Speech by FS at luncheon cum conference on the 20th anniversary of the establishment of the HKSAR in Washington, DC (English only) (with photo)
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Dr Paal (Vice President for Studies, Carnegie Endowment for International Peace, Dr Doug Paal), distinguished panelists, ladies and gentlemen,
Good afternoon.
It's a pleasure to be here with you today, in Washington, DC. I have the good fortune to spend a long weekend here following the annual meetings of the IMF and World Bank last week.
I certainly wish I can stay a bit longer. This city is not just one of the most well-known capitals in the world. There is much more than politics that makes this city shine. Washington is a lifestyle capital - a city of parks and bicycles, a city with great sports teams.
Washington, DC is also a place with great history and culture, where you can find some of the most extraordinary art performing venues, museums and monuments. And it is, of course, a city that boasts with world-class experts and intellectuals and the institutions that attract them. And I've been privileged to meet with a number of them during my visit.
Today, it is equally privileged and gratifying for me to see you all and share with you the remarkable story of Hong Kong in the last two decades as a Special Administrative Region of China, and the exciting opportunities ahead for Hong Kong, and you.
Let me start with a few numbers. Last year, the Hong Kong economy nearly doubled that of 1997. Our real GDP growth over the past 20 years has averaged 3.2 per cent a year, notably higher than that of the the world's advanced economies, which grew just 2 per cent a year on average. This year, we are looking at a possible growth of over 3.5 per cent.
Our per capita nominal GDP this year is expected to reach a new high of around US$46,000. That surpassed such major economies as Germany, the United Kingdom and Japan.
Over the past 15 years, Hong Kong has consistently been among the world's top five economies in funds raised through IPOs, initial public offerings. In fact, over the last two years, we've been ranked number one.
There's more. The market capitalisation of our stock market in 2017 is eight times larger than it was in 1997 - soaring from US$410 billion to about US$3.6 trillion.
Hong Kong is an international financial, trade and logistics centre, and one of the best places to do business. We have long flown the flag of free trade. The Heritage Foundation, right here in Washington, has named Hong Kong the world's freest economy for the past 23 years. Yes, we championed free enterprise - the free flow of capital, information and people.
An unwavering commitment to free enterprise is a sure guarantee of competitiveness. For the past two years, the World Competitiveness Yearbook, produced by Switzerland's International Institute for Management Development, has named Hong Kong the world’s most competitive economy.
There are, essentially, no restrictions on foreign investment in Hong Kong. And international companies enjoy the same equitable and business-friendly environment as their local counterparts. That, to be sure, includes our low and blessedly simple tax system.
What's more, our common law system, and the fine tradition of the rule of law, safeguards the rights of all people and all businesses. Regardless of their nationality, regardless of their size, they are treated equally. Call it a level playing field.
The independence of our judiciary is stipulated in the Basic Law, our constitutional document. It guarantees Hong Kong's independent judicial power, including that of final adjudication. It notes, as well, that the power of final adjudication is vested in Hong Kong's Court of Final Appeal.
Enterprises and investors from around the world, and certainly those from the United States, turn to Hong Kong because they trust Hong Kong. Because we share so many common values, from the rule of law and independent judiciary to the protection of human rights and open and free markets.
I am pleased to say that the longstanding partnership between Hong Kong and the United States - in trade, culture and so much more - remains intact and rewarding for all concerned.
It helps that we like to do business together. The US is Hong Kong's second largest trading partner. Last year, Hong Kong was the ninth largest export market for US goods, with exports totalling US$35 billion.
I should add here that Hong Kong is the number-one trading partner for the US when it comes to trade surplus - that US surplus coming in at some US$27.5 billion in 2016.
To take a couple of sweet and savoury examples, the US is Hong Kong's fourth largest source of wine in value, with imports of US wine reaching US$60 million last year. Last year, as well, we were the fifth largest export market for US beef and veal.
We also love to invest in each other's opportunities. At the end of 2015, the US was the seventh most popular destination for Hong Kong's outward direct investment, with an ODI stock exceeding US$11.1 billion. At the same time, the US was our seventh largest source of inward direct investment, with an IDI stock of nearly US$41 billion.
It's no surprise that about 1 300 US companies keep offices in Hong Kong. Or that the American Chamber of Commerce in Hong Kong is the largest international chamber in the city - and one of the biggest American chambers outside the US.
A big part of Hong Kong's success these past 20 years has been our "one country, two systems" framework, which gives us the first mover advantage in tapping the massive market of the Mainland of China, and many advantages available to no other economy.
That includes our status as the world's largest offshore Renminbi business hub. At the end of June 2017, Renminbi deposits in Hong Kong exceeded RMB600 billion. We offer diversified investment, financing and risk-management products in Renminbi and handle more than 70 per cent of the world's offshore Renminbi transactions' settlement.
