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Following is the speech by the Chief Executive, Mr C Y Leung, entitled "Forward ASEAN: One Community, One Vision, One People" at the 12th Association of Southeast Asian Nations (ASEAN) Leadership Forum in Kuala Lumpur today (April 26):
Your Royal Highness, Your Excellencies, Tan Sri Dr Jeffrey Cheah, Tan Sri Michael Yeoh, distinguished guests, ladies and gentlemen,
Good afternoon and thank you for the privilege of addressing this forum. It's a great pleasure to be here in Kuala Lumpur. One of Asia's most dynamic capital cities, Kuala Lumpur is also among the world's fast-emerging global cities. No less important, it's one of my favourite cities for its hospitality.
The theme of this 12th Leadership Forum, "Forward ASEAN: One Community, One Vision, One People", smartly reflects the growing collaboration that has come to mark 21st century Asia. I believe that co-operation - in our business and trade, in our political ties, and in our cultural development - is the only way forward. For ASEAN, for China, and for Hong Kong.
That rock-solid certainty in the value, and rewards of co-operation, is the driving force behind the ASEAN-Hong Kong Free Trade Agreement, which has been under negotiation since last July. The third round of negotiations concluded last month in Hong Kong. All is progressing smoothly, and I look forward to a successful conclusion in the coming year.
Of course, Hong Kong and ASEAN have long enjoyed strong relations. That is much in evidence in our trade ties. ASEAN is Hong Kong's second-largest trading partner in goods and our fourth largest in services. Last year, the total value of merchandise trade between us exceeded US$106 billion - up 10 per cent over the previous year.
Indeed, given our continuing growth in trade, and our expanding bilateral relations in general, we plan to open a new Hong Kong Economic and Trade Office in the region.
Once our FTA is up and running, I'm confident it will boost our "super-connector" role between Mainland China and ASEAN. Hong Kong is, after all, a trade and logistics hub, the world's Chinese financial centre and China's international financial centre. When you are in Hong Kong, you are in China - a market with tremendous potential. And, thanks to our "One Country, Two Systems" arrangement, we share with our international business partners, and that definitely includes our ASEAN partners, the double benefits of "One Country" and "Two Systems".
Take, for example, CEPA - our Closer Economic Partnership Arrangement with Mainland of China. In effect since 2004, CEPA is Hong Kong's free-trade agreement with the Mainland. Since 2006, all Hong Kong products meeting CEPA origin rules gain tariff-free access to the Mainland market. And, the vast services market of the Mainland has been gradually opening to Hong Kong services suppliers now for more than a decade.
CEPA is nationality neutral. Which means that ASEAN investors can realise the same advantages that Hong Kong companies enjoy. They only need to establish manufacturing operations in Hong Kong or partner with a Hong Kong company to take advantage of all that CEPA can offer ASEAN products and services.
And there's more good free-trade news on the way. By year's end, I expect that Hong Kong will enjoy basic liberalisation of trade in services with the Mainland. The first big step in that development was set in motion just last month, when basic liberalisation of trade in services between Hong Kong and the neighbouring, very prosperous Guangdong Province was achieved.
Guangdong has long been a major recipient of Hong Kong investment. Indeed, in 2013, it accounted for about one-third of our outward direct investment in the Mainland. And the new agreement gives Hong Kong investors first-mover advantage in the opening up of Guangdong's services sectors.
The Guangdong Free Trade Zone, formally established earlier this week, is sure to supercharge Hong Kong business and investment in Guangdong, and that, I hasten to add, will include Hong Kong-based ASEAN companies. In particular, it will benefit our high value-added services. None more so than our financial industry.
In fact, Hong Kong has been in the offshore Renminbi business since 2004. Today, we are the world's largest offshore Renminbi centre. Indeed, the Renminbi may well be the best illustration of Hong Kong's "super-connector" role between the Mainland and the rest of the world. Through cross-border trade, direct investment and portfolio investment, Hong Kong links offshore and onshore Renminbi markets, promoting the healthy circulation, and development, of Renminbi funds.
The development to date has certainly been promising. Last year, Renminbi trade settlement handled by banks in Hong Kong reached RMB 6.3 trillion, up 63 per cent, year-on-year. We have, as well, the world's largest offshore pool of Renminbi liquidity. At the end of February, Renminbi customer deposits and outstanding certificates of deposit issued totalled RMB 1.1 trillion.
Our Renminbi financing activities are also buoyant, the amount of outstanding Renminbi loans increasing from 116 billion at the end of 2013 to RMB 188 billion at the end of 2014, an increase of 62 per cent in a year.
From 2007 to February of this year, nearly 500 Renminbi bond issuances have taken place in Hong Kong, with an outstanding amount exceeding RMB 370 billion. Hong Kong is also the world's largest offshore Renminbi investment product market. Renminbi investment funds, insurance, currency futures, real estate investment trusts, shares, derivative products and more are available through Hong Kong.
It's all supported by advanced infrastructure. The average daily turnover on Hong Kong's RMB Real Time Gross Settlement system reached RMB 960 billion at the end of February. Today, more than 220 banks participate in the Renminbi clearing platform in Hong Kong. They form a global Renminbi payment network covering some 40 countries and regions.
