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Transcript of remarks by CE at question-and-answer session of Joint Business Community Luncheon 2016 (2) (English only)

Moderator: Good. Table 26.

Attendee: Leland Sun from the Hong Kong General Chamber of Commerce. Mr Chief Executive, the General Chamber of Commerce greatly appreciates the initiative to promote the development of start-ups, as you just mentioned, particularly in the innovation, science and technology sectors. Nevertheless, as many of us in this room here today represent the SME sector, and from your Policy Address, there did not appear to be much focus for SMEs, the backbone of Hong Kong's economy. We're currently also going through a tough patch right now. So, could the Chief Executive tell us whether there are any new plans, or new initiatives, that would provide assistance for SMEs? Thank you.

Chief Executive: We have a host of policy measures to assist SMEs, whether by way of enhancing marketing efforts or providing soft loans and so on. When it comes to innovation and technology-related SME businesses, again we have in this year's Policy Address measures to help them. I do realise the fact that very often, when you apply to Government for government money, there is a process to go through, and the possibility of rigidity, or the prospect of relaxing some of the rigidity is one of the things that this Government is looking at right now, so we want to make the application for and the dispensation of such funds as user-friendly as possible.

Moderator: Table 30.

Attendee: Daniel Yip from the Federation of Hong Kong Industries. The Federation in general welcomes the Government's introduction of pragmatic policies and measures in the aspect of reindustrialisation, innovation and technology development, and transformation and operating of Hong Kong industries. However, one of the biggest challenges of the industries is the shortage of industrial talent and labour in Hong Kong. How will the Government address such issue? Thank you.

Chief Executive: These industries should not be too labour-intensive. We know the general labour population situation in Hong Kong. As I said, we can't rely on, we can't compete on cost with our competitors. We have to compete on value and therefore value-addedness. And so, I like the word that you used, talent, industrial talent. It is all I think that we very much need to focus on. One of the paragraphs in the Policy Address refers to encouragement that we should give to young people in the studies of STEM. STEM, science, technology, engineering, and mathematics. In recent years, for one reason or another, there's been a decline of interest on the part of young people studying these subjects, particularly engineering. So we need to give them all the encouragement and support we can. So that's on the supply side. But we need to develop the related sectors before these aspiring industrial talents will actually take on such courses. I have a couple of ideas, probably it's not the time to elaborate them. Over the next couple of years, I would like to get the industry involved, so that not just university students, but also high school, senior secondary school students, will be interested in taking industry, particularly industries with high innovation technology content, as their career.

Moderator: We've probably time for one last question. Over there. I can't see the table number. it's a bit far away. It's nearly at the back.

Attendee: Takao Maruyama from Japanese Chamber. So, I am working on the partner's manufacturing in China, and I need to take a tax for manufacturing. So, I'm afraid that my question is too much detail, but please consider to maintain the position of Hong Kong as a supply chain hub for China. So, we have a notice from HKIRD (Inland Revenue Department), that the depreciation of the fixed asset working out of Hong Kong is taxable, unless there is direct evidence, such as contract manufacturing. Our company is manufacturing product at the partner's factory with a lot of fixed assets. We don't have any direct contract, so we follow the notice from the IRD for the tax payment, but from the accounting point of view, I believe the depreciation of the fixed asset can be counted into the cost, and the profit before tax is calculated by the deduction of cost from sales. However, according to the notice from IRD, the depreciation of the fixed asset cannot be counted as a cost and it is taxable. I heard HKIPA discussing with IRD based on the common accounting system the same point of view. However, discussions have not been disclosed yet. So I am personally afraid current taxation for the depreciation of the fixed asset out of Hong Kong will influence negatively on the position of Hong Kong to play the role of international supply chain hub for China. So please consider again.

Chief Executive: Thank you. Yes, we are interested in maintaining our role and our competitive edge as an international supply chain hub, and we want to maintain as user-friendly as possible a general taxation regime. If I could ask my colleague to contact you on the question of policy, I'm not going to ask for your tax files from IRD. I don't do that. But I'll ask my colleagues to, perhaps sit down with you, to discuss the general principle behind this policy and see what could be done. Thank you.

Moderator: Chief Executive, thank you again very much for your very candid responses to the questions from the floor. I think you know that you're amongst friends here in the business community and we very much look forward to supporting the work of the administration and the work of the Government in making Hong Kong a better place for all Hong Kong people. Thank you very much.

Ends/Wednesday, January 27, 2016
Issued at HKT 18:46


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