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Following is the speech by the Chief Secretary for Administration, Mr Stephen Lam, at the Hong Kong-Guangdong Business Conference in Warsaw 2011 today (October 27, Warsaw time):
Deputy Prime Minister Pawlak (Waldemar Pawlak, Deputy Prime Minister and Minister of Economy of Poland), The Honorable Governor Huang (Huang Huahua, Governor of Guangdong Province), Distinguished Guests, Ladies and Gentlemen,
It is a great pleasure to be here in the spectacular city of Warsaw for this Hong Kong-Guangdong Business Conference.
Hong Kong-Polish Ties
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First of all, I congratulate Poland on its achievements as one of the fastest growing economies in Europe and the sixth largest in the EU. This is no mean feat in the current global economic climate.
Your capital city, Warsaw, has also evolved into a lively cultural hub, with festivals, events, markets, fairs, and indeed there are plenty of things to see and do.
Similar to Hong Kong, Warsaw is a city of contrasts; of East and West, old and new, natural beauty and architectural splendour.
The creative talent and spirit of the Polish people is celebrated in the wonderful galleries, theatres and music halls across this city.
Hong Kong has benefited from this explosion of Polish business and culture. Hong Kong also welcomes the growing number of bilateral cultural events.
Polish musical group Karbido staged memorable performances at a recent Hong Kong Arts Festival; some 19 classic and award-winning Polish films featured in the Polish New Wave Cinema programme in Hong Kong in 2009.
Hong Kong and Pearl River Delta
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I am delighted to have this opportunity to talk to you about my home city, Hong Kong. Governor Huang has just brought us all up to date with the exciting developments in Guangdong and the Pearl River Delta region. I would now like to give you a flavour of Hong Kong's role as an international gateway to the Mainland of China, including for Polish companies looking to the vast markets in the Mainland and across Asia.
The key of our region's success is to combine the many advantages of Guangdong with the unique attributes that Hong Kong brings to the table.
First, we are increasing our cross-boundary collaboration with our neighbours in Guangdong Province, particularly in the Greater Pearl River Delta. This region is often called "the world's factory" because of its dynamic manufacturing base which includes substantial Hong Kong investments. Around 80 000 Hong Kong factories operate in the GPRD, employing over 10 million workers. Our closer links with the Delta are helping to open up new business opportunities and strengthen our financial ties with the Mainland. Over the years, Hong Kong has also benefited tremendously through developing our own services-oriented economy, with a focus on trading, logistics, financial and professional services. Today, the services sector accounts for some 93% of our GDP.
At the same time, we are closely connected with the PRD, which is just an hour's train ride away from our city centre. We are linked by cross-boundary roads, railways, air services and ferry services. We also have a shared history and a shared culture that helps to unite our communities.
As you can imagine, our boundary crossing points are extremely busy. They are also remarkably efficient. On an average day this year, there are more than 685 000 crossings by land, sea and air. Each day, more than half a million people travel in both directions across the land boundary points. In 2010, there were more than 240 million boundary crossings between Hong Kong and Guangdong. This is the busiest boundary on earth.
Last year, we signed a Framework Agreement on Hong Kong/Guangdong Co-operation. This reflects a shared commitment to break down barriers to trade and investment and open up the flow of ideas and innovation throughout the Delta region.
All our companies, including Polish firms based in Hong Kong, can benefit from this closer integration.
The Agreement reaffirms Hong Kong's status as a global centre for finance, trade and logistics. By combining our city's strengths with those of our neighbour, we aim to establish the region as a world class metropolis and one of the most competitive regions in the world by 2020.
Several large-scale infrastructure projects are underway, or planned, to open up new opportunities and make it easier and more efficient for people and goods to move around the region.
These include the Hong Kong-Zhuhai-Macao Bridge, which will span 30 kilometres and provide quicker and easier access to the western shores of the Delta; an express rail line that will join Hong Kong with the Mainland¡¦s vast high-speed rail network; and a new boundary crossing to improve access between Hong Kong and the fast-growing southern city of Shenzhen.
Hong Kong-Guangdong co-operation extends well beyond infrastructure. To become truly world class, we are linking hands on a wide range of software elements too.
We are collaborating on environmental issues including clean air, water and energy to ensure a healthy living environment that will attract overseas talent. We are streamlining immigration procedures to facilitate a free flow of people within the GPRD. We are setting common standards based on international best practice to ensure the highest quality and reliability of our goods and services. We are also collaborating on innovation and technology, science and education, arts, culture and tourism.
