Opening speech by Chief Executive-elect at Wharton Global Forum Hong Kong 2017 (English only) (with photo)
Dean Garrett (Dean, Wharton School of the University of Pennsylvania, Professor Geoffrey Garrett), George (Chairman of Wharton Global Forum Hong Kong, Mr George Hongchoy), distinguished guests, ladies and gentlemen,
It gives me great pleasure to join you all here today, at the 50th Wharton Global Forum, a flagship event of the University of Pennsylvania. Let me first thank the Wharton Business School for choosing Hong Kong for the third time to hold this memorable event and for those who have come from around the world. A big welcome to Hong Kong.
For those who are not entirely familiar with the Hong Kong political structure, let me just explain briefly my position as the Chief Executive-elect. Hong Kong is a Special Administrative Region (SAR) of the People's Republic of China since July 1, 1997, operating under "one country, two systems", and enjoying a high degree of autonomy under the Basic Law. The Chief Executive of the HKSAR is the head of the HKSAR and is accountable to both the Central People's Government of the People's Republic of China and the HKSAR in accordance with the provisions of the Basic Law. The Chief Executive is selected by an Election Committee and appointed by the Central People’s Government, serving a term of five years. I resigned from my position as the Chief Secretary for Administration in the current term of government to contest in the election for the Fifth Term Chief Executive, won the election on March 26 this year and will take office in just a week's time, on July 1. Two days ago, I announced my team of Principal Officials, also appointed by the Central People's Government upon my nomination in accordance with the Basic Law. I wish to say that as a government-in-waiting, we are excited about the many opportunities ahead that will bring Hong Kong to greater heights.
So when Mr Paul Cheng, one of your most senior alumnus - in age, he said, as he was a graduate in 1961 - invited me to speak at this Forum just three days after Election Day, he impressed upon me that the Wharton Global Forum is one of the most appropriate channels for me to "connect" with many distinguished people who hold senior positions in the finance and technology sectors and at the same time promote Hong Kong's financial and innovation hub status. Paul is clearly very clever as he knows well that "connectivity" is my election slogan, and finance as well as innovation are two major sectors in my economic development agenda.
Before I talk about my vision for Hong Kong's financial and technology development, let me just impress upon you the strong ties between Hong Kong and the United States (US) on various fronts, and we have a great deal to learn from and offer each other. Last June, I made a nine-day fully packed official visit to the States, covering the three cities where we have an Economic and Trade Office, that is, Washington DC, New York and San Francisco, and picked up even more ideas for closer collaboration, some of which I have shared with the US Consul-General and the American Chamber of Commerce in Hong Kong.
The United States is Hong Kong's second-largest trading partner. Hong Kong is America's ninth-largest export market. Last year, Hong Kong bought US$35 billion worth of goods made in America. Taking wine as an example, since we removed all wine duties in 2008, the total value of our wine imports has quadrupled, to a record breaking HK$12 billion last year. Indeed, American wineries continue to make a significant presence in major wine fairs in Hong Kong, namely the Hong Kong International Wine & Spirits Fair, Vinexpo, ProWine Asia and the Wine & Dine Festival. More amazing is that you can always enjoy fine American wine at many of our local restaurants or easily buy them at wine stores and supermarkets.
Hong Kong is a cosmopolitan city and there is a strong American presence here. According to the US Consulate General in Hong Kong, some 90 000 US citizens are living in Hong Kong. Nearly 1 400 US companies operate in Hong Kong. And the American Chamber of Commerce in Hong Kong, with some 1 700 members, is the largest international chamber in the city and one of the largest American chambers outside the US.
Hong Kong is also a magnet for foreign capital. We were the world's fourth-largest recipient of foreign direct investment in 2016. The US, at the end of 2015, ranked seventh among the top sources of investment into Hong Kong, with a stock of over US$40 billion.
Thus, US citizens, US companies, US goods and capital are all alive and thriving in Hong Kong. For good reasons.
And here I want to give you a quote. It reads like this, "Hong Kong's strong traditions of rule of law, low levels of corruption, and high levels of public safety make it a preferred choice for US businesses in the region." This very strong statement of support and endorsement does not come from me. It came from the Hong Kong Policy Act Report 2016 submitted by the US Department of State to the US Congress.
That preference for Hong Kong as the base of American businesses for overseeing regional operations in Asia speaks, loud and clear, of the confidence US companies and global business have in Hong Kong's enduring advantages. And let me elaborate on a few of those "enduring advantages".
For business, they begin with confidence. I trust that Hong Kong rolls out a level playing field for all companies.
