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Thailand and Hong Kong had long enjoyed excellent economic relations and their relations could be further enhanced with Hong Kong's ongoing economic integration with mainland China, the Director of Hong Kong Economic and Trade Office in Singapore (HKETO), Ms Subrina Chow, told businessmen at a seminar in Bangkok today (October 27).
In her opening speech at the business seminar entitled "Hong Kong: Seize Now Your Opportunities for Business in China and Beyond" organised by the HKETO, Ms Chow said Thailand and Hong Kong were each other's major trading partner, with trade between the two economies growing on an average of 13% from 2004 to 2008.
Ms Chow believed that bilateral trade between Thailand and Hong Kong would continue to expand as economies in Asia and around the world found their way to recovery from the global economic downturn.
"In Hong Kong, after four quarters of contraction, our economy resumed growth at 3.3% in the second quarter of this year as compared to the previous quarter. Our unemployment rate has also stabilised since June," she said, adding that this was partly a result of the various stimulus and relief measures introduced by the Hong Kong Special Administrative Region (HKSAR) Government over the past 18 months.
To combat the global financial crisis, the HKSAR Government has introduced stimulus and relief measures totalling more than HK$87 billion (or US$11 billion), which is equivalent to about 5.2% of Hong Kong's GDP. It has also set aside more than HK$100 billion (or US$13 billion) to provide loan guarantees to the small and medium-sized enterprises.
Ms Chow said that another major factor contributing to the rebound of the Hong Kong economy was the resilience of its closest economic partner - mainland China, of which Hong Kong was the largest foreign investor and third largest trading partner.
The cumulative value of Hong Kong investment on the Mainland amounted to about US$350 billion or 40% of the national total at the end of 2008. On the other hand, the Mainland is also Hong Kong's largest source of inward direct investment and the cumulative value reached US$479 billion at the end of 2007, accounting for 41% of Hong Kong's total stock.
Mainland China and Hong Kong have been going through economic integration over the past 30 years since the opening up of the Mainland economy. The integration was heightened in 2003, when the Mainland and Hong Kong, being two separate WTO members, entered into a free trade agreement called "The Mainland and Hong Kong Closer Economic Partnership Arrangement" (CEPA).
"Under this agreement, the goods and services of Hong Kong enterprises, regardless of their source of investment or country of origin, enjoy favourable access to the Mainland market," Ms Chow said.
She said the Mainland and Hong Kong had also achieved significant progress in enhancing integration in financial services, citing increasing co-operation between the stock exchange of Hong Kong and those of Shenzhen and Shanghai.
In addition, banks in Hong Kong had been offering a variety of RMB services since 2004, and Hong Kong became the only place outside the Mainland to have a RMB bond market in 2007.
New transport infrastructure is also under development to improve the efficiency of people and cargo flow between Hong Kong and the Mainland, Ms Chow added.
The Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Zhuhai-Macao Bridge will greatly reduce the travelling time among major cities in the Pearl River Delta by the time they are completed in 2015 to 2016.
On Hong Kong's future development, Ms Chow referred to the policy address by the Chief Executive two weeks ago, saying that a range of measures have been set out to further strengthen Hong Kong's four pillar industries and promote the development of six other industries identified as its new engines for economic growth.
The six industries are medical services; education services; cultural and creative services; environmental industry; testing and certification; and innovation and technology.
Ms Chow said Hong Kong's strategy was to remove barriers hindering the development of the six industries, and help them tap into new markets on the Mainland and in the rest of Asia.
She pointed out that some of these six industries, such as medical services and the cultural and creative industries, were also flourishing in Thailand, urging relevant enterprises to keep a close watch on new opportunities arising in Hong Kong for their business.
She highlighted that the traditional strengths of Hong Kong, which included simple tax system and low tax rate, free flow of information, absence of exchange control, corruption-free government, superb infrastructure, rule of law and independent judiciary, political stability and security, were still the key determining factors drawing foreign enterprises to Hong Kong.
Illustrating the opportunities offered by Hong Kong for business in China, the other four speakers of today's seminar covered in detail the topics on CEPA, Double Taxation Agreement (DTA) between Thailand and Hong Kong, cross-border RMB trade settlement and partnership with Hong Kong to expand business into China and international market.
Speaking on CEPA, the Deputy Director of HKETO, Mr Law Kin-wai, said, "CEPA is a win-win agreement, bringing new business opportunities to the Mainland, Hong Kong and all foreign investors."
Saying that all imported goods of Hong Kong to the Mainland enjoyed zero tariff under CEPA, Mr Law pointed out that foreign companies were welcome to set up manufacturing operations in Hong Kong to produce goods meeting CEPA origin rules to enjoy the benefits.
He said CEPA also allowed Hong Kong service suppliers (HKSS) to enjoy preferential treatment in 42 service sectors, stressing that the criteria for establishing the status of HKSS were "nationality neutral" and foreign investors were welcome to establish their business in Hong Kong, to acquire or to join forces with enterprises in Hong Kong to make full use of CEPA opportunities in entering the Mainland market.
While noting that about half of HKSS was known to have predominant foreign investment, he revealed that there were currently more than 38 Thai companies with regional or local offices in Hong Kong which could potentially benefit from CEPA.
Partner of PricewaterhouseCoopers Legal and Tax Consultants Ltd Mr Paul Stitt briefed the seminar on the major features of the DTA between Thailand and Hong Kong and how Thai businessmen could take advantage of it.
Talking about the best way to make investment in Hong Kong or via Hong Kong into the Mainland, he explained the interaction of the China and Hong Kong tax systems that made Hong Kong a favourable location for investment into China, adding that structuring investment into China via Hong Kong might enable tax reduction of around 8% on profits remitted to Hong Kong.
A pilot scheme was launched in July to allow the use of RMB in settling cross-border trade transactions between China and other countries. Under the scheme, certain banks can provide related services to enterprises using RMB to settle trade transactions with their counterparts in China.
Director, International Corporates, Commercial Banking, The Hongkong and Shanghai Banking Corporation Limited, Mr Nick Levitt discussed in the seminar how the scheme could work to facilitate companies doing business with China and how they could capture the opportunities lying ahead.
The last speaker of the seminar, Regional Director, Southeast Asia and India, Hong Kong Trade Development Council Ms Loretta Wan told the audience that Hong Kong was the best partner to expand their business into China and international market, listing the strategic advantages that Hong Kong offered to overseas companies.
The half-day seminar attracted about 100 participants from the Thai business sector and foreign business associations in Bangkok.
Ends/Tuesday, October 27, 2009
Issued at HKT 12:00
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