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Following is the speech by the Chief Executive, Mr Donald Tsang, at the business seminar "Hong Kong: Your Asian Connection" in Moscow today (September 2):
Distinguished guests, ladies and gentlemen,
It is a great pleasure to be here in Moscow. This is the final day of our visit to Russia, so allow me to first thank you for the warm hospitality we have received, and secondly to welcome you all to this conference, "Hong Kong: Your Asian Connection"¡¨.
Indeed, Hong Kong and Russia have been firmly connected for many years.
We are connected by trade; we are connected by modern telecommunications; and we are connected by international finance. And -given the emerging nature of the Russian and Chinese economies - we are increasingly connected by new opportunities.
In the next few minutes, I will talk about some of these opportunities and why we believe Hong Kong is Russia's best business partner in Asia.
I will focus on two main areas, Hong Kong's potential as a sourcing hub and as a fund-raising platform for business.
These are two of Hong Kong's strengths and two key ingredients for success in our globalised world.
But first let me answer an important question: why Hong Kong?
Hong Kong has a unique set of attributes that set us apart in Asia. In Hong Kong we enjoy a free flow of information with press freedom; we have a fully convertible currency and liberal immigration policies combined with a strong reputation for international best practice.
We have no restrictions on the flow of capital, we have a low and simple tax system and we have a level playing field for business where local and overseas firms are treated as equals.
The US-based Heritage Foundation has ranked Hong Kong as the world's freest economy for each of the past 16 years.
At the same time, we are firmly linked to the world's fastest growing large economy, the Mainland of China.
Over the years, Hong Kong has emerged as the premier international gateway into and out of the Mainland for trade and investment.
And, along with most of the rest of Asia, Hong Kong has stood up strongly to the recent global financial crisis. In the second quarter of this year our economy grew 6.5%. It was our fifth consecutive quarter-on-quarter growth.
Also, in the first half of this year, our bilateral trade with Russia reached US$1.1 billion. That is more than double that of the same period in 2009.
All this provides a sound foundation for stronger business ties between Hong Kong and Russia.
As a sourcing hub in Asia, Hong Kong is stable, dynamic, and above all, well connected.
All companies in Hong Kong can enjoy unparallelled connectivity with the vast markets in Mainland China.
Modern infrastructure helps to transport goods into and out of the Mainland reliably and efficiently. By teaming up with a Hong Kong partner, overseas firms instantly benefit from the knowledge and contacts that our local firms have built up over many years.
Apart from a prime location and decades of experience, we also have a unique free-trade pact with the Mainland, the Closer Economic Partnership Arrangement, or CEPA.
Once again, foreign firms, including Russian companies incorporated in Hong Kong, can enjoy the same benefits as local firms under CEPA. This includes a "first-mover" advantage in tapping Mainland markets.
CEPA has been expanded every year since its launch in 2004. This has accelerated the process of breaking down cross-boundary trade barriers, particularly in the industrious Pearl River Delta region, which is also known as "the factory of the world".
A series of early and exclusive pilot initiatives under the CEPA framework open the door to new opportunities for business in our neighbouring province of Guangdong.
For managers overseeing global supply chains, Hong Kong is an ideal location for establishing regional headquarters or regional offices.
Businesses will find ready access to excellent infrastructure, professional services firms, logistical support and an experienced workforce to oversee their expanding operations in the region.
A base in Hong Kong also comes fully equipped with a range of professional support services. These include legal services, banking and finance, accounting, patent registration services, sales, marketing, quality control, logistics, design, international arbitration and mediation services.
From primary raw materials to high quality finished products, Hong Kong is an excellent choice for businessmen managing their global supply chain.
Over the past two years, Russia has slashed import duties on components and raw materials. This has helped to promote the domestic production of consumer goods and to broaden the country's industrial base. This trend of localisation is a positive signal for Hong Kong suppliers of industrial parts and components, especially those for consumer goods such as consumer electronics.
Moving on to my second point, Hong Kong as a capital-raising platform for Russian firms.
Here too we are seeing encouraging signs for closer co-operation with companies seeking out new fund-raising avenues.
Earlier this year, we welcomed the first Russian enterprise to list on the Hong Kong stock market.
Aluminium giant UC Rusal raised some US$2.2 billion through its initial public offering in Hong Kong in January.
I understand that other Russian firms are also considering listing on our stock market. I can assure you that Hong Kong has some unique advantages and a good deal of expertise in this area.
Commodities firms such as UC Rusal are particularly well suited to a Hong Kong listing.
Our two nations are neighbours. Russia is one of the world's largest commodities exporters, while China is a huge consumer. Hong Kong serves as China's global financial centre with access to fast-growing capital markets and a first-class reputation for handling IPOs of all sizes.
In July, Agricultural Bank of China staged a dual listing in Hong Kong and Shanghai that has raised a world record US$22.1 billion.
Last year, Hong Kong ranked number one in the world for IPO funds raised. Total funds raised in Hong Kong through IPOs exceeded US$31 billion in 2009. According to a first half report for 2010 by accounting firm PricewaterhouseCoopers, IPO funds raised this year will be even higher than in 2009.
Although Hong Kong is a relatively small place geographically, we consistently rank alongside London and New York as an international financial centre.
The Hong Kong stock market is the seventh largest in the world and third largest in Asia by market capitalisation. Market cap stood at US$2.3 trillion at end July.
Hong Kong is also a well-established international banking centre with about 70 of the worlds largest 100 banks operating in the city.
Hong Kong's suitability as a preferred capital-raising centre for Russian firms is supported by our market liquidity, attractive valuations and access to investors in Mainland China and throughout Asia.
The Stock Exchange of Hong Kong continuously strives to streamline the listing process, without compromising our market quality.
To better cater for market needs, improve transparency and enhance corporate governance, our Stock Exchange recently updated the listing rules for minerals and exploration companies. This helped to put our regulatory framework with respect to these companies on a par with international standards.
One final point that will be of great interest to Russian firms doing business with the Mainland of China.
Hong Kong is well on the way to becoming the offshore centre for renminbi business.
Earlier this year, the Central Government in Beijing gave the green light for companies around the world, including Russian companies, to settle trade with the Mainland using renminbi.
Since 2004, Hong Kong banks have been able to offer renminbi services and in 2007 Hong Kong became the first, and only, place outside the Mainland to have a renminbi bond market.
Please do take advantage of Hong Kong's financial infrastructure in settling your Mainland trade transactions in renminbi.
This is an important area for Hong Kong's continuing evolution as our nation¡¦s global financial centre. Our Secretary for Financial Services and the Treasury, Professor K C Chan, will talk more about this topic a little later this morning.
It only remains for me to encourage you to take advantage of Hong Kong as your link to the Mainland of China and to the rest of Asia, making use of a full range of economic freedoms, a business friendly environment and a stable and well-capitalised financial services sector.
Once again, thank you for your warm hospitality and I look forward to stronger relations between Hong Kong and Russia.
Thank you.
Ends/Thursday, September 2, 2010
Issued at HKT 16:08
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