Alongside the Renminbi, Hong Kong gives investors - from the United States and from around the world - unparalleled access to the Mainland's capital markets and financial products. That's thanks to the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect and, since July, Bond Connect, as well as the Mainland-Hong Kong Mutual Recognition of Funds arrangement.
Our close connections with the Mainland will continue to grow and that will only create more opportunities for Hong Kong.
Hong Kong is destined to play a pivotal role in the Guangdong-Hong Kong-Macao Bay Area development, a national strategy of China announced in March this year.
The fast-growing Bay Area counts a population of over 66 million, covering Hong Kong, Macau and nine fast-growing cities in Guangdong Province, including Shenzhen, Guangzhou and Zhuhai. The Bay Area's GDP exceeds US$1.3 trillion. That, ladies and gentlemen, is comparable to Australia or South Korea.
The Bay Area is China's most affluent region, and its development will accelerate the flow of people, goods, capital and information throughout the region, presenting enormous opportunities for Hong Kong and overseas companies.
Next year, the Hong Kong-Zhuhai-Macao Bridge and the Express Rail Link between Hong Kong and Guangzhou will be up and running, further boosting our connectivity with the Mainland and expanding our economic hinterland immersurably. With the Hong Kong-Zhuhai-Macao Bridge, a "one-hour living circle" within the Pearl River Delta area covering Hong Kong and Macau will be created, and most of the major cities in the Pearl River Delta are within three hours' drive from Hong Kong. Within a day, we can also reach cities in Vietnam.
And the Express Rail Link will reduce the journey time between Guangzhou and Hong Kong to around 48 minutes. Passengers of the rail link can also easily access to the over 22,000-km national high speed rail network connecting all the major cities in China. It will take less than nine hours from Hong Kong to Beijing and right hours to Shanghai.
Hong Kong is a logistics hub. Within five hours of flying time from Hong Kong, you can reach half the world's population. Our airport has been the world's busiest cargo airport for the past seven years. And construction is now underway to expand the airport into a three-runway system, which will double our cargo throughput capacity to 9 million tonnes a year, and passenger capacity to 100 million per year.
These, and other major infrastructural developments, have not gone unnoticed. Indeed, over the past seven years, Hong Kong has been ranked number one in infrastructure by the World Economic Forum and its annual Global Competitiveness Report.
So if anything has changed since our reunification with our motherland, it's that the "one country, two systems" framework has expanded our possibilities and our promise. Enriching Hong Kong - and the companies that partner with Hong Kong.
With tax reform a topical subject in Washington these days, I thought you might want to know a little more about Hong Kong's approach to that infamous three-letter word.
I take pride in saying that Hong Kong is among the most tax-friendly economies in the world. That, by the way, comes from the 2016 Paying Taxes study of 189 economies. We impose only three direct taxes: profits tax, salaries tax and property tax.
That means, ladies and gentlemen, no sales tax, no VAT, no GST, no capital gains tax, no tax on dividends and no estate duty. Aside from a few goods, including tobacco, gasoline and motor vehicles, we don't impose any import duties, either.
And soon enough, the Hong Kong tax man will be asking for less, not more, from Hong Kong's smaller businesses.
In the annual Hong Kong Policy Address, just five days ago, our Chief Executive Mrs Carrie Lam announced cutting the tax burden of mainly small and medium-sized companies, including start-up enterprises of course. Specifically, the tax rate for the first HK$2 million in profits - more than US$257,000 by the way - will drop from the current 16.5 per cent rate to just 8.25 per cent. And the standard profits tax rate of just 16.5 per cent would remain, unchanged, for profit exceeding HK$2 million.
The Policy Address also outlined plans to significantly enhance tax deductions for research and development expenditures. The point here is clear: we are determined that our future will be fuelled by innovation and technology. And we want to make it as easy as possible for I&T companies and technology start-ups to thrive and flourish in Hong Kong.
We will hold a Tax Summit in Hong Kong in one week's time. We want to hear from the Hong Kong community, business community in particular, on how best to create more forward-looking tax policies to drive our economy forward.
More good reason, I'd say, for US companies and investors to look to Hong Kong for opportunity when planning their expansion into the flourishing markets of China and Asia.
My thanks to the Carnegie Endowment for International Peace for hosting today's conference, for giving me this welcome opportunity to speak to you today - and, in just a moment, to answer some of your questions as well.
Oh, and let me assure you, dessert is on the way.
So thank you again for having me today.
Ends/Tuesday, October 17, 2017
Issued at HKT 3:29
Issued at HKT 3:29
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