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Following is the speech by the Chief Executive, Mr Donald Tsang, at the Gala Dinner co-hosted by the Fraser Institute and the Lion Rock Institute in celebration of Hong Kong being ranked as the world's freest economy in the Economic Freedom of the World 2011 Annual Report at Harbour Grand Hotel Hong Kong this evening (September 20):
Distinguished Guests, Ladies and Gentlemen,
It is always a pleasure of mine to welcome the Fraser Institute to Hong Kong. Here I must thank the Lion Rock Institute for arranging tonight's dinner and for its continued work to foster economic freedom in Hong Kong.
I am of course delighted that Hong Kong has again been ranked by the Fraser Institute as Number One in the world for Economic Freedom. This Gala Dinner is a great way to mark that achievement and to celebrate the benefits of economic freedom.
Hong Kong has been ranked Number One for more than three decades. We'll do our best to make it Number One for the next three decades too. We are never complacent in this. This recognition from the Fraser Institute highlights our long-standing commitment to free and open markets. This philosophy has served our city well – in good times and in bad, in times of stability and great upheaval.
The Fraser Institute last held its Gala Dinner here in 2008, at the height of the global financial crisis. In fact, it was in the same week that Lehman Brothers filed for bankruptcy in the US – a decision that only deepened the sense of gloom that was being felt in world markets at that time.
Three years on, we are still feeling the aftershocks of the worst global financial crisis since the Great Depression. Some economists are predicting a double-dip recession, which I am sure we all hope does not eventuate, but for which we must be well prepared.
In such testing times, it is important for an externally-oriented economy such as Hong Kong to remain true to our philosophy. That means strong fiscal discipline, low taxes, open markets, free flow of information, goods and capital, clean government and a level playing field for business.
The fact that we have held true to these beliefs for decades is no doubt one reason why Hong Kong has consistently ranked so highly in the league tables of economic freedom. As the old saying goes: "If it ain't broke, don't fix it."
At the same time, the Fraser Institute's report, along with others covering competitiveness, business environment and livability, also identify areas where there is room to improve. Because of our extensive international networks and connections, Hong Kong understands more than most economies the need for constant vigilance to remain competitive and relevant in the global marketplace. And while it is always nice to receive an accolade for a job well done, it is perhaps more useful to look at the areas on which we need to work and to stay ahead of the competition. We will be looking closely at the areas in your report that might need more attention on our part – thanks for the useful reference.
Despite the global turmoil, Hong Kong today is doing quite well. We are looking at 5% to 6% growth this year in GDP. Trade remains strong, the retail sector is doing very well and our unemployment level is low by global standards – it's now at 3.2%, almost equivalent to full employment. We do have concerns about higher inflation and asset price bubbles and we are keeping a very close watch on both of these areas.
Last year, Hong Kong was the world's third-largest recipient of Foreign Direct Investment flows, and the second-largest FDI recipient in Asia. Second only to the whole of China. We attracted a record US$69 billion. In terms of FDI stock, Hong Kong ranked the highest in Asia last year, with a 30 per cent share, or a little over US$1 trillion.
Hong Kong and the Mainland of China also continue to invest heavily in each other's economies – with the realised stock of two-way, inward investment hitting US$800 billion by end-2010. That's a pretty solid vote of confidence in each other's future. We are in the future of Mainland China. And Mainland China has confidence in us, Hong Kong.
This is also a reflection of the important role that Hong Kong has played in the Mainland's opening up and reform process. This process started in 1978 but has accelerated in recent years as China and the rest of Asia have become the focus of greater investment interest.
Since 1997, Hong Kong has been able to play a much greater role in this process under "One Country, Two Systems". This is because the Central Government of China is leveraging all the strengths and advantages that Hong Kong enjoys as a free and open economy to provide a testing ground for the nation's liberalisation of trade and services.
For example, under "One Country, Two Systems" Hong Kong remains a separate member of the World Trade Organisation. This has allowed us to sign a free-trade pact with the Mainland of China to provide greater access to this huge market for Hong Kong's goods and services.
The Mainland-Hong Kong Closer Economic Partnership Arrangement, or CEPA, was launched in 2004. It has gradually been expanded since then to include more opportunities for Hong Kong manufacturers and service providers to access the Mainland markets, often through pilot programmes in adjoining Guangdong Province.
We are now working on the eighth round of enhancements to CEPA and our ultimate goal is to fully liberalise trade in services between Hong Kong and the Mainland by 2015.
Last year we also signed the Framework Agreement on Hong Kong/Guangdong Co-operation. This Agreement further opens the gates to cross-boundary trade, finance and investment with Guangdong Province, which now has a population of 100 million. Not a bad market for starters.
So, you can see that we are constantly looking for ways to open up trade and investment pathways and to improve our business-friendly environment.
Market freedom lies at the heart of Hong Kong's role as China's global financial centre and the development of the offshore Renminbi market. This exciting development will have a huge impact on Hong Kong's financial sector. It is paving the way for the gradual and greater use of Renminbi for international trade and investment.
But the reason this is possible in Hong Kong is because it is underpinned by the same fundamentals required for a global financial centre to flourish – sound and transparent regulations, a freely convertible currency, superb real-time, multi-currency settlement infrastructure, low and simple taxes, a tried and trusted legal system, the free flow of information and a critical mass of world-class talent in finance, equities, banking, insurance and corporate law.
Around 180 banks are currently using Hong Kong's Renminbi clearing platform. This includes branches of overseas banks as well as overseas branches of Mainland banks which together form a Renminbi payment and settlement network covering over 30 countries. This year the total value of trade settling in Hong Kong is likely to go over 1.5 trillion Renminbi. The savings of Renminbi in Hong Kong has already exceeded half of a trillion. The market is going at an accelerated pace. The strength of Hong Kong in this system is apparently getting momentum. It is going to be the most important powerful tool as Renminbi becomes liberalised and international convertible currency.
The development of a Renminbi bond market in Hong Kong has also gathered pace since the first launch in 2007. In just the first half of this year, there were 38 Renminbi bond issuances in Hong Kong totaling 43 billion Renminbi – more than all the bonds issued last year. In other words, this year we are going to at least double what we did last year.
Ladies and gentlemen, these are just some of the ways that Hong Kong's commitment to economic freedom benefits not just our city but also our nation and our business partners around the world.
Our clean and efficient government continues to look for ways to cut red tape, eliminate outdated regulations and safeguard property rights. In recent months, business registration, customs clearance and arbitration services have all been streamlined to enhance our business-friendly environment. Just now we got a reference to the introduction of minimum wage in Hong Kong being a handicap. Let's see how carefully it has been fashioned in a way that while we introduced minimum wage policy this year, unemployment rate continues to decline, indicating the wisdom and appropriateness of our policy.
So, economic freedom is part of Hong Kong's DNA. We value the Fraser Institute’s recognition of Hong Kong's endeavours and we look forward to seeing you back in Hong Kong again and again.
Thank you very much and have a great evening.
Ends/Tuesday, September 20, 2011
Issued at HKT 22:34
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