************************************************************
Following is the speech by the Chief Executive, Mr Donald Tsang, at the dinner co-hosted by Asia-Pacific Chamber of Chile and Bank of Chile in Santiago, Chile, today (April 13, Santiago time):
Distinguished guests, ladies and gentlemen,
It is wonderful to be here in Chile – a country famous for its contrasting scenery and business opportunities. Although I only arrived in Chile yesterday, I have already seen some wonderful landscapes and have got a taste of the great potential for our closer bilateral ties.
Today, I would like to say a few words about the opportunities for stronger links between Chile and Hong Kong. I will also talk about our city's role as China's global financial centre.
In many ways Hong Kong and Chile could hardly be more different. Here in Santiago I have found an incredible vibrancy and distinct South American flavour. The wide open spaces, snow-capped peaks, great architecture, the warmth of the people, and the culture have a unique character all of their own.
By comparison, Hong Kong is a relatively small city on the southeastern tip of Mainland China, and at the heart of East Asia. We have a population of around 7 million people, mostly Chinese. Our compact city surrounds a spectacular deep water harbour and verdant hills – and our history has produced its own style of East-meets-West culture.
At the same time, there are some important similarities between our two places in terms of doing business.
Both Hong Kong and Chile have prospered by promoting free trade and open markets. Both of us welcome investors from all corners of the globe and we both work hard to provide a business-friendly environment.
This is underscored by Hong Kong's ranking as the world's freest economy for the past 18 years, according to both the Fraser Institute in Canada and the US-based Heritage Foundation. The Heritage Foundation also ranks Chile as the seventh freest economy in the world and the freest in Central and South America – so we obviously have the same outlook and approach to economic freedom.
I know that Chile has signed a large number of Free Trade Agreements (FTAs) with its partners around the world, including Mainland China (see Note). We have been negotiating an FTA between Hong Kong and Chile for the past couple of years.
Over the past five years, our bilateral trade has grown at a healthy rate of over 12 per cent (12.4 per cent) per annum on average. Last year, our bilateral trade exceeded US$900 million, an increase of more than 16 per cent year-on-year.
We are on the right track and I can assure you that there is still plenty of room to enhance and broaden our trade relations.
The wine trade is an excellent example of the strengthening ties between our two economies. Growth in this area has been especially encouraging since we abolished duties on wine in 2008. Last year, we imported over US$17 million worth of wine from Chile, which makes you our seventh largest source of wine imports. This is more than double the amount of wine imported in 2007.
Although we have a relatively small population of 7 million – just over 1 million more than what you have here in Santiago – Hong Kong people are very wine-savvy. In fact, they are the largest per capita consumers of wine in Asia, according to a recent study by global exhibitor Vinexpo. Another significant trend identified in the study is that China is by far the fastest growing market for imported wine.
Chile can take advantage of our zero wine duties, excellent logistics and prime location to tap the China market – and of course add a few more labels to the selection of fine wines in Hong Kong.
In 2010, Hong Kong and Chile signed a Memorandum of Understanding on wine-related business. We want to learn from Chile's expertise in establishing our city as a wine trading hub in Asia.
I mention the wine trade specifically because it highlights a great model for expanding our bilateral trade. The model is a simple but effective one: low, or no, taxes plus bilateral accords equals business opportunities.
This not only applies to wine but across a broad spectrum of activities.
In Hong Kong we have no capital gains tax, no death duties, no VAT or GST. People pay no more than 15 per cent salaries tax and profits tax is capped at 16.5 per cent.
Foreign firms are free to invest as they choose. We don't impose any nationality restrictions on corporate ownership and there is no restriction on the flow of capital or goods. The free flows of information and ideas are protected by law, and we do not have any censorship regime.
This, together with the rule of law, a clean and efficient government and a well-educated workforce, provides the bedrock for our business-friendly environment.
Last year, Hong Kong was ranked as the world's most competitive economy for the first time in the Institute for Management Development's World Competitiveness Yearbook 2011.
With a deep pool of talented professionals, good management practices and an independent common law legal system, Hong Kong is the preferred choice for enterprises looking to the vast China markets.
Among other things, we have a unique free trade pact with the Mainland – the only instance of such an arrangement between a city and its sovereign. We call this the Closer Economic Partnership Arrangement, or CEPA, and it is possible because Hong Kong and China remain separate customs territories under the "One Country, Two Systems" formula.
