SCED's speech at Hong Kong Summit on regional co-operation between Hong Kong and East Asia
Following is the speech by the Secretary for Commerce and Economic Development, Mr Gregory So, at the Hong Kong Summit on regional co-operation between Hong Kong and East Asia today (July 11):
Honourable ministers, distinguished guests, ladies and gentlemen,
Good morning. It is my great pleasure to participate in the Summit today to share with you my views on this very important topic of regional co-operation between Hong Kong and East Asia.
I would like to first thank the Chinese General Chamber of Commerce for organising this event, which provides a valuable opportunity for all of us to get together and explore the future road map of the region.
The growth of East Asia has been remarkable in the past decade. Despite the financial crisis and economic turmoil in other parts of the world, China, ASEAN (the Association of Southeast Asian Nations) Member States, Japan, Korea and Hong Kong jointly contributed about 27 per cent of world trade in 2011, rising significantly from 21 per cent a decade ago. The combined GDP of these economies also constituted around 24 per cent of the world GDP in 2011. Economies in Asia demonstrated strong resilience to concerns about the sovereign debt crisis in Europe and sluggish growth in developed economies. Notably, with enormous potential to develop further, Asia has become an important stabilising factor in global economic growth.
Despite our recent success, we cannot be complacent or overlook various forces at play that might rock the boat in which we are all riding. A number of European economies are still plagued by mounting debt issues that will take time to resolve, and the US economic recovery has yet to take root. In the meantime, the growth of these economies will suffer, with inevitable spillovers to the rest of the world. We are closely monitoring developments and will take necessary action to mitigate the negative impact on our economy. We also notice that there has been a rise of protectionist sentiments around the globe recently. This is alarming. This trend must not be encouraged as it would undermine our collective efforts to boost economic growth. We must uphold the doctrine of global trade liberalisation and prevent the expansion of protectionism.
To this end, apart from continuing our work in advancing the negotiations of the Doha Development Agenda on further trade liberalisation in the multilateral context, there is room for East Asian economies to strengthen partnership, step up co-operation and make concerted efforts rather than dealing with the problems individually. For example, Hong Kong, Mainland China and ASEAN, as well as Japan and Korea, have been sharing a common interest in promoting monetary and financial stability in the region. Joint efforts have been put together in the Chiang Mai Initiative Multilateralisation, which aims to provide financial support, through currency swap transactions, to participants facing balance of payments and liquidity difficulties. The total size of the arrangement amounts to US$120 billion. Another example is the Asian Bond Markets Initiative, which aims to promote development of the local currency-denominated bond markets in Asia. The success of the above initiatives proves that co-operation is the key to mutual success.
Apart from fending off possible external threats, regional economic co-operation helps to pool resources, enlarge the market, and expand economies of scale. Regional economic co-operation is not a zero-sum game. It strengthens the supply chain and better connects markets in the region to create positive synergies to overcome the challenges of globalisation.
Despite being a small economy, Hong Kong has thrived as a highly open market-based economy. Being a global and regional financial, logistics and information hub, Hong Kong is in the best position to play a key role in fostering and facilitating regional economic development as well as trade and investment flow. Let me just share with you a few facts about the key features of the Hong Kong economy.
Firstly, the services sector is now the major driver of our economy, contributing about 93 per cent of our GDP. Hong Kong has well-developed financial, professional and business service sectors with strong global as well as regional connections with Mainland China.
Secondly, we have a low and simple tax regime. In Hong Kong, we have no capital gains tax, no VAT, and no GST. People pay no more than 15 per cent salaries tax, and profits tax is a flat 16.5 per cent. Foreign firms are free to invest as they choose. We do not impose any nationality restrictions on corporate ownership, and there is no restriction on the flow of capital or goods. With a large pool of experienced professionals, good management practices and a sound legal system, Hong Kong is the preferred choice for overseas enterprises to set up regional headquarters and offices. To date, more than 3,700 regional headquarters and regional offices of overseas companies are based here.
