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CE's speech at conference on "The US-Asia Dynamic in the 21st Century: Challenges Ahead" (with photo/video)
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     Following is the speech by the Chief Executive, Mr Donald Tsang, at the conference entitled "The US-Asia Dynamic in the 21st Century: Challenges Ahead" this morning (October 18):

Distinguished guests, ladies and gentlemen,

     Thank you very much for the invitation to speak with you today.

     The discussion today is one of such depth and breadth that it is hard to know how, or where, to begin. Indeed, we could easily spend a week discussing the challenges of, say, the US-China relationship, or the US-India relationship, let alone try to cover the entire spectrum of the US-Asia relationship in the 21st century in just one day.

     Fortunately, we have the combined intellect, brainpower and resources of the Asia Society, the Brookings Institution and the University of Hong Kong to give it a good shot. And I must thank all three of these august institutions for holding this conference here in Hong Kong.

     To those of you who are visiting us - welcome. I hope you find some time to experience the contrasts of East and West and ancient and modern that define our city, our heritage, culture and outlook - and more important, our future.

     It is an honour that you have all come together in Hong Kong to discuss such a far-reaching subject. I hope that I can provide a Hong Kong perspective on some of the issues that I believe we will all face in the 21st century.

     Seventy years ago - in February 1941 - the renowned publisher Henry Luce expounded the idea of "The American Century" in an editorial he wrote for Life magazine. It was a remarkably prescient piece of journalism that some say still reflects US foreign policy today.

     Luce was actually born in China, the son of missionaries. Given his background and upbringing, it's no surprise that his case for the internationalisation of American values and ideals was written in the tone of a preacher. He made it his mission to change the American psyche from its inward-looking and isolationist ways, to embrace its role as a global economic, cultural and moral power.

     At the time, his view was not in the majority. But it did represent a deep undercurrent of opinion that felt America could best protect its interests and way of life, only if it played a greater role in shaping world affairs.

     The shock and utter disbelief of the attack on Pearl Harbour in December 1941 was the tipping point that forever altered the US's view of its role and responsibilities.

     And America's entry into World War II not only changed the course of that global conflict - it also changed the course of the 20th century.

     The UN, NATO, the IMF/World Bank, the GATT/WTO and the WHO - all post-war institutions championed by the US and its allies - provided the global institutional framework for peaceful co-existence, economic development and social progress that is unprecedented in human history.

     But as we enter the second decade of the 21st century - which some are calling "The Asian Century" - what does the future hold for the US's role in global affairs? Will the influence of American civilisation wane, as Asian cultures and values come to the fore? Will the market-led, Western capitalist model of development maintain its primacy? Will our global institutions need to be reformed or recalibrated to reflect the changing tide of global economic and political power?

     I don't have a crystal ball to answer all these interesting questions with any certainty - indeed only time will provide such answers.

     But what I can offer are some Hong Kong perspectives on some of the challenges we face as one of the most open and connected economies and societies in the world.

     I believe this is relevant to your discussions today because the world in the 21st century will be more open, more interconnected, more dynamic and probably more volatile than ever before - and by volatility I do not necessarily mean war or conflict, but rather increasing uncertainty or sudden challenges such as financial crises or outbreaks of disease.

     Hong Kong has thrived as a global centre for trade and commerce. The impressive skyline that you see is a bar chart of our progress over the past 50 years. I think we'll build an even more impressive bar chart over the next 50 years.

     One reason is simply luck, or fate, or kismet - whatever you want to call it. We have been blessed with a superb location and a natural deep-water port perfectly placed at the centre of global and Asian trade routes. And all of this also happens to be in a strategic location for China, which will be the world's largest economy within the next 20 or 30 years.

     But location is nothing unless you can leverage it - and that is why we have invested huge sums over the years in physical infrastructure to make the most of our location and increase our connectivity with the world.

     Our container port, our airport, our highway network and the railway lines we are building - all intended to keep us connected, competitive and relevant globally, regionally and nationally. We'll continue to invest heavily in infrastructure and I believe that Asian economies generally will spend huge sums in the next few decades upgrading their physical infrastructure. Asia - and the rest of the world - will become even better connected. The modernisation of Asian infrastructure will continue apace.