And we make it easy for people to do business. We believe, passionately, in free enterprise, in the right to make money - and keep most of it. We have a simple and low tax regime, with salaries tax kept at 15 per cent and profits tax at 16.5 per cent, and by the way, I intend to make our tax system more competitive by introducing a two-tiered profits tax system which will collect less from SMEs and start-ups. For the past 23 years in a row, Hong Kong has been ranked first in the Index of Economic Freedom, published annually by the Heritage Foundation and the Wall Street Journal. Indeed, as a result of these strengths, Hong Kong has continued her position as the world's No. 1 in terms of economic competitiveness as evaluated by the Swiss-based International Institute for Management Development in its World Competitiveness Yearbook 2017.
Our judiciary is independent, grounded in the rule of law, and our intellectual property protection regime reassures companies from around the world. We are one of the safest cities in the world, with the crime rate in 2015 hitting 911 per 100 000 population, compared to 2 104 per 100 000 population in New York City in the same year. The number in Hong Kong has further fallen to 825 cases per 100 000 population in 2016 - a 44 year low.
Wharton's Global Forum naturally inspires us all to see each other's development in the global context. After all, we live in a global world; we trade and pursue opportunities in the global economy. The emergence of protectionism in some countries is unsettling and it is thus gratifying to know that our Nation has mapped out a clear vision for global growth - that is the Belt and Road Initiative.
The Belt and Road is one of the most ambitious initiatives in the 21st century, embracing more than 60 countries on three continents, covering 4.4 billion people, and accounting for over 30 per cent of global economic value. It is also multifaceted, encompassing infrastructure, finance, trade, and people to people exchanges. With time, determination and a great deal of capital, it can, I believe, become the force that drives the global economy in the 21st century.
China has made it a major policy to support Hong Kong's participation in the Belt and Road development. Specifically, the Central Government will support (i) to build a platform of comprehensive services, such as accounting, design, consultancy, legal and arbitration, high added-value shipping, R&D and other professional services; (ii) to facilitate capital flows and promote Renminbi internationalisation and the development of the Belt and Road investment and financing platform; (iii) to promote cultural exchanges for greater mutual understanding among the people along the Belt and Road; and (iv) to deepen co-operation with the Mainland of China and jointly develop markets along the Belt and Road.
We strongly believe that Hong Kong, with our unique advantages under "one country, two systems" - close ties with the Mainland coupled with rich experience and expertise in working with the rest of the world - will be able to make important contributions to this endeavour.
Starting with our strongest pillar - financial services. One of the world's major financial centres, Hong Kong is also China's international financial centre. I am pleased to update you that Hong Kong has formally become a member of the Asian Infrastructure Investment Bank, AIIB, earlier this month (June 7). We have the capital markets and the financial products, as well as the professional services expertise, to support the operation of the AIIB.
According to AIIB President Mr Jin Liqun, Asia will need about US$730 billion a year to cover infrastructure construction between 2015 and 2020. That need, he added, cannot be met by existing multilaterals. And the private sector will play a considerable role in raising funds for the Belt and Road projects.
For that, they can look to Hong Kong, to our capital markets and our world-class financial professionals.
In 2016, the Hong Kong stock market was the world's seventh-largest in market capitalisation and first, overall, in equity funds raised through initial public offerings.
Bond issuance is another powerful fund-raising channel. Hong Kong's offshore Renminbi bond market - we call them "dim sum" bonds - is the largest of its kind outside the Mainland. Bolstering those bonds is Hong Kong's RMB600 billion liquidity pool, which is also the largest outside the Mainland.
The Hong Kong Monetary Authority opened an Infrastructure Financing Facilitation Office, a one-stop shop for Belt and Road infrastructure investment and financing, with a view to facilitating co-operative efforts and efficient investments in the realisation of these projects. In just a year's time more than 60 local, Mainland and overseas organisations have joined the Office as business partners, and we look forward to many more.
Of course, we also welcome companies from all over the world to take advantage of Hong Kong's strengths as a capital formation centre, especially our unique strengths, for example, in the settlement of deals and raising of funds in Renminbi. As you know, the Renminbi was added to the International Monetary Fund's Special Drawing Rights basket last year, alongside the US dollar, the euro, the yen and the pound sterling. That will surely expand the Renminbi's global reach and use.
Another advantage of Hong Kong is of course our international connectivity. Hong Kong International Airport, flying high since 1998, has been the world's busiest cargo airport for the past seven years. It's also the third-busiest international passenger airport in the world, connecting Hong Kong to about 190 destinations worldwide, including some 40 Mainland destinations.
While it makes Hong Kong an Asia-Pacific aviation hub today, it has nearly reached its full capacity in less than 20 years since commissioning, which is why we are developing a Three-runway System for the airport. Construction works have already started in August 2016. When completed in 2024, the airport will have the capacity to handle around 100 million passengers and 9 million tonnes of cargo annually.