Thirdly, Hong Kong is a leading provider and recipient of foreign direct investment (FDI). In 2011, we were the world's fifth largest and Asia's second largest FDI provider. As an FDI recipient, we were the world's fourth largest and Asia's second largest. Also in 2011, the FDI outflow amounted to over US$82 billion and FDI outward stock amounted to around US$1,046 billion. In the same year, our FDI inflow amounted to around US$83 billion and total FDI inward stock amounted to around US$1,138 billion. Hong Kong is an international financial centre with strong fund-raising capability. For three years in a row since 2009, Hong Kong topped the world in terms of equity fund raised through Initial Public Offering. We are well poised to influence a lot of investment decisions and play a pivotal role in channelling investment to and within the region.
Strategically, Hong Kong is one of the key gateways of Mainland China. Hong Kong serves as the two-way bridge between Mainland China and the world, substantiated by its long-established business links and extensive network in Mainland China.
Reflecting the superb international connectivity of Hong Kong, in 2011, about 10 per cent of Mainland China's trade in goods with the world went through Hong Kong. In the same year, 98 per cent of total exports to the world from Hong Kong were re-exports, of which over 60 per cent were of Mainland China origin. Hong Kong's strong cross-boundary links, efficient infrastructure and decades of experience in doing business in Mainland China have all along offered foreign firms an effective springboard to explore the Mainland market.
Hong Kong is also a strong catalyst in better connecting the Mainland regional markets through expanding intra-regional investment opportunities. With the presence of more than 3,700 regional headquarters and regional offices in Hong Kong and abundant supply of professional talents, who possess ample knowledge of the growing opportunities in the Mainland market, investors could really make use of these services in marketing, brand-building, setting up of businesses or diversifying their production, etc.
Above all, the Central People's Government has given policy support to help enterprises in both the Mainland and Hong Kong to "go global" together. We can facilitate more investment from Mainland China to the region on the one hand and help investors in the region to invest in Mainland China on the other. Renminbi internationalisation is a new trend in strengthening trade and investment links with Mainland China. Hong Kong offers well-established Renminbi cross-border trade clearing and settlement services, which further facilitates investment flows between Mainland China and the region. The Closer Economic Partnership Arrangement (CEPA), a free trade arrangement signed by Mainland China and Hong Kong in 2003, has also accelerated economic integration between the two places. Foreign investors are welcome to take advantage of the preferential treatment offered by CEPA.
With our unique and close relationship with Mainland China, Hong Kong can provide new opportunities for our trading partners and contribute to further regional economic integration for the benefit of all in the region.
Hong Kong has benefited enormously in the past for being part of East Asia. We are happy to share our experience and work with others to strive for stronger economic success. We are ready to contribute to various initiatives to forge deeper and broader economic links with our trading partners in the region. In this connection, Hong Kong has conveyed our wish to join the ASEAN-China Free Trade Area. We believe that the inclusion of Hong Kong in this Free Trade Area will create a win-win situation for all parties concerned and contribute to trade creation and further economic integration in the region.
Apart from the ASEAN-China FTA, we also note with immense interest the development of other free trade agreements (FTAs) in the region, such as the China-Korea FTA, China-Japan-Korea FTA, ASEAN+3 and ASEAN+6, so on and so forth. Being part of the region, we will follow developments closely and, where appropriate and with the support of Mainland China, we will explore ways with the respective economies on how best to engage Hong Kong in these discussions.
There is a Chinese saying that a single chopstick can be easily broken but not a bundle of chopsticks. Together we thrive and alone one withers. It is time for us to join hands and contribute to the prosperity and stability for all in East Asia. Sharing this common aspiration, I look forward to exchanging views and sharing ideas with participants on how best we could work together. I wish the Summit every success and look forward to our closer co-operation in the future.
Wednesday, July 11, 2012