Kong remains a leading international financial centre and an attractive fund raising platform. Last summer, we introduced a framework for overseas companies to list in Hong Kong through depository receipts. Our aim is to attract more foreign firms to list in our city. They can take advantage of our strong links with the Mainland as well as our open and transparent financial system.
Over the past decade, our stock market has increased in size by more than four times. Market capitalisation at end-April this year was almost US$1.5 trillion, or just over 1 trillion Euros. It is the 7th most capitalised bourse in the world and third in Asia. In terms of initial public offerings 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 raised almost 1 billion Euros in the world's largest initial public offering (IPO) so far this year.
Zhongwang Holdings is China's largest producer of aluminium products. I mention this in closing because aluminium, together with tin, are traditional materials for the 10th Anniversary gifts and this is the 10th Plenary Session of the Business Co-operation Committees.
Why aluminium and tin?
Well, these materials are strong, flexible and difficult to break - qualities required for a long-lasting and healthy relationship, such as the one Hong Kong enjoys with the EU.
Ladies and Gentlemen, I have given you an update on the economic situation in Hong Kong. I look forward to the Opening of the 10th Anniversary Plenary Session tomorrow, and talking in greater detail about the future for Hong Kong-EU ties.
I assure you that there is plenty of opportunity for stronger bilateral relations between the EU and Hong Kong.
Have a great evening.
Thank you.
Ends/Tuesday, June 9, 2009
Issued at HKT 13:00
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