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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Hong Kong Trade Development Council business luncheon in São Paulo, Brazil today (December 7, Sao Paulo time):
Distinguished Guests, Ladies and Gentlemen,
Good afternoon.
It is my great pleasure to be here in Brazil ¡V a country famous for spectacular carnivals, samba and football.
This is an exciting time to visit your beautiful country and the vibrant city of São Paulo. The dynamism of this city and its people reminds me of Hong Kong ¡V only on a much larger scale!
The next few years will be an extremely busy time for you with Brazil hosting the 2014 FIFA World Cup and Rio de Janeiro as the host city for the Olympics in 2016.
São Paulo is Brazil's business and financial centre, with world-class services and infrastructure. No doubt, this city will have an important part to play in the successful preparations and staging of these two massive sporting events.
I mention this from experience. Our nation's capital, Beijing, had the great privilege of hosting the last Olympics in 2008.
It was a fantastic occasion that united our entire nation and raised China's global profile. Hong Kong played a small role with the successful staging of the Equestrian Events of the Beijing Games.
As well as being a wonderful sporting occasion, the Equestrian Events in Hong Kong also highlighted our city's close integration within our nation.
Today, 13 years after the establishment of the Hong Kong Special Administrative Region, our city is both an international gateway to Mainland China and China's global financial centre.
Brazil and China are also members of the BRIC group of large emerging economies.
Each of these emerging economies has weathered the global financial crisis in good shape. Brazil's economy is forecast to grow at a healthy average annual rate of 5.7 per cent in the next four years.
In Hong Kong, we recently revised upwards our GDP growth forecast for this year to 6.5 per cent. Now is the ideal time for Hong Kong and Brazil to renew our commitment to bilateral trade and seek out new business opportunities at this crucial juncture for our two economies.
Today, I shall talk about a number of key areas with great potential for closer co-operation between us.
These areas can help boost our bilateral trade and investment, create jobs and forge even stronger links between us.
I am sad to say that the Hong Kong football team has many hurdles to cross before we can qualify for the 2014 World Cup Finals, but our city is a great team player in terms of international business and finance.
Hong Kong's successful reunification with Mainland China in 1997 has its foundation in the principle of "One Country, Two Systems".
Under "One Country, Two Systems", Hong Kong has maintained its competitiveness and its capitalist way of life. Hong Kong people continue to run Hong Kong with a high degree of autonomy. We have the rule of law and a low and simple tax system. In Hong Kong profits tax is capped at 16.5 per cent and people pay no more than 15 per cent salaries tax. There is no VAT, no GST, no capital gains tax and no inheritance tax.
We also have free flows of capital, talent and information.
According to the US-based Heritage Foundation, Hong Kong is the world's freest economy. If there were medals for this category, we would have won gold for being the freest economy for each of the past 16 years.
Hong Kong is a relatively small and compact place with a population of seven million people. What we lack in size we make up for in other departments.
Hong Kong is the world's eleventh largest trading entity and the thirteenth largest exporter of commercial services. We are also the fifteenth largest centre for international banking, and we are home to one of the largest stock markets in the world.
"One Country, Two Systems" ensures that we maintain our individual member status in international bodies, including the WTO and APEC under the name, Hong Kong, China. I can assure you that our athletes will be carrying the Hong Kong, China flag at the 2016 Olympics. If they happen to win a gold medal, the Chinese national anthem will be played in their honour. This is another example of "One Country, Two Systems" at work.
Importantly for international trade, we negotiate our own bilateral agreements related to business, investment, culture and many other areas.
Today, our region is at the heart of global trade, and Hong Kong is right in the middle of the action.
Some 6 600 Mainland Chinese and overseas companies have a base in Hong Kong.
These include a number of Brazilian enterprises, such as Banco do Brazil, Samarco and TAM (Tˆhxi Aˆmreo Marˆqlia) Airlines.
According to the World Investment Report 2010, Hong Kong attracted US$48 billion worth of foreign direct investment last year. Hong Kong is also by far the single largest investor in Mainland China.
Investors are attracted to Hong Kong by our location on the southeastern tip of China and on the doorstep of the dynamic Pearl River Delta region in Southern China. This region is often referred to as "the world's factory" because of its incredible manufacturing output capacity.
It represents a vast hinterland that connects to Hong Kong by an efficient infrastructure network covering land, sea and air.
