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Following is the speech by the Chief Secretary for Administration, Mr Stephen Lam, at the Hong Kong Gala Dinner in Berlin, Germany on October 24 (Berlin time):
Honourable Members of Parliament, Distinguished Guests, Ladies and Gentlemen,
Guten Abend.
On behalf of the Hong Kong Government, let me first welcome you to the Gala Dinner hosted by our Economic and Trade Office in Berlin (Berlin ETO). Today, we have a very strong presence of Members of the Parliament, and of the diplomatic community.
It gives me tremendous pleasure to be here in Berlin, or perhaps I should say, to be back in Berlin. I have visited this great city and other places around Germany on several occasions for business and for pleasure.
It is also an honour for me to be here in this historic venue right in the heart of your capital city.
Germany is well known to Hong Kong. My wife and I are quite fond of visiting your country.
Over the summer, we had our holiday in Germany. We enjoyed a leisurely River Rhine cruise. The scenery along the riverbank was amazing-and the wine was also very good!
Back in 2003 I took my family on a round trip tour of this wonderful country. We visited Dresden, Leipzig, Munich and Heidelberg as well as Berlin. It was a fantastic experience and gave us all a real sense of this country's history and culture.
Bayern Munich is also one of the most popular football teams followed by our local soccer fans.
Your national team manager, Franz Beckenbauer was one of my heroes when he played for Bayern Munich. I recall the 1970 World Cup semi-final when he played on against Italy even after breaking his arm. That is the mark of a true competitor and team player. Germany went on to win the World Cup.
We also have the German-Swiss International School which is one of our largest popular international schools. In 2007, the Hong Kong Government allocated a second campus for the German-Swiss International School to help cope with growing demand. This is a clear indication of the large and inclusive presence of our German community in Hong Kong.
Economic Prospects
Today, I bring to you three messages. First of all, on Hong Kong-Germany economic relations, I would like to thank all our German friends for their enthusiastic support and assistance in helping us establish the Berlin ETO with full diplomatic credentials. The office was officially opened earlier this year and is doing a very important job in promoting stronger relations between Hong Kong and Germany as well as the wider region of Central and Eastern Europe.
There are tremendous opportunities for German companies in Hong Kong.
You only have to look at the large number of German cars on our roads to see that Hong Kong people have an enthusiasm for quality and precision engineering.
Even during these tough economic times, the major German car makers reported exceptional growth in sales in Hong Kong as well as the Mainland of China.
Even half way around the world in Hong Kong, we are not immune from the economic uncertainty in the Euro Zone. After all, Hong Kong is a small and externally-oriented economy.
The EU is our second largest trading partner after the Mainland of China. Germany is our single largest trading partner in the EU. Last year, the value of our bilateral trade amounted to US$18 billion (13 billion Euros).
What happens here affects our city, our nation and our region. Although Asia is faring better than Europe and the US at the moment, we are all in the same boat when it comes to a globalised economy.
We have been watching the events in Europe and in Germany very closely. We also note Germanyˇ¦s central role in Europe's economic affairs.
The question is not whether Europe will recover from the current economic downturn, but when? I don't think anyone has the answer to that right now. But I would like to say that in Hong Kong we are encouraged by the renewed commitment of European leaders, including Chancellor Angela Merkel, to lead the Euro Zone out of the current crisis in unity and with determination.
My job today is to highlight some of the opportunities for German companies in Hong Kong and throughout Asia during these uncertain economic times. I believe these opportunities are extremely bright.
Allow me to update you on some of the recent developments in Hong Kong.
In general the Hong Kong economy is stable and growing. Since early 2009, our economy has recovered strongly from the global financial crisis.
- We recorded 7% GDP growth in 2010 and a robust 6.3% growth in the first half of this year.
- Our total exports rose almost 23% (22.8%) in 2010 and more than 13% (13.3%) year-on-year in the first eight months of this year.
- Also, our unemployment rate has returned to below pre-financial crisis levels. It currently stands at 3.2%.