CEPA
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One of the most important building blocks for our closer co-operation is a unique free trade pact called the Mainland-Hong Kong Closer Economic Partnership Arrangement, or CEPA. Since its launch in 2003, CEPA has opened up huge markets for Hong Kong goods and services in the Mainland of China. CEPA is more than a trade document. It is an on-going and commitment from both sides to open the door wider to cross-boundary business. CEPA has been expanded each year since its introduction. It currently covers 44 service areas, provides tariff-free access to "made in Hong Kong" goods and gives our companies first-mover advantage in Mainland markets.
And because CEPA rules are nationality-neutral, foreign firms including Polish companies incorporated in Hong Kong, can enjoy the same benefits as local enterprises.
According to our investment promotion agency, Invest Hong Kong, about 30% of the companies it assists say that CEPA is one of the factors in their decision to invest or expand in Hong Kong. Perhaps that is not so surprising when you imagine what preferential access to a potential market of 1.3 billion people could do for your business.
Hong Kong-Guangdong collaboration is crucial to the ongoing success of CEPA. Because of our close proximity and strong links, pilot initiatives are often launched between Hong Kong and Guangdong first. Once they have been tested and proven to be effective, they will be introduced nationwide through CEPA.
In recent years, CEPA has become an increasingly open and vibrant platform for Mainland companies to go global and build their international market and reputation.
International Financial Centre and Offshore Renminbi Services
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Hong Kong is also a highly effective testing ground for the Mainland's financial reform and opening up to the world. The liberalisation of the Mainland currency, the Renminbi, is part of the fast-evolving international financial architecture.
Economists are debating when and how the Mainland currency, the Renminbi, will become an international currency. The Mainland's capital account is still closed. However, the pace of financial liberalisation is quickening and Hong Kong plays a central role in this process.
Under the "One Country, Two Systems" concept, Hong Kong maintains its own currency, we have our own tax and legal systems and we have free flows of capital. We also have a robust regulatory regime, open markets and zero tolerance of corruption.
All this makes Hong Kong a valuable testing ground for the Mainland's financial liberalisation.
Renminbi banking has gathered momentum since its launch in Hong Kong in 2004. Today, some 128 authorised institutions are engaged in Renminbi business including deposits, remittances, credit cards and checking accounts. Total Renminbi deposits in Hong Kong at the end of July topped 572 billion Renminbi, or about US$90 billion. (£á65 billion).
A more recent development has been the introduction of the Renminbi trade settlement scheme. Businesses around the world, including in Poland, can settle their Mainland trade using Renminbi instead of a third currency.
In the first seven months of this year, Renminbi trade settlement through Hong Kong's banking system reached 953 billion Renminbi, or US$150 billion (£á108 billion). Hong Kong accounts for more than 80% of the total cross-border trade settlement in Renminbi.
We are also delighted to see the Central Government's support of Hong Kong's continued prosperity and stability highlighted in the National 12th Five Year Plan. The Plan pledges full support for our role as a centre for finance, trade and shipping. More recently, a raft of new policies and measures was announced by Vice Premier Mr Li Keqiang during his visit to Hong Kong in August.
These measures consolidate Hong Kong's evolution into the region's financing, offshore Renminbi market and asset management centre, and cement our status as an international financial hub.
One of these new measures will allow more non-financial Mainland corporations to sell Renminbi-denominated bonds in Hong Kong. This should better meet Hong Kong investors' demands for Renminbi-denominated products while satisfying the financing needs of Mainland companies.
Just last week we launched another new initiative, Renminbi-denominated gold bar trading.
Other strategies to expand the scope of our Renminbi business include allowing investments in the Mainland equity market through the RMB Qualified Foreign Institutional Investor (RQFII) scheme to a maximum of 20 billion Renminbi. The Central Government has also announced the launch in the Mainland of an exchange-traded fund (ETF) with Hong Kong stocks underlying.
Beijing has also decided that foreign direct investments denominated in Renminbi can be routed through Hong Kong into the Mainland.
Our freely convertible currency, deep pool of local and international financial talent and a cluster of top international banks makes Hong Kong an ideal conduit for the wider use of the Renminbi outside the Mainland.
Although Hong Kong is a relatively small city, our stock market has risen to become the seventh largest in the world and the third largest in Asia, with market capitalisation of US$2.1 trillion as at end-September.
For the past two years, Hong Kong has led the world in total funds raised through Initial Public Offerings (IPOs), surpassing London and New York. New listings raised a total of more than US$31 billion in 2009 and US$57 billion in 2010.
We are actively encouraging more overseas firms to list in Hong Kong. In the past two years, resources firms from Russia, Europe and Mongolia as well as high-end brands from Italy and France have successfully launched IPOs in Hong Kong.
These companies are enticed to Hong Kong by attractive valuations and the potential to reach wealthy investors in China and throughout Asia. A Hong Kong listing also raises the profile of a company's brand among Mainland consumers.
