**********************************************************
Following is the speech by the Financial Secretary, Mr John C Tsang, on "Hong Kong's Role in China's 12th Five-Year Plan - Opportunities for Canadian Business" at the Montreal Breakfast Seminar in Montreal, Canada today (July 14, Montreal time):
Michel (Leblanc), distinguished guests, friends, ladies and gentlemen,
Good morning.
It is great to be here in the beautiful multicultural city of Montreal.
First of all, I would like to thank the Board of Trade of Metro Montreal for organising this Seminar and giving me the chance to meet you all today.
There is an old Chinese proverb which says that "Tell me and I'll forget; show me and I may remember; involve me and I'll understand".
Although I am here to tell you about the latest developments in Hong Kong - and I certainly hope you don't forget them - the main purpose of my trip is to involve Montreal's business community more deeply in the exciting growth story in our part of the world. That way, we can all grasp the opportunities for closer ties between our communities, our cities and our economies.
I also look forward to seeing for myself the huge potential for co-operation between Montreal and Hong Kong in a number of key development areas. Among other things today, I'll be visiting one of the world's largest video game producers (Ubisoft) here in Montreal and touring the Montreal Cultural Heritage District.
I see significant opportunities for collaboration between Hong Kong and Montreal in both innovation and technology and cultural industries, as well as other key sectors.
I shall expand on this in a moment, but first allow me to outline why the timing of my visit to Montreal is important.
Since my previous trip to Canada for the G20 Summit last year, Hong Kong's economy has rebounded strongly from the global financial crisis. Last year, our economy grew by a healthy 7 per cent. It expanded 7.2 per cent in the first quarter of this year compared to the same period in 2010. We forecast a full year GDP growth of between 5 and 6 per cent this year.
Our bilateral trade with Canada increased almost 13.5 per cent last year compared to 2009. Trade between us reached CAD$4.4 billion in 2010. Also last year, more than 10 per cent of total trade between Canada and Mainland China was routed through Hong Kong. This trade amounted to some CAD$3.7 billion.
To borrow a phrase from my old maths teacher - this is not bad, but you can do better!
Since the global financial crisis, the economic centre of gravity has shifted from the traditional markets in the West to emerging economies in the East, and not least to China.
In April, the International Monetary Fund (IMF) predicted robust 7 per cent economic growth for Asia in 2011 and 2012. What's more, the IMF predicts that China will lead the Asian growth cycle. It estimates 9.5 per cent GDP growth for the Mainland China economy in 2011 and 2012.
This brings me to the main theme of my talk today. The theme is: "Hong Kong's Role in China's 12th Five-Year Plan - Opportunities for Canadian Business".
The National 12th Five-Year Plan was adopted by the Central Government in Beijing in March this year. The Plan provides a clearly defined blueprint for the economic and social development of China up to 2015.
For the first time, The Plan devotes a full chapter to Hong Kong and nearby Macao. This is significant because it underscores Hong Kong's role in, and opportunities arising from, our nation's rapid development.
Given the already deep connections between Hong Kong and Canada, we would like to see more Canadian companies involved in these opportunities.
In particular, I encourage you to explore opportunities for collaboration in our so-called emerging sectors. These include six industries where Hong Kong has a clear advantage in our region. These industries are innovation and technology, medical services, green industries, education services, testing and certification and creative and cultural industries.
In each of these areas, Canada and especially Montreal, have a great deal of expertise and experience.
For example, Montreal is regarded as a cultural capital while Hong Kong has designs on becoming a cultural hub in Asia. Montreal prides itself on its advances in innovation and technology, while Hong Kong is pouring resources into this area so that we too can move up the value chain. Also, your commitment to environmental industries is of great interest to us in Hong Kong and throughout our region.
Among other things, the 12th Five-Year Plan pledges the Mainland's support in fostering these emerging sectors in Hong Kong. And because Hong Kong is an international business and financial centre, that means more opportunities for our overseas partners, including those from Montreal.
Beyond supporting our emerging sectors, The Plan identifies key areas where Hong Kong can, and will, help to propel our nation's development. Chief among these is our role as China's global financial centre. Other areas include, in no particular order, our development as an international asset management centre and international centre for trade and for shipping.
Allow me to focus on Hong Kong's role as China's global financial centre. This is an area with significant opportunities for Hong Kong, for Mainland China and for our trading partners, including Canada.
China's rapid growth in the wake of the financial crisis has given our nation more financial clout on the international stage. However, Mainland China maintains a closed capital account and imposes restrictions on investment.
