Speech by CE at 18th Annual Hong Kong Business Summit (English only) (with photos/video)

     Following is the speech delivered by the Chief Executive, Mr C Y Leung, at the 18th Annual Hong Kong Business Summit luncheon organised by the Hong Kong General Chamber of Commerce this afternoon (November 29):

C K (C K Chow), distinguished guests, ladies and gentlemen,

     Good afternoon. Thank you, Albert, for your very kind words.

     It is my great pleasure to be here with you today. The Annual Business Summit of the Hong Kong General Chamber of Commerce is one of the most prestigious business events in Hong Kong. This is your 18th year. My congratulations to the Chamber on its remarkable achievements. I would like to commend the Chamber for its choice of the theme today - "New World, New Capitalism: Rethinking the way we do business beyond 2013". It cannot be more timely.

     Nearly five years after the financial tsunami, economies in different parts of the world are still suffering from the repercussion. And for some of these economies, the situation could even get worse before it gets better.

     We have seen quantitative easing and debt restructuring on unprecedented levels. Few cities, if any, have been unaffected by the crisis. As a small, open economy and externally oriented, Hong Kong continues to feel the impact.

     Hong Kong must be fully geared up for this post-crisis era, which is just taking shape. As I have mentioned in my election manifesto and on other occasions, I firmly believe that, to continue moving with the times, Hong Kong requires an appropriately proactive government that seeks changes while maintaining overall stability.

     What exactly is "appropriately proactive"? Are we forgoing the principle of "big market, small government"? Are we abandoning free market principles?

     Let us first look at some of the hard facts. The per capita real GDP of Hong Kong rose about one-third, 33.5 per cent to be exact in the 12 years between 1997 and 2009. During the same 12 years, the income of the group having the highest 10 per cent per capita household income increased by 64.7 per cent, while the income of the group having the lowest 10 per cent per capita household income dropped by 22 per cent. So one went up by 64.7 per cent, the other dropped by 22.2 per cent. It is evident that many people in the lower income group have not benefited from our economic prosperity. Community groups see bigger and bigger disparities between their interests in economic development. Many see redistribution and not economic growth as the only way to move forward. This could be the major obstacle to our pro-growth policies.

     I do not agree that the Government should take on everything. I do not agree that the Government should be sitting around, doing nothing all in the name of market economy either. I agree it is not easy to achieve the delicate balance required. I stress: it is not easy. In my eyes, government can play a positive role in facilitating the market and societal development. New capitalism requires a new working relationship between enterprises, the market and the government.

     I am not suggesting we turn our back on the driving forces behind our city's success. Far from it. We need to build on the fantastic work that we together have done in creating one of the best business environments in the world, right here in Hong Kong, in our home city.

     We are firmly committed to the core attributes of our city's incredible success story - our low and simple tax system, our rule of law, our independent judiciary and trusted common law legal system, our efficient city administration, our clean and dedicated civil service, our world-class education and health systems, and much more.

     Our city's much cherished values and freedoms underpin Hong Kong's society. These will continue to be the bedrock for progress under the "One Country, Two Systems" principle.

     Many of Hong Kong's business-friendly characteristics that I have mentioned have been championed by members of the Hong Kong General Chamber of Commerce since it was established back in 1861.

     We should build on these achievements.

     But how?  

     I am going to share my thoughts from three different but inter-related angles: our relationship with the Mainland, our relationship with the rest of the world, and our relationship with ourselves.

     First and foremost, our relationship with the Mainland. The Mainland is, and will continue to be, our vast hinterland and greatest opportunity for growth. Our growth strategies are increasingly aligned with those of the Mainland. The mention of, and support for, Hong Kong's advantages in the National 12th Five-year Plan underscore the very nature of the relationship between Hong Kong and the Mainland.

     New infrastructure including the Hong Kong-Zhuhai-Macau Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link will continue to enlarge the footprint of our effective hinterland, open up new markets and strengthen supply chains across the country.

     The Government does not pick winners in business - that is not part of our long-standing economic ethos. But we do encourage and support sectors that would broaden the base of our economy which in turn opens up new opportunities for doing business, create better jobs for a wider spectrum of the workforce and create more growth nodes.

     To unlock opportunities in the Mainland, there needs to be greater cohesion and collaboration among the Government, businesses, and talents from the research and academic sectors. There needs to be a broader cross-section of ideas from the different sectors.

     Currently, the Government has four offices in the Mainland in the key cities of Beijing, Chengdu, Guangzhou and Shanghai. We are planning to set up a new office in Central China, and are comparing the different possible locations. The Government will be more supportive of Hong Kong businesses and Hong Kong people in the Mainland, help to promote the Hong Kong brand and the many sub-brands under the Hong Kong brand, many of these brands owned by members of your Chamber. Put simply, this will enable the Government to be more proactive.

     I have been working with our Mainland counterparts on the setting up of permanent exhibition venues in major Mainland cities to showcase products not only made in Hong Kong, but also made by Hong Kong. I know it would mean a lot to you and other local companies.

     The Mainland and Hong Kong Closer Economic Partnership Agreement, CEPA, currently covering 48 services sectors, gives Hong Kong firms and overseas companies incorporated in Hong Kong market access privileges. CEPA represents an important opportunity for Hong Kong companies. At the same time, I hear loud and clear from our business community that the full benefits of CEPA are not being felt for one reason or another.  