Hong Kong's recovery is closely tied to the relatively healthy economic situation in Asia and particularly in Mainland China. In fact, we have seen more companies and business professionals heading to Hong Kong from Europe and the US. They are attracted by Hong Kong's role as an international business centre and as China's global financial centre.
Both our local and international business communities benefit immensely from our city's location on the doorstep of Mainland China. Hong Kong is distinct in Asia in many aspects. We have a low and simple tax system with salaries tax of 15% and profits tax capped at 16.5%.
There is no capital gains tax, no VAT or GST, no death duties and, for those of you in the wine trade, there are no tariffs on wine in Hong Kong.
The Hong Kong Government has no deficits. We have accumulated fiscal reserves of about HK$600 billion and foreign exchange reserves of about HK$2,000 billion.
We have a clean and efficient civil service and zero tolerance of corruption.
These elements combined are crucial to Hong Kong's position as premier international gateway to China for trade, finance and investment.
- The World Bank ranked Hong Kong second in the world again this year in its "Ease of Doing Business" report. This is testament to the Government's commitment to providing a business-friendly environment.
- We have also been ranked as the world's freest economy by the US-based Heritage Foundation for the past consecutive 17 years and by the Fraser Institute in Canada for more than three decades.
The International Monetary Fund has projected real GDP growth in emerging Asian economies this year to be a healthy 8.2%, and 8% next year. China's real GDP growth rate is expected to remain high at around 9% next year.
I believe this is an ideal time for German businesses to explore the opportunities in our part of the world. The message is simple: please keep on coming to Hong Kong.
Financial Services
My second message is that Hong Kong is set to become the International Financial Centre of Asia and the Offshore Renminbi Service Centre.
Hong Kong is part of China, but is outside the Mainland. We have our own currency and financial system. That makes Hong Kong the ideal location to be the testing ground for the liberalisation of Renminbi.
We were encouraged by the National 12th Five Year Plan which was adopted by the Central Government in Beijing earlier this year. For the first time, the Plan highlights key areas where Hong Kong can best contribute to the overall development and advancement of our nation.
The Plan fully supports Hong Kong's position as China's global financial centre, especially in the areas of developing offshore business using the Mainland currency, the Renminbi and as an asset management hub in Asia.
Our stock market is the seventh largest in the world and third largest in Asia with market cap of some US$2.1 trillion. 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.
Since 2004, Hong Kong has been the focus of offshore Renminbi banking, Renminbi trade settlement and offshore Renminbi bond issuance. The pace of these developments is quite breathtaking. There are many products which one can trade in Hong Kong in Renminbi these days.
(1) You can hold savings deposits and settle credit cards in Renminbi.
(2) Just last week we launched another new initiative, Renminbi-denominated gold bar trading.
(3) Also last week, the Central Government approved the first Mainland company to issue Renminbi bonds in Hong Kong. State-owned steel maker Baosteel will issue 6.5 billion Renminbi (740 million Euros) worth of Renminbi-denominated bonds.
Previously, local firms and overseas enterprises such as McDonald's and Caterpillar, as well as international institutions including the Asian Development Bank, had issued Renminbi bonds in Hong Kong.
(4) 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 scheme to a maximum of 20 billion Renminbi.
(5) The Central Government has announced the launch in the Mainland of an exchange-traded fund with Hong Kong stocks underlying.
(6) Beijing has also decided that foreign direct investments denominated in Renminbi can be routed through Hong Kong into the Mainland.
In 2009, total Renminbi deposits in Hong Kong amounted to just 60 billion Renminbi or almost 7 billion Euros. Today this figure is over 570 billion Renminbi and is expected to exceed 1 trillion Renminbi, or over 100 billion Euros, by the end of this year.
That is why Hong Kong is set to become the Offshore Renminbi Service Centre. Our secret is that we are part of China, Beijing has confidence in Hong Kong. But we also have a financial and monetary system which is distinct and international.
All these represent new opportunities for the business community at home and abroad. We warmly welcome German financial institutions to come and join us.
Service Industries
My third message is that there are wide-ranging opportunities for promoting service industries in Hong Kong.