I now turn to Innovation and Technology (I&T), in which we have a lot more to catch up with in light of global developments as well as the amazing progress of our neighbour Shenzhen. Technological advancements in digital communication, in cloud computing, big data, robotics, biotech, financial technology, and many more, have constructively disrupted the status quo, and changed entirely the way that we live, the way that we work and communicate.
With the establishment of our Innovation and Technology Bureau in November 2015, we have given our R&D personnel and entrepreneurs dedicated support for enhancing the local innovation and technology ecosystem. Governmental I&T policies and programmes, with a total amount of over HK$18 billion, are being rolled out. Our I&T agenda is ambitious and well rounded, encompassing areas such as promoting more midstream research, supporting start-ups, driving "re-industrialisation", helping SMEs upgrade and transform, encouraging the application of technology in addressing social issues, and so forth. I intend to encourage private corporations to also invest in R&D by offering tax incentives.
At the start of the year, I, on behalf of the HKSARG, signed a Memorandum of Understanding with Shenzhen to jointly develop the Lok Ma Chau Loop into the Hong Kong-Shenzhen Innovation and Technology Park. The 87-hectare site is strategically situated at the boundary of Hong Kong. We plan to turn the Park into a key base for scientific research, bringing together the brightest R&D talents, locally and overseas, and Shenzhen's manufacturing capabilities. The Park is set to attract leading enterprises, R&D institutions and overseas and Mainland talent.
When we talk about talent, nothing is more important than our investment in education, which now accounts for 21 per cent of the HKSAR Government's total recurrent expenditure. Hong Kong believes in education. And, as the next Chief Executive, I have promised additional recurrent funding for education even before taking office. In the first month of my office I will take a package of proposals to the Legislative Council for the voting of additional funds to improve the current situation, from improving the teacher/class ratios in primary and secondary schools to making university education more affordable.
Our nurturing of talent will benefit from international exchanges and co-operation. In recent years, I was involved in the establishment of two US higher education institutions in Hong Kong, namely the Booth School of Business of the University of Chicago and the Savannah College of Arts and Design. It is very exciting for me to learn that the Penn Wharton China Center (PWCC) was set up in Beijing in March 2015. As an outpost for a premier educational institution, the PWCC provides on-the-ground support for the growing numbers of programmes and collaborations between the University of Pennsylvania and many academic, government and business partners throughout China. It represents a substantial commitment to advance a long history of engagement with China by the Wharton School and its parent university, the University of Pennsylvania, in an increasingly interconnected global environment. I hope that Hong Kong will be able to tap into this rich resource and get connected with the PWCC.
Finally, let me provide an update on a subject very close to my heart, that is, arts and culture. No city could claim to be a world city without offering its people and visitors rich cultural exposure and experience. In my last four and a half years as the Chief Secretary for Administration as well as Chairperson of the West Kowloon Cultural District (WKCD) Authority, I visited over 30 public and private museums and performance venues during my official trips. This has given me added confidence about how the WKCD project, a cultural precinct on a prime 40-heactre waterfront site in West Kowloon, will elevate Hong Kong's cultural status. From next year onwards, major venues will open in the WKCD, comprising the Xiqu Centre for Chinese opera performances, an extensive park and waterfront promenade, a museum on contemporary visual arts called M+ and the Hong Kong Palace Museum, which showcases precious artefacts from the renowned Palace Museum in Beijing. Hardware aside, Hong Kong is also among the world's largest art auction markets, along with New York and London. We are the regional hub for major art fairs and exhibitions, such as Art Basel Hong Kong as well as our home-grown Fine Art Asia, Art Central and Ink Asia.
On July 1, 2017, I will assume office as the Fifth Term Chief Executive of the Hong Kong SAR. I firmly believe that Hong Kong has a strong base - our rule of law, our freedoms, our systems, our talents, and the unique advantages of "one country, two systems". My election slogan is "We Connect”. My priority is to unite everyone in society and connect with our citizens to develop our economy and improve people's livelihood. I and my government will also work hard to engage with outside parties to strengthen links between Hong Kong and the Mainland as well as other countries, with an aim to consolidate and elevate Hong Kong's status as Asia's world city.
Ladies and gentlemen, Hong Kong provides an ideal platform for new ideas and businesses to grow. My thanks to the Wharton School for organising this annual gathering here. This Forum is an exciting opportunity for us to exchange views on innovation and entrepreneurship. The momentum and goodwill are astonishing, as shown in your participation at this Forum. We look forward to your active participation and contribution to new ideas.
I wish each and every one of you the best of success, and happiness, in the coming years. Thank you very much.
Ends/Friday, June 23, 2017
Issued at HKT 12:00
Issued at HKT 12:00