We are discussing the possibility of forging links with Mainland stock exchanges in Shanghai and Shenzhen to provide a more competitive trading platform for investors.
I encourage Polish companies to consider using Hong Kong as a capital-raising platform.
We could not have achieved all this without a well-educated and hard-working labour force that is multi-skilled in ability, multi-lingual in communications and multi-national in outlook.
The Hong Kong Government adheres to the principle of "big market, small government". Public expenditure is just about 20% of our GDP. In a competitive and fast-changing world, our most important role is to remove obstacles to economic development and enhance Hong Kong's competitiveness. That way we leave our business community to concentrate on what it does best - business.
Opportunities for Polish Companies
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To expand our economic base, we have identified six industries with a competitive advantage in our region. The Hong Kong Government is exploring ways to enable these industries to take off and achieve their full potential. These industries are education services, innovation and technology, green industries, testing and certification, creative and cultural industries and medical services.
I believe there are strong opportunities for Polish companies and talents to contribute to these sectors in Hong Kong. Through closer collaboration in these services sectors we will be able to strengthen links with Poland and establish a stronger tripartite relationship between Poland, Hong Kong and Guangdong.
Bilateral trade between Hong Kong and Poland has shown impressive growth in recent years, rising by an average annual rate of nearly 15% between 2006 and 2010. In 2010 total trade between us exceeded US$850 million (£á616 million). I would hope this growth trend will continue.
Our strengthening ties are borne out by a number of senior governmental and trade visits in recent years. These include high-profile Polish delegations representing political, commercial and economic spheres.
I believe there is no better time than now for Polish companies to invest in Hong Kong and to expand the already strong links between our two business communities.
Asia has emerged from the recent global financial crisis in relatively good shape. Hong Kong has also made a full recovery, recording robust GDP growth of 7% last year. In the first half of this year, our economy expanded by 6.3%.
We all benefited from China's economic strength and resilience. This helped to cushion our enterprises, particularly the small and medium companies, against an export collapse with strong domestic demand, lifting credit constraints and implementing an exceptionally large fiscal stimulus.
Apart from being right on the doorstep of China, Hong Kong is a stable and dynamic international business and financial centre. We also share many of the characteristics that are cherished by entrepreneurs the world over: the rule of law; the free flows of capital, ideas and information; a low and simple tax regime with profits tax of 16.5% and salaries tax capped at 15%. There is no VAT, no GST, no estate duties, no capital gains tax and even zero duty on wine. We also work hard to maintain a highly transparent and effective regulatory environment to underpin Hong Kong's status as a global financial centre.
Hong Kong remains a key destination for foreign direct investment (FDI). We attracted US$69 billion worth of FDI last year. That is according to the World Investment Report 2010. This was an all-time high and lifted Hong Kong to become the world's third largest FDI recipient and second in Asia behind the Mainland of China.
Hong Kong is also a preferred location for multinational companies. Over 3 700 overseas and Mainland companies have chosen to set up their regional operations in our city, demonstrating their confidence in Hong Kong as an international business hub.
These numbers underscore Hong Kong's strong appeal to a growing number of international companies as a platform to reach Guangdong and the rest of the Mainland, as well as the Asia-Pacific region.
Invest Hong Kong and its teams have been busy assisting new companies to set up in Hong Kong and existing firms to expand their operations in our city. The Department has a great track record of assisting companies, big and small. I am told the Department has already exceeded its initial target to assist 290 companies this year.
I should also mention that the single largest source of non-local firms in Hong Kong is the Mainland of China. Given that China is now the world's second largest economy, many of these firms see Hong Kong as the most effective springboard to reach overseas markets and expand globally.
Representatives from InvestHK who are here today will be happy to share their experience and ideas with you. Please feel free to raise any questions with them about exploring the business potential in our part of the world.
We also have the Hong Kong Trade Development Council who organises international trade fairs all year round. The Council connects the international business community to suppliers in Hong Kong, in Guangdong and throughout the Mainland.
Conclusion
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So to conclude, if Polish companies come to Hong Kong, you will find:
* a growing market of our 100 million people in Hong Kong and Guangdong;
* a free trade area which starts in Hong Kong and expands throughout China with a market of over 1.3 billion people;
* an international financial centre which is the freest in Asia and which will become the first offshore Renminbi Service Centre.
You will also find Hong Kong to be a vibrant city with over 36 million tourists every year and a place with the most international cuisine in Asia.
So your companies will have ample business opportunities and you yourselves will have a good time in Hong Kong.
Hong Kong and our partners in Guangdong provide a winning combination for both local and overseas investors. We look forward to welcoming more great Polish ideas, innovations and products coming to this exciting region soon.
Thank you very much.
Ends/Thursday, October 27, 2011
Issued at HKT 19:16
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