     Another reason we've thrived is the systems we have put in place. Open market, free flow of information, level playing field for business, clean government, and trusted legal system.

     All of this combined has given global businesses the confidence to set up shop in Hong Kong and manage their regional, or China, operations from here. American companies have led the way with almost 820 regional headquarters or offices in Hong Kong - more than one-fifth of all regional HQs or offices in the city.

     All of these systems are protected by our Basic Law and our legal system. We understand very deeply that no matter what happens in the future we must protect this institutional framework because it provides the certainty and peace of mind that international businesses need to operate efficiently and effectively. Looking ahead, I believe that companies and investors will continue to gravitate to those countries and economies in Asia that have a solid institutional foundation and which play by the rules. I believe Hong Kong has a definite edge in this regard.

     Apart from location and institutional strength, Hong Kong has thrived because we have a flexible, well-educated workforce and a substantial concentration of service industry brain power.

     In the '60s and '70s, Hong Kong prospered as a manufacturing base. In the '80s and '90s the manufacturing operations moved into the Pearl River Delta and elsewhere in Asia. At the start of the new century, we refined and honed our expertise in the global supply chain, management and logistics, as well as design, marketing and management. We have transformed from an economy that made things, into one that makes things happen.

     That trend and transformation into a knowledge-based economy continues. We will see Hong Kong grow and lead in new areas such as creative and cultural industries, medical services, testing and certification, environmental industries, innovation and technology, and education services. At the same time, we will strengthen our traditional pillar industries of financial services, trading and logistics, business services and tourism.

     Education is a lynchpin of our future development. To ensure that we have the human capital needed in the years ahead, we will continue to ensure that education and training remain the largest single item of government expenditure. We spend more than 22 per cent of our annual Budget on education and training, probably the highest percentage in any first-world economy. To invest in our future, we need to invest in our people.

     Education has always been highly valued in Asian society, but unfortunately not always widely available. As Asian economies grow and prosper, more children will benefit from better education opportunities and the human capital of Asia will be enhanced as a result.

     In India and China alone, tens of millions of students will be striving to move up the value chain - to boost their earning power and improve their living standards, to buy a phone, a laptop, then a car, and eventually an apartment, raise a family, and then send their kids to school - and, hopefully, a better school than the one they attended.

     Education will become an increasingly important growth industry for Asia - and will present huge opportunities as well as challenges for exporters of education services such as the United States, Canada, Australia and the United Kingdom. Resource allocation and quality control will be the two main challenges that I see.

     Here in Hong Kong, we have the highest concentration of international schools in Asia; and we are working hard to increase the international mix of students at our universities and colleges. And, we're making it easier for those college students to remain in Hong Kong and work here after they graduate. We want them to become part of the Hong Kong success story.

     Tens of thousands of Hong Kong kids have also studied overseas and returned home with new experiences to share and a new take on life. Coupled with the high concentration of international businesses in Hong Kong, the return of our students means there is a constant flow of new ideas into Hong Kong - a perennial blending of East and West that enriches and enlivens our culture, and nurtures creativity and innovation. The more interconnected we become, the more we will see similar blending and adaptation across the region.

     When we think about the future of Asia - or indeed the world - we are actually talking about how the students and young adults of today, and their kids, will shape that future. It's not so much about what our generation talks about today - it's about the value systems and life experiences that the current generation are growing up with, the type of world they are living in now, and the type of world they want to create for their families.

     That's why I believe a defining characteristic of "The Asian Century" will be the extent to which pluralism takes root and how people from all cultures and different ways of life will come together as global citizens.

     I believe we will see a crystallisation of shared values, but at the same time a more diverse range of views, systems and government models on how best to realise or live those values.

     It's happening now. Kids today are more connected, and have more information at their disposal, than at any other time. This trend will only accelerate.