Under CEPA, all products with the "Made in Hong Kong" label are exempt from tariffs when entering Mainland China. There are some fairly straightforward rules-of-origin criteria to meet, which, in most cases is not a problem. Because CEPA rules are nationality-neutral, companies from Chile and around the world can enjoy the same benefits as local Hong Kong firms.
Chile's services industries can also take advantage of CEPA. Currently 47 service sectors are included in CEPA including key areas such as banking, tourism, legal and medical services, accounting, conventions and exhibitions, and transport and logistics services. The number of areas covered under CEPA has increased each year since implementation in 2003, making this an ongoing and expanding commitment to break down barriers to trade.
Our goal is to achieve full liberalisation of goods and services trade between the Mainland and Hong Kong by the end of 2015.
Hong Kong's strong cross-boundary links, efficient infrastructure and decades of experience in doing business in the Mainland offer Chilean firms a head start in tapping these markets.
Similar to Santiago, Hong Kong is not just a great trading hub, it is also an international financial centre. Last December, the World Economic Forum ranked Hong Kong first in its Financial Development Index. We are quite proud of this because it takes us above the US and the UK as the first Asian financial centre to top this ranking.
We have one of the largest stock markets in the world. The Hong Kong Exchanges and Clearing Limited is the sixth largest bourse in the world and second largest in Asia by market capitalisation (figures at the end of January 2012). The market cap is around US$2.5 trillion, larger than Korea, Singapore and Malaysia combined.
Over 1,500 companies are listed in Hong Kong. Of these, more than 40 per cent are from Mainland China. Many of these companies use Hong Kong as a tried and trusted launch pad to "go global". We have also been attracting companies from around the world to launch initial public offerings (IPOs) or issue depository receipts.
For each of the past three years, our exchange has led the world for total funds raised through IPOs. Total IPO funds raised in Hong Kong last year reached US$33 billion.
Our city is particularly attractive for overseas resources firms, mainly because Mainland China is such a huge consumer of natural resources. Companies from resources-rich countries such as Russia, Mongolia and Kazakhstan have successfully launched IPOs in Hong Kong. In December 2010, Brazilian mining giant Vale SA became the first company to issue Hong Kong depository receipts.
Other recent high-profile listings have included top brand names from Italy, France and the US. As well as offering attractive valuations, a Hong Kong listing also raises the profile of companies in Mainland China, where quality brands are increasingly in demand.
I encourage Chile's leading brands and resources firms to consider listing in Hong Kong. We have all the financial services expertise to ensure smooth listings of all sizes.
As China's global financial centre, Hong Kong is at the centre of activities to internationalise the Mainland currency, the Renminbi.
Over the past few years, while other financial centres were in virtual lockdown mode because of the global financial crisis, Hong Kong has made significant progress in developing its offshore Renminbi business.
In the space of just a few years, we have become a global hub for offshore Renminbi trade settlement, financing and wealth management involving partners around the world. In 2011, the value of Renminbi trade settlement conducted through Hong Kong's banks was around RMB1.9 trillion. That is over 90 per cent of total external trade settlement using Renminbi.
Since August last year, Chilean firms and companies globally have been able to settle their Mainland trade throughout China using Renminbi. This can reduce costs and exchange rate risks of settling trade in a third currency. It can also attract Mainland partners who prefer to use Renminbi for their transactions to avoid foreign-currency exposure.
I encourage Chilean firms to consider this option. Hong Kong stands ready to offer all necessary services, advice and experience in this field.
With ample Renminbi liquidity, more foreign firms are using Hong Kong as a platform to raise capital for their Mainland operations. We began issuing Renminbi bonds in Hong Kong in 2007. These are sometimes called "dim sum" bonds, after the popular Cantonese cuisine which is famous in Hong Kong.
Last year alone, there were 91 "dim sum" bond issuances with a total value exceeding RMB107 billion, or about 8 trillion Chilean Pesos. It is safe to say that investors are acquiring a taste for these products.
Ladies and gentlemen, this is just a snapshot of the opportunities for closer links between Chile and Hong Kong in business and finance. We would also like to see more of Chile's vibrant arts and culture coming to Hong Kong, more Chilean tourists and, of course, more of your Chilean wine.
Thank you for this opportunity to talk with you all today. I am sure we can look forward to stronger links between our two economies and a bright and prosperous future.
Thank you very much.
Note: Chile has signed more than 20 FTAs with about 60 other countries or blocs including China since 2006 according to the HKTDC.
Ends/Saturday, April 14, 2012
Issued at HKT 10:13
NNNN