Hong Kong has evolved rapidly from a fishing village into a manufacturing hub, and now a global financial centre. Over time, we have gained a great deal of experience and know-how in doing business with Mainland China.
We also share the same culture, speak the same language and have a mutual goal of establishing the Pearl River Delta as one of the world's most competitive regions.
Brazilian companies can also take advantage of our Trade Development Council's close contacts with Mainland businesses. The TDC has a great deal of expertise in matching overseas companies with the right partners in the Mainland. I know that Chris (Jackson) and his team from the TDC who are here today will be happy to share their expertise with you.
Hong Kong's position as China's global financial centre can open up a number of opportunities for companies overseas, including here in Brazil.
The Mainland's economic success has been a driving force for Asia's recovery from the global financial crisis.
One way for Brazilian firms to tap into our nation's growth trend and liquid capital markets is by listing on Hong Kong's stock market. Despite the global financial turmoil, our stock market is the seventh largest in the world and third largest in Asia by market capitalisation. At end-October total market cap was almost US$2.7 trillion. There is plenty of room for growth.
Just two weeks ago, the Hong Kong Government gave regulatory approval to Brazilian mining giant Vale SA to offer its shares in Hong Kong. Vale will list on our stock market tomorrow. The company will also become the first company to issue Hong Kong depository receipts, since new rules were introduced two years ago.
Vale is already listed here in São Paulo as well as in the US and Europe. Asia is the missing link. Because Hong Kong is 10 hours ahead of Brazil, listing in our city would mean that Vale shares could be traded around the clock.
As well as accessing the fund-raising opportunities in Hong Kong, listing on our stock market can also raise the profile of a company and enhance its prestige in our region.
Last year, Hong Kong led the world in IPO funds raised. In 2009, total funds raised through IPOs in Hong Kong exceeded US$31 billion. This year, the figure has already passed the US$40 billion mark.
Brazil is a major producer of resource commodities, and Mainland China is a major consumer of mining commodities. This complementarity can be further optimised using the Hong Kong services platform.
I encourage more Brazil's firms from all sectors to consider the capital-raising potential of listing in Hong Kong.
Another significant financial development is the growing internationalisation of the Mainland currency, the Renminbi. As China's premier city for global finance, Hong Kong has an important role to play in this liberalisation process.
Our Renminbi experience already covers a number of areas, including Renminbi banking, bond issues and trade settlement.
Since June this year, overseas companies, including Brazilian firms, have been able to settle trade with the Mainland using Renminbi in Hong Kong.
Brazilian enterprises can leverage on Hong Kong's experience in offshore Renminbi business to settle their Mainland trade in Renminbi. This would help to offset the risks of exchange rate fluctuations and give more certainty to business transactions.
Today services account for over 90 per cent of Hong Kong's GDP. Last year, we exported more than US$86 billion worth of services.
Given Brazil's rapid development, and with the world's two largest sporting events coming to your country, I see some bright opportunities for close partnership between our services sectors.
Beyond financial services, Hong Kong has world-renowned infrastructure, logistics and real estate services.
TDC knows all about the world-class services that support our transportation, tourism, conventions and exhibitions and telecommunications sectors.
All this could help to propel the economic expansion in Brazil.
This brings me to the final topic of my talk ¡V our unique free trade agreement with Mainland China, the Closer Economic Partnership Arrangement, or CEPA. CEPA came into force in 2004 and has been expanded each year since then. The aim of CEPA is to break down barriers to trade and investment between Hong Kong and the Mainland.
CEPA currently covers no fewer than 44 services areas, including key areas such as mining, logistics, conventions and exhibitions, legal services and financial services.
CEPA is relevant to your companies here in Brazil because the rules of this agreement are nationality blind. In other words, companies from around the world, including São Paulo, that are incorporated in Hong Kong can enjoy the full benefits of CEPA in accessing markets throughout Mainland China, just like other Hong Kong firms.
Above all, CEPA is another example of Hong Kong's contributions as a team player in connecting companies from around the world to the vast China market.
Ladies and Gentlemen, Hong Kong and São Paulo are international business and financial centres that serve the needs of our rapidly growing economies.
We both have vibrant communities and talented people eager to build on the progress made so far.
I look forward to even stronger links between us so that we can take full advantage of the opportunities ahead for our cities, our countries and our regions.
Thank you very much.
Ends/Wednesday, December 8, 2010
Issued at HKT 05:02
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