Perhaps the most telling piece of statistic is this: Hong Kong now handles about 70 per cent of the world's Renminbi payments - that according to the Society for Worldwide Interbank Financial Telecommunication.
And we're only getting started. We are strengthening our market infrastructure and financial offerings to enhance their market friendliness. And we will continue to work with the Mainland to create Renminbi opportunities that reward us all, including ASEAN companies handling their Renminbi transactions in Hong Kong.
Our place as China's international financial centre is visible in other ways as well. The most recent example of this is the Shanghai-Hong Kong Stock Connect. Launched last November, the programme underscores our "super-connector" role between the Mainland and the rest of the world.
Through Stock Connect, investors from Hong Kong, and overseas, including ASEAN, of course, can trade in more than 500 Shanghai-listed shares through the Hong Kong Stock Exchange, directly, for the first time. And Mainland investors can use onshore Renminbi funds to invest in shares listed on Hong Kong Stock Exchange. This unique connectivity with the Mainland stock market will bring huge opportunities to Hong Kong.
In fact, Stock Connect is already benefitting financial intermediaries in Hong Kong. They're the ones offering investment management and market research, as well as custodian and brokerage services, to Hong Kong and international investors turning to the Mainland stock market.
It's all been smooth sailing since the November launch. Actually, it's been high-speed cruising of late. Less than three weeks ago, both Shanghai-bound and Hong Kong-bound turnovers broke single-day records, with the highest combined daily turnover reaching approximately US$5 billion.
Shanghai-Hong Kong Stock Connect is only the beginning. We are now hard to work on the Shenzhen-Hong Kong Stock Connect - the next step forward in the harmonising of the Hong Kong and Mainland financial systems.
There's more than finance in our future, thanks to China's Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives. Here, too, Hong Kong's "super-connector" role can help bring China and the world together.
"One Belt, One Road," as it's called, will promote closer co-operation with countries across Asia, Europe and Africa. Connectivity is the magic word. And we will see this unprecedented coming together in a great many areas, from the strengthening of infrastructural facilities to the enabling of unimpeded trade and investment, the deepening of financial integration and the building of people-to-people bonds among countries across the three continents.
Hong Kong is strategically located at the centre of Asia, perfectly positioned between the Mainland and overseas markets. The world's eighth-largest trading economy, Hong Kong is a key regional trade and logistics centre. The "One Belt, One Road" initiatives will only extend our reach. Our advantages will bring us closer to ASEAN, the Middle East, Africa, Russia, Kazakhstan and other Central Asia countries.
Those advantages include our powerful competitive edge in services, from trade, logistics and finance to legal, accounting and other professional services, together with infrastructural project management, environmental and risk assessment, and transport and tourism services. The "Belt-Road" initiatives will create immense demand for these and other high-level services.
Hong Kong is the world's freest port for trade and investment. Capital, information, trade and people: they all flow freely in and out of Hong Kong. The US-based Heritage Foundation has ranked Hong Kong number one in its Index of Economic Freedom every year since 1994.
Hong Kong is also the easiest place in the world to do business. We are, after all, blessed with a low and simple tax system and world-class logistics and communications infrastructure, all built on the rule of law, on judicial independence and on intellectual property protection regime. And, let me add, ASEAN businesses can compete with other companies, local and overseas, on an equal footing in Hong Kong.
As the "Belt-Road" developments increase the flow of international investment, as well as investment in and out of China, Hong Kong is supremely placed to serve as the "super-connector".
The Silk Road Fund and Asian Infrastructure Investment Bank (AIIB) are integral to the "Belt-Road" strategy. With a final funding target of US$40 billion, the Silk Road Fund will provide investment and financing support for infrastructure construction, industrial co-operation and other connectivity projects among countries along the "One Belt, One Road." With 57 founding members, the AIIB will help address the region's infrastructure financing funding gap, estimated to be about US$780 billion a year between 2010 and 2020.
Hong Kong's financing and asset management professionals can support the AIIB in such areas as project financing, investment, financial management and foreign exchange management. We can help it realise the huge infrastructural investment needed to connect the Belt-Road's ambitious blueprint.
In the long run, Hong Kong will benefit from the increasing intra-regional trade along the "Belt-Road." China is, of course, a major ASEAN trading partner. And it's expected that multilateral trade will soar as the Belt-Road's infrastructural and economic prospects become reality.
Hong Kong is already helping Mainland enterprises "go global" with a wide range of professional services in the financial and legal areas. In the coming "Belt-Road" era, that support will grow immeasurably. It will create unprecedented opportunities for Hong Kong's financial services industry and professionals - and our ASEAN partners.
Ladies and gentlemen, I am confident that economic and trade ties between ASEAN and Hong Kong will only continue to grow, indeed, to soar. Convinced that, for all of us here today, the best has yet to come.
My thanks to our event organiser, the Asian Strategy & Leadership Institute, for this welcome opportunity to talk to you this afternoon about ASEAN and Hong Kong. About the promising tomorrow we are working to realise today. Right now. Right here in Kuala Lumpur.
Thank you.
Ends/Sunday, April 26, 2015
Issued at HKT 20:36
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