     Facebook has more than 800 million users, of which 75 per cent are outside of the United States. If it was a country, it would be the third most populous country in the world. There are more than 70 languages available on the site. Then we have YouTube, Twitter, LinkedIn, Sina Weibo, Douban, MySpace, Ning, Google Plus - just to name a very few - which would easily have 800 million users or more between them as of today, and are growing at an exponential rate.

     The rise of social media and the huge upsurge in the amount of information available on the Internet presents fundamental challenges to governments around the world - for example, as we've seen in North Africa and the Middle East. But also to the way in which stable governments and established democracies engage their citizens, or don't engage their citizens as we've seen in Wall Street. Our young people want to be heard - there is actually nothing new in that. But what is new is the way in which our young people are able to harness the power of technology to amplify their voices and sway public opinion.

     What I find interesting in all of this is how people from different cultures, with different languages and from different social strata, have all used advances in communications technology to effect social change.

     Why does a YouTube video go viral around the world? Because it highlights or taps into a common human trait, feeling, or experience. The rise of social media is teaching us - sometimes in a very stark way - that there are common values shared by people regardless of culture, language, upbringing or religion.

     Justice, fairness, freedom, respect and empowerment are common threads. This trend can't be reversed because, for a start, we will only see more advances in the information technology that has allowed it to take root. And it's a trend that will be taken forward by the current generation here in Asia and all around the world.

     Looking ahead to US engagement in Asia, I feel that respect and fairness will be two of the major values that can bring us closer together - as well as potentially pull us apart.

     As Asian economies grow and prosper, they will become more confident about what they want and how they want to achieve it. I believe that the US and the West need to better understand the development aspirations of Asia - particularly in light of the global financial crisis which has severely eroded trust in the Western financial model.

     Asia suffered terribly in 1997 and 1998 due to the predatory practices of some banks and investment houses. As Europe struggles with its debt woes, and the US tries to wean itself off cheap money, Asia will inevitably be affected by a looming economic downturn.

     Fourteen years ago, Asia learned its lessons and took its medicine - and it was very painful medicine, I can tell you. In Hong Kong, for instance, our asset value dived by two-thirds; our GDP did a lot better though. But, as a result, Hong Kong emerged leaner, stronger and more resilient than ever. Sitting in Hong Kong, looking across the Pacific, and then on across the Atlantic, all I would say is that we know from bitter experience that sometimes you just have to knuckle down and take the pain.

     Ladies and gentlemen, I can't finish today without saying a few words about China - because the Sino-US relationship is so important to the peace and prosperity of the world, and in particular the Asia-Pacific. Of course, here in Hong Kong, we want to see deep, broad and positive engagement between my country and the US that benefits both sides.

     Despite the remarkable achievements of the past two decades, China's emergence on the global stage is still in the early stages. The process of modernisation, urbanisation, opening up and reform still has a long way to go.

     And, it will proceed at a pace that suits China's development needs, its own circumstances and systems, and which are in the best interests of the country and its 1.3 billion people. Americans will do the same for their own people, and one must expect China to do the same, for her people.

     Our history and culture stretches back 5,000 years. One of the fundamental concepts that we adhere to is that of harmony. This is best represented by the symbols for "yin" and "yang", which interlink and combine to make the perfect circle. Confucius once said that we find "harmony in diversity", which means that to achieve harmony we must recognise, respect and try to accommodate the differences in this world.

     One of the reasons Hong Kong has been so successful is because we have been able to absorb and adapt many different experiences and outlooks from people all around the world. Our history is deeply rooted in Chinese culture, but we have also embraced and celebrated all that the rest of the world has to offer. That is why Hong Kong is such a unique and beguiling place. I see that same process unfolding within my country. And after the Reform, will come the Renaissance.

     Looking ahead to the Sino-US relationship in the 21st century, I believe that America and China can achieve so much more together, and can achieve so much more for the world, if the relationship is based on mutual trust, mutual respect and mutual benefit. In other words, more can always be achieved as partners rather than competitors, and as friends rather than foes.

     Ladies and gentlemen, I wish you all the best for your discussions today and welcome all back to Hong Kong in the future for similar deliberations.

     Thank you very much.

Ends/Tuesday, October 18, 2011
Issued at HKT 12:00

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