     We need more support. We need clearer procedures. We need better co-operation at the regional level. I see it as my responsibility to safeguard the interests of Hong Kong in this unique free trade agreement, and we need to work together in the process.

     Now let me talk about Hong Kong's relationship with the rest of the world. Hong Kong is an international metropolis. The Hong Kong Special Administrative Region Government, using the name of Hong Kong, China, participates in over 200 international organisations, such as APEC and the World Trade Organisation. Hong Kong, in its own right, signed more than 300 agreements with overseas and international organisations.

     In recent years, there has been a significant financial and economic swing away from the traditional markets in the West and towards Asia. As a result, Asian economies have become more interconnected. Hong Kong, as an international city, cannot afford to miss out on the opportunities of regional integration. I want to highlight three key areas of great potentials for Hong Kong: trade, financial services and shipping.

     A year ago, Hong Kong formally requested to join the ASEAN-China Free Trade Area. Since then, we have been lobbying hard the 10 ASEAN member states.

     I believe that both Hong Kong and our neighbours in Southeast Asia, including the regional powerhouses of Indonesia, Thailand and Malaysia, will benefit from closer trade links with us.

     Our city would also be able to play a more prominent gateway role between ASEAN and Mainland China. We would all benefit from more efficient supply chains as well as exchanges of experience, technology and know-how in the region.

     On financial services, Hong Kong is the only place that enjoys strong financial connectivity with both Mainland China and markets around the globe. We have free flows of capital, a robust regulatory regime and a huge pool of local and overseas financial talents.

     Hong Kong has established itself as a key player in the internationalisation of the Mainland currency, the Renminbi. We have a huge opportunity to develop offshore Renminbi business in Hong Kong. The scale and scope of Renminbi liberalisation is increasing rapidly along three main paths of trade settlement, financing and asset management.

     How do we capitalise on these new directions and new opportunities? We need to consolidate our strengths and sharpen our competitive edge. Our priority areas include improving the regulatory framework, enhancing investor protection, and promoting market innovation and diversification. The Financial Services Development Council that is being formed will provide a platform for collaboration of the public and private sectors to consolidate and elevate Hong Kong's position as an international financial centre in the country, as the National 12th Five Year Plan has promulgated.
     On shipping, is the maritime industry past glory of Hong Kong? Of course not. As a coastal city and an established seaport for over a century, it is only logical for the Government to support the continued development of our maritime industry.

     What we need to do is to help the industry stay competitive. We should also help the industry broaden its scope to include all the maritime services. We can turn any competition we have with the Mainland ports into collaboration by providing services to the shipbuilding and shipping industries there.

     Now, let us look at ourselves. Look at Hong Kong.

     Since taking office in July, I have outlined four priorities for my government. I see them as the key components to turn Hong Kong around and to create a brighter future for the people of Hong Kong. They are housing and land, the environment, aged society and poverty alleviation.

     Of course, it is the business community that drives the growth of the economy, and it is the growth of the economy that gives us the financial ability to tackle these issues.

     High land prices and business space rents are holding back business expansion and hindering start-ups. It particularly affects our 300 000 small and medium-size enterprises, which provide 1.2 million, or over half, of the jobs in the private sector. This is a significant constraint for Hong Kong's development in the long run.

     Easing the current tight supply of business space is vital. We will also look at promoting business space development along new railway lines, which has proven to be successful in the past. We will continue to identify government, institutional or community, or GIC in short, sites for business space development as well as housing. Opportunities outside the traditional business districts are also coming on stream. The Government will look at the long-term land use planning. This will include land production by reclamation outside of the inner harbour.

     On the environment, I would like to reiterate my commitment to improving the quality of Hong Kong's air. Poor air quality is bad for business. I am also very concerned about the impact of bad air on the health of our people. Yes, some pollution sources are beyond our boundary. We are therefore working with our neighbour cities in setting reduction targets and in formulating new policies. There are many other areas where we can and will make a difference. It's time for us to rethink our approach towards the environment and reassess the costs of not doing the right things fast enough.

     Hong Kong is a prosperous city. Our people should not have to face hardship in later years. One of the first things my Administration did in office was to propose a new Old Age Living Allowance for those most in need of assistance. I sincerely hope that the 400 000 people who are eligible for the new allowance will be able to receive it very soon.

     In the meantime, we have announced the establishment of the Commission on Poverty to undertake an overall review of the forms and manners by which poverty is manifested and their underlying causes. The Commission will also look into the establishment of a poverty line so that we can properly and objectively deal with the issue.

     Ladies and gentlemen, given the opportunities we have and the support of the country, Hong Kong is the envy of many other economies. Of course, there are also challenges. To make the best out of these opportunities and support, and to address the challenges, we need to make decisions - sometimes hard decisions. This is where we need leadership. We need political leadership from the Government; we also need thought leadership from the business community.

     Both government and business leaders have to tell the people where the new world is heading, what are the opportunities and challenges ahead, and what actions are needed. Gone are the days when closed-door meetings between the business sector and the Government will turn ideas into realities. The people have to be on side. This is where we need public advocacy from the business sector on top of thought leadership. Show the people that we have a new world in Hong Kong, and a new world outside of Hong Kong. Show them that a new capitalism is not just about profit, but also people and planet. Show them that businesses and the people share the same future - a brighter future.

     Ladies and gentlemen of the business community, I and the entire Government of Hong Kong look forward to working closely with you.

     Thank you very much.

Ends/Thursday, November 29, 2012
Issued at HKT 17:43