Hong Kong's advantage is that we have the Mainland as our main trading partner. We have a unique free trade pact with Mainland China. We call this the Closer Economic Partnership Arrangement, or CEPA. This is the first such trade pact signed by the Mainland. Its goes beyond World Trade Organisation obligations. CEPA was signed in June 2003 and came into force the following year.
A recent survey by our inward investment agency Invest Hong Kong, found that there are currently a record high of 6 950 Mainland and overseas companies based in Hong Kong. Some 3 500 of them run their regional operations out of Hong Kong.
This represents over 40% growth as compared to the 4 800 Mainland and overseas companies in Hong Kong in 2002, before the CEPA-effect took hold. In fact, Invest Hong Kong found that 30% of companies say that CEPA is a factor in their decision to move to Hong Kong or expand their operations in the city.
Under CEPA, local firmsˇVincluding German and other foreign companies incorporated in Hong Kong-can enjoy wide-ranging benefits including enhanced access to 44 services sectors in the Mainland and tariff-free entry for products.
Also, last year we signed a Framework Agreement on Hong Kong-Guangdong Co-operation. The aim here is to combine the advantages of Hong Kong with those of our neighbours in Guangdong Province to establish one of the most competitive regions in the world by 2020.
A clear indication of our economic integration with Guangdong is the synergy between Hong Kong's services industry and our manufacturing base across the boundary. Today there are over 80 000 Hong Kong factories based in Guangdong, employing around 10 million workers. This is three times the working population of Hong Kong.
Back in Hong Kong, we have identified six industries where Hong Kong has a clear advantage in our region. The Government is nurturing these industries so that they can reach their full potential.
These industries are education services, testing and certification, green industries, medical services, innovation and technology and creative and cultural industries.
As these sectors continue to flourish in Hong Kong, I see good opportunities for German companies to contribute to, and benefit from the new developments.
Germany is renowned for its high-end, high quality and high value-added services sector. We welcome more German companies to come to Hong Kong and lend their expertise to the development of these sectors.
Germany's experience in the pharmaceutical industry would be well suited to our aspirations in this field. German technology firms, including those specialising in green technologies, could also gain an advantage in Hong Kong and establish a strong foothold in our region.
Germany's reputation for design and luxury brands is also well-established in our region. We are pleased that Germany is our partner country for our Business of Design Week 2011 beginning November 28. Germanyˇ¦s high-profile participation this year will not only add to the reputation of this internationally acclaimed event, it will also raise the profile of German designs and creative solutions in Hong Kong and throughout Asia.
It is often said that creativity and culture go hand in hand. This brings me to one of my favourite topics and Hong Kong's single most ambitious project, the West Kowloon Cultural District, or WKCD. We are in the process of transforming a prime 40 hectare harbourfront site into a magnificent cultural district.
The WKCD will include no less than 15 arts venues, including a Grand Theatre, concert hall and an M+ museum focussing on modern visual art. I have had the chance to visit many great cultural and arts venues during my trips to Germany.
Earlier today, I was captivated by the magnificence of Museum Island. I believe there is huge potential for creative talents from Germany to join us in making the WKCD a great success and helping to establish our city as a cultural hub in Asia.
Ladies and gentlemen, I hope I have provided some food for thought on how Germany and Hong Kong can further deepen and broaden our bilateral relationship.
To conclude, I'd like to say that Germany has a fine reputation in Hong Kong:
- German products inspire confidence. Hong Kong people believe in German technology.
- Germany is the country in Europe which has a down to earth and no-nonsense approach in doing business.
- Both Germany and Hong Kong are strategically located: in Germany it's your reach out to both the Western and Eastern parts of Europe; in Hong Kong we are a fine location for doing business with China and Asia.
Our Berlin ETO will keep you all updated on the latest developments in Hong Kong. Please don't hesitate to approach Stephen and his team should you have any questions about Hong Kong. And do come and visit us soon.
Thank you and have a great evening.
Ends/Tuesday, October 25, 2011
Issued at HKT 09:40
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