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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Hong Kong-Russia Business Seminar "Hong Kong: Your Partner for Success in Asia" in Vladivostok, Russia today (May 20, Vladivostok time):
Distinguished Guests, Ladies and Gentlemen,
Dobry den (means "good afternoon" in Russian).
It is my great pleasure to lead a high-profile business delegation from Hong Kong to the great city of Vladivostok.
This is my second trip to Russia in as many years. Last year, I also had the good fortune to visit the western part of your country and experience the warm Russian hospitality. It is great to be back.
I understand that the name, Vladivostok is translated as "The Lord of the East". It is a captivating name for this city. I invite you to consider our visit as: the Lord of the East meets Asia's world city.
We call Hong Kong Asia's world city because of its global dimensions. We are at the crossroads of international trade and finance. We have a cultural mix of East and West, and we are connected to destinations around the world through advanced soft and hard infrastructure.
Almost 3,000 kilometres separate Hong Kong and Vladivostok, yet our two nations are neighbours and friends. Instead of flying into Russia, as I did last year, this time I simply took a coach from Suifenhe in Northern China to Vladivostok.
I mention this because it highlights the physical proximity and strong links between our two nations. Also, increasingly frequent exchanges between Russia and Hong Kong are a sign of our growing friendship as well as the stronger ties between our economies and our people.
Visa-free travel, which was introduced last year, also makes it easier to visit, do business and invest in each other's economies.
My talk today will focus on ways to take full advantage of having Hong Kong as your partner for success in Asia.
And because this is a business seminar, I will get straight to the business of making money - or to be more precise, the business of raising capital. Indeed, this is an area where Russia has been making a splash in Hong Kong this year. In January, UC Rusal became the first Russian company to list in Hong Kong. Its US$2.2 billion Initial Public Offering was also the world's largest so far this year.
And if you believe what you read in the press, a number of other Russian firms are looking to leverage Hong Kong's potential as a capital-raising centre.
We welcome Russian firms of all sizes and from every sector to list in Hong Kong. Let me focus on the commodities sector for a moment, because this is such a major part of the economy here in the Russian Far East.
In March, Hong Kong hosted the Mines and Money Conference. During the Conference, Robert Friedland, the executive chairman of international firm Ivanhoe Mines, predicted that - and I quote: "Hong Kong will become the largest mining finance market in the world." End quote.
Mr Friedland has already put his money where his mouth is. He listed his company's Mongolian coal subsidiary, South Gobi Energy Resources, on the Hong Kong stock market earlier this year.
Hong Kong is an ideal fit for Russian commodities firms. On the one hand, our nation's economy is developing rapidly, and is among the largest consumers of commodities. On the other hand, Russia is one of the largest commodities exporters. Our well-developed financial services sector makes Hong Kong a natural listing platform for Russian firms.
Although we are a relatively small city, our stock market is the third largest in Asia and seventh largest in the world by market capitalisation. At end-March this year, market cap was US$2.3 trillion.
We have made no secret of our intention to further internationalise our stock market by encouraging more Mainland and overseas companies to raise funds in Hong Kong.
Rusal's successful listing underscores our city's experience in handling IPOs. In fact, last year Hong Kong led the world in funds raised through IPOs. Total IPO funds raised in Hong Kong in 2009 exceeded US$31 billion.
We have the necessary world-class financial, insurance and legal services to make sure the listing process goes smoothly. This gives companies confidence and peace of mind when they list on our stock market.
In 2008, 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 firms, to tap the enormous capital-raising potential in our part of the world.
The Hong Kong Exchanges and Clearing (HKEx) has been organising various events to promote the understanding of Hong Kong's securities market to entrepreneurs and government representatives in Russia. Members of the HKEx are here today. They will be happy to answer any questions that you may have.
Ladies and Gentlemen, the stock market is a jewel in our financial crown, but there is also much more to Hong Kong's money markets.
Hong Kong is our nation's most important international financial centre and an offshore Renminbi settlement centre for trade finance. The Renminbi trade settlement scheme came into operation last July. This has significantly expanded the scope of Renminbi transactions in Hong Kong and reinforced our status as a global financial centre.
Since 2004, our banks have been offering a wide range of Renminbi services including deposits, remittances, exchange and checking accounts.
In 2007, Hong Kong became the only place outside the Mainland to have a Renminbi bond market. And last year, the Central Government issued its first sovereign bonds in Hong Kong totaling 6 billion Renminbi.
Hong Kong will continue to play a pivotal role in the regionalisation and internationalisation of the Mainland currency. This process is gathering steam on the back of our nation's resilience to the global financial crisis.
Hong Kong, with its free flow of capital, talent and information is a key facilitator for our nation's financial liberalisation. We also have an independent judiciary that underpins our common law legal system as well as a transparent regulatory system and a clean and efficient government.