Here enters Hong Kong, with our open markets, free flow of capital and strong links with financial centres around the globe. All this has helped to establish Hong Kong as a testing ground for the liberalisation of the Mainland currency, the Renminbi. Today, Hong Kong is the offshore centre for Renminbi banking, Renminbi trade settlement and the issuance of Renminbi bonds.
Canadian firms can raise capital for their Mainland operations by issuing Renminbi bonds in Hong Kong. Last year, fast food giant McDonald's became the first foreign company to issue Renminbi-denominated bonds. Then follow Caterpillar and others. A variety of enterprises, including the Asian Development Bank, have also since followed suit. I encourage Canadian firms to test the waters in this area.
Canadian firms doing business in the Mainland can also take advantage of our Renminbi experience by using Hong Kong as the centre to settle trade using Renminbi. Renminbi trade settlement was introduced by the Central Government in 2009 and expanded last year. Canadian companies can now settle their trade with the Mainland using Remninbi in 20 Mainland provinces and cities.
Another opportunity for Canadian companies is to list on Hong Kong's stock market. Once again, our biggest advantage is the China factor.
The great thing for overseas companies listing in Hong Kong is that they can attract wealthy institutional investors from Mainland China and throughout Asia. At the same time, a Hong Kong listing helps firms to raise their profile in the Mainland and promote their brands across our nation's vast markets. We offer attractive valuations while maintaining robust listing rules.
In each of the past two years, Hong Kong has led the world in funds raised through IPOs. Last year, IPO funds raised in Hong Kong reached US$58 billion (CAD$55.7 billion). This included SouthGobi Energy Resources which is owned by Canada's Ivanhoe Mines. The company raised about US$440 million (CAD$423 million) through its secondary listing in Hong Kong. Other resource firms from Russia, Brazil and Switzerland have also listed in Hong Kong over the past year or so. Hong Kong is particularly attractive for overseas resource companies because our nation is a major consumer of natural resources, and places like Canada are major producers.
Beyond the resource sector, companies from Britain, France, Japan and Italy have listed in Hong Kong. They cover a broad range of sectors from financial services to fashion. They join more than 600 Mainland Chinese companies on our stock market, which is the second largest in Asia by market capitalisation. Our bourse is also the sixth largest in the world with market cap of around US$2.8 trillion (CAD$2.7 trillion).
Ladies and gentlemen, although the 12th Five-Year Plan highlights Hong Kong's close integration within our nation, this is only part of the picture.
Two weeks ago, on July 1, we celebrated our 14th Establishment Day Anniversary. This coincides with Canada Day, so it is a double celebration for our large Canadian community. In fact, there are around 300 000 people in Hong Kong with Canadian citizenship.
Not only has our city become more closely integrated within our nation over the past 14 years, it has also retained all the important characteristics that have set Hong Kong apart in Asia for many decades.
For example, an independent judiciary continues to underpin our common law legal system. Our legal system is based on the English system and similar to that in Canada. We continue to maintain our own low and simple tax regime with salaries tax capped at 15 per cent, and profits tax at 16.5 per cent. There is no capital gains tax in Hong Kong, no inheritance tax, no VAT and no GST. Only income sourced in Hong Kong is taxed in Hong Kong. And we do not even have any duty for wine.
These are some of the attributes that have helped Hong Kong maintain its ranking as the world's freest economy according to both the Canada-based Fraser Institute and the Heritage Foundation in the US.
This Number One ranking is important to us because it shines a light on Hong Kong's business-friendly environment. Foreign firms, including more than 100 Canadian companies with offices in Hong Kong, are attracted by our free flows of capital, information and ideas. Our liberal immigration policies have helped to establish a deep and broad pool of international talent.
Ladies and gentlemen, Hong Kong enjoys the best of both worlds. We are a city in China but outside the Mainland; we have a central part to play in our nation's economic and social development, while, at the same time, we are a vibrant international business and financial centre in our own right.
All this is guaranteed under the "One Country, Two Systems" formula for our reunification with the Mainland and supported by our nation's 12th Five-Year Plan.
But there is only so much I can tell you about the opportunities for Canadian business in Hong Kong. The best way to experience our city is to come and pay us a visit. That way you can better understand the great potential for closer links between Hong Kong and Montreal and get fully involved in the exciting growth story in our part of the world.
Thank you very much.
Ends/Thursday, July 14, 2011
Issued at HKT 21:10
NNNN
