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Speech by FS at Conference on Global Financial Economic Challenges 2012 in Hanoi (English only) (with photo)

     Following is the speech by the Financial Secretary, Mr John C Tsang, on "Hong Kong as the Gateway to China" at the Conference on Global Financial Economic Challenges 2012 jointly organised by the Ministry of Finance of Vietnam, the Korea Asset Management Corporation and the Asian Development Bank in Hanoi today (April 23):

Distinguished Guests, Ladies and Gentlemen,

     Xin Chao [Good afternoon in Vietnamese].

     It is my great pleasure to be here in Hanoi.

     I always enjoy my visits to Vietnam. The fascinating culture, the great food, the friendly people are all close to my heart. And it's only about 120 minutes from Hong Kong.

     I wish to thank the Ministry of Finance of Vietnam, the Korea Asset Management Corporation and the Asian Development Bank for organising this Conference for us today.

     It is, of course, no coincidence that my work keeps bringing me back to this wonderful country.

     My first experience of Vietnam was in a previous role as Director of the Chief Executive's Office. I was here to attend an APEC meeting.

     My most recent trip here as Financial Secretary was in December 2008. It was a particularly exciting trip because we had a number of new initiatives to announce between our respective governments. A lot of water has flowed beneath the Long Bien Bridge (Famous Hanoi Bridge) since then.

     So today, I would like to speak with you about some of the latest developments in my home city and new opportunities for Vietnam's investors and companies in Hong Kong.

     Perhaps most important for both our business sectors is our emergence from the global financial crisis. Hong Kong and Vietnam have both rebounded strongly from the financial tsunami in 2008.  Last year, Hong Kong's economy grew five per cent year-on-year. Vietnam was our 15th largest trading partner in 2011. Our bilateral trade reached US$8.4 billion  (HK$65.7 billion), a 35 per cent increase compared to 2010.

     However, the lingering sovereign debt crisis in Europe and sluggish growth in the US íV two of our most important markets íV continues to impact on our economy, and particularly on our exports.

     In my Budget in February, I forecast GDP growth for Hong Kong of between one and three per cent this year. At the end of the day, our performance will depend to some extent on the pace of recovery in the Eurozone and the US.

     On the other hand, the situation is more positive on the home front. We have been forging much deeper and broader financial and economic links with our nation, China. This has strengthened Hong Kong's position as the premier international gateway to the Mainland for our business people, including our Vietnamese business community.

     As you may know, this year we shall be celebrating the 15th Anniversary of the establishment of the Hong Kong Special Administrative Region on July 1. How time flies!

     Over the past 15 years, Hong Kong has continued to thrive as a highly open market-based economy.  This is due, in no small part, to the successful implementation of the "One Country, Two Systems" principle.

     Under this principle, Hong Kong people continue to run Hong Kong with a high degree of autonomy. The SAR Government is responsible for all areas of Hong Kong's administration, with just two exceptions íV defence and foreign affairs, which are the responsibility of our sovereign nation.

     For us, "One Country, Two Systems" is more than a concept or principle to guide us íV it forms the fabric of our society. It is also guaranteed in our constitutional document, the Basic Law.

     "One Country, Two Systems" has enabled us to build on the unique strengths and characteristics that have driven the city's rapid development for over a century. Among other things, Hong Kong remains an individual member of key international institutions, such as the World Trade Organization, APEC and the World Customs Organization. We look forward to cheering on our athletes at the London Olympics this summer as they compete under the name "Hong Kong, China".

     We maintain our own financial system with a well-known and much envied low and simple tax regime. In Hong Kong we have no capital gains tax, no death duties, no VAT, no 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. Our media is uncensored and businesses benefit from free flows of information, ideas and talent.

     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.

     Also, over a period of 18 years, before and since Hong Kong's reunification with the Mainland, we have maintained our position as the world's freest economy. That is according to both the Heritage Foundation in the US and the Fraser Institute based in Canada. Neither the Asian financial crisis nor the more recent global financial crisis could shake our resolve to protect our economic freedoms.

     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 Mainland markets. Around 7 000 Mainland and overseas companies have a base in our city, with more than half of them serving as regional headquarters and regional offices.

     Among other things, we have a unique free trade agreement with the Mainland íV the Closer Economic Partnership Arrangement, or CEPA for short. CEPA is made 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 the Mainland. 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 Vietnam and around the world can enjoy the same benefits as local Hong Kong firms.

     Currently 47 service sectors are included in CEPA covering key areas, such as trade, banking, tourism, legal and medical services as well as transport and logistics services. The number of areas covered under CEPA has increased each year since the beginning of 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 Vietnam's firms an effective springboard to reach Mainland markets.

     We also have a Comprehensive Agreement for Avoidance of Double Taxation (CDTA) between Vietnam and Hong Kong. I had the privilege of signing the CDTA in December in 2008.

     Not only is Hong Kong a great trading hub in Asia, 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.

     Our stock market is among the largest in the world. The Hong Kong Exchanges and Clearing Limited is the 6th largest bourse in the world and 2nd largest in Asia by market capitalisation. Our 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 which more than 40 per cent are Mainland firms. Many of these companies use Hong Kong as a tried and trusted launching pad to "go global". We have also been attracting more companies from around the world to raise funds with Initial Public Offerings (IPOs) or issue Hong Kong 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.

     Recent high-profile listings have included top brand names from Italy, France and the US. As well as attractive valuations, a Hong Kong listing also raises the profile of companies in Mainland China, where quality brands are increasingly in demand.

     I encourage Vietnam's leading brands to consider listing in Hong Kong. As well as a business-friendly environment, 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. I see some important opportunities for Vietnamese investors to take full advantage of Hong Kong's position as the major centre for offshore Renminbi business.

     In the space of just a few years, we have made good progress in promoting offshore Renminbi trade settlement, financing and wealth management among our partners around the world. In 2011, the value of Renminbi trade settlement conducted through Hong Kong's banks was close to 2 trillion Renminbi. That is over 90 per cent of total external trade settlement using the Renminbi.

     Since August last year, Vietnamese firms and companies around the world, 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.

     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 denominated bonds, sometimes called the "dim sum" bonds, in Hong Kong in 2007.

     Last year alone, there were 91 such issuances with a total value exceeding 107 billion Renminbi.  It is an effective way for overseas companies to finance their operations in the Mainland.

     I hope that companies from Vietnam will consider using Hong Kong as their partner in a full range of offshore Renminbi business activities.  Hong Kong stands ready to offer all the necessary services, advice and experience in this field.

     Ladies and Gentlemen, these are some of the opportunities for closer links between Vietnam and Hong Kong in business and finance.

     We would also like to see more of Vietnam's wonderful culture, brands and entrepreneurship coming to Hong Kong.

     Once again, thank you for your warm welcome today, and I look forward to building even stronger links between Vietnam and Hong Kong.

     Thank you very much.

Ends/Monday, April 23, 2012
Issued at HKT 12:25


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