All this is part of our business-friendly environment.
Now, allow me to take you back to my trip from Suifenhe in China to Vladivostok yesterday.
I enjoy travelling by land. Unlike air travel, you don't have to check in bags, turn up at least an hour before departure and keep an eye on the weather conditions in case of delays. Nowadays, we have to look out for volcanic dust as well. With land travel, you can enjoy the scenery, stretch your legs and talk to fellow passengers. I also like to travel by train. I did that last year during my trip from Moscow to St. Petersburg. New technology also means that trains are continuing to transform our business environment in this age of globalisation.
Modern trains are fast, clean and efficient.
In Hong Kong, high-speed trains will soon open up a new frontier in our connectivity with the Mainland of China.
We are investing more than US$8 billion (HK$66.9 billion) in our own Express Rail Link, the XRL. This will connect Hong Kong to the Mainland's 16,000-kilometre high-speed rail network that is being completed at full steam.
When our XRL opens in 2015 it will bring major Mainland cities within easy reach of Hong Kong by rail. Shanghai will be six hours and Beijing just eight hours from Hong Kong by train.
It will also make good business sense to take the train rather than to fly to Mainland cities within a 1,000-kilometre radius of Hong Kong. These cities have a combined population of some 80 million people and represent our immediate hinterland in the Pearl River Delta or PRD.
This extended market presents important opportunities for our business community.
As well as the XRL, we have also begun construction of a massive 29-kilometre bridge that will open up the western part of the PRD. The PRD has gained a reputation as the "world's factory" because of its industrious workforce and competitive business environment. The mega bridge, that will connect the cities of Hong Kong, Macao and Zhuhai, will be a direct route to new and less developed markets. I like to think of it as a future corridor of opportunity.
Many of our local companies, together with some 6,600 Mainland and overseas firms that operate in Hong Kong, depend on efficient cross-boundary connections to grow their businesses.
World-class infrastructure enables our foreign firms to tap enormous business potential and sourcing opportunities around the region, and particularly in the PRD. And all the time, these firms enjoy the full benefits of a base in Hong Kong.
Something that invariably brings a smile to our business community is our low and simple tax system.
In Hong Kong, salaries tax is capped at 15 per cent and companies pay no more than 16.5 per cent profits tax. There is no inheritance tax, no capital gains tax, no VAT and no GST. And only income sourced in Hong Kong is taxable in Hong Kong.
I encourage more Russian firms to come to Hong Kong and enjoy the best of both worlds - a prime location and vast hinterland combined with business-friendly policies and a cosmopolitan lifestyle.
We also have a unique free trade pact with the Mainland, what we call the Closer Economic Partnership Arrangement, or CEPA. Our companies value CEPA because it is yet another way to tap the lucrative markets on our doorstep.
Under CEPA, all companies in Hong Kong, including overseas companies incorporated in Hong Kong, can enjoy preferential access to markets in Mainland China.
CEPA applies throughout the Mainland and covers 42 services areas, including legal services, shipping, logistics, mining and conventions and exhibitions. Just imagine what this advantage could do for your business.
Finally, I would like to wish Vladivostok every success in its preparations for hosting the Asia Pacific Economic Co-operation Leaders Summit in 2012.
Since Hong Kong's reunification with our Motherland in 1997, our city has remained an individual member of APEC. Our individual member status is made possible by the unique "One Country, Two Systems" formula for the establishment of the Hong Kong Special Administrative Region in 1997. Under "One Country, Two Systems", Hong Kong also maintains its own shipping register, negotiates its own air services agreements and remains a separate customs territory and a member of the WTO. In fact, I chaired the WTO Ministerial Conference in Hong Kong in December 2005.
Our capitalist system is as vibrant as ever, and Hong Kong people continue to run Hong Kong with a high degree of autonomy.
In other words, the "One Country, Two Systems" principle means Hong Kong has retained all the ingredients that have contributed to the city's emergence as an international business and financial hub in Asia.
We fully support APEC's initiatives to break down barriers to trade and investment and boost co-operation within the region. These principles of free trade and open markets underpin Hong Kong's strength as your partner for success in Asia.
Ladies and Gentlemen, it has been a great pleasure for me to speak with you today.
Our two nations are part of the so-called BRIC group of rapidly developing economies - Brazil, Russia, India and China. Great things are expected from these economies in the next few years.
Hong Kong, with its capital-raising potential, low taxes, free flow of money and information and high-quality services will continue to be a premier gateway to the Mainland of China for Russian businesses. So, please do take this as an invitation, a personal invitation from me, to come and visit Hong Kong to see for yourself the enormous potential for business in our part of the world.
Once again, thank you for your warm hospitality, and see you in Hong Kong.
Spasibo (meaning "thank you" in Russian).
Ends/Thursday, May 20, 2010
Issued at HKT 12:43
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