SCED's speech at "Think Global, Think Hong Kong" Symposium in Tokyo
Following is the speech by the Secretary for Commerce and Economic Development, Mr Gregory So, at the "Think Global, Think Hong Kong" Symposium in Tokyo today (May 15):
Distinguished guests, ladies and gentlemen,
Ohayou gozaimasu (meaning "Good morning" in Japanese).
I am delighted to join you all today for this "Think Global, Think Hong Kong" Symposium.
The Chief Executive of the Hong Kong SAR would very much like to come today but was prevented to do so due to his domestic commitment. He urged me to convey his good wishes to you, to congratulate the Hong Kong Trade Development Council for organising this event, and to thank all of you for coming.
It is a great pleasure to be here in Tokyo to experience the wonderful Japanese culture, the friendship of the people and, of course, your excellent cuisine.
In Hong Kong, we have a deep appreciation of everything Japanese. From the numerous sushi and ramen restaurants, to music and performing arts, to the cars on our roads and the appliances in our homes, Japanese influences are all around our city.
Perhaps because of our affinity with the Japanese people, Hong Kongers were particularly shocked by the devastation and loss of life caused by the Great East Japan Earthquake just over a year ago.
We are also pleased to see Japan back on its feet and moving ahead once again.
Despite the devastating impact of the earthquake and tsunami, our bilateral trade last year still registered growth of 4 per cent compared to 2010. This is testament to the strong trade links between us. In 2011, Japan was Hong Kong's third largest trading partner after Mainland China and the US.
Through this Symposium, we aim to forge even closer links between Hong Kong and Japan.
Under the theme, "Think Global, Think Hong Kong" we will highlight areas where our city's unique strengths can assist Japanese firms in spreading their wings and reaching out to markets in Mainland China, across Asia and around the world.
It is my job today to give you a brief overview of Hong Kong's role as a springboard for Japanese firms to go global. According to my colleagues at InvestHK, our department responsible for Foreign Direct Investment, the number of Japanese companies that they assisted to set up in Hong Kong during the first three months of this year represented a 78 per cent increase over the same period last year.
In the next few minutes I will cover five broad areas where Hong Kong's position can benefit Japanese firms. These areas are Hong Kong's role as a service platform, a premier gateway to Mainland China, an international financial centre, a capital raising platform, and the fifth area is our city's role as an international asset management centre.
First, Hong Kong's advantages as an international service platform for Japanese firms.
Hong Kong is strategically located in the heart of East Asia. Our city is within five hours' flying time from half the world's population. Our economy is consistently ranked as the freest in the world by both the US-based Heritage Foundation and the Fraser Institute in Canada. This ranking highlights our simple and low taxation, free flows of capital and ideas, excellent infrastructure and the Government's unshakable commitment to promoting free trade and free enterprise.
All this underscores Hong Kong's advantageous position as a city in China but outside the Mainland. Since our reunification with Mainland China in 1997, Hong Kong has maintained its own characteristics under the principle of "One Country, Two Systems". We have our own currency and our own financial system, which is separate from that of the Mainland. Our common law legal system is underpinned by an independent judiciary and we maintain a level playing field for business.
Hong Kong's diverse and vibrant service sector contributes around 93 per cent of our GDP. It also helps to ensure that our economy keeps moving up the value-added chain by providing higher value-added services.
With a full range of services, Hong Kong is a one-stop shop for companies wishing to expand their presence in Mainland China and around the world.
Our agile, mobile and multilingual workforce supports the rapid expansion in Hong Kong's services sector. Professional and government bodies also ensure that international standards are met and corporate governance is rigorously enforced.
My second point is Hong Kong's gateway role to the vast markets in Mainland China. Hong Kong is the single largest investor in each and every province of Mainland China. At the same time, the Mainland is Hong Kong's leading source of foreign direct investment. By the end of 2010, the total value of cross-boundary investment in both directions amounted to around US$797.1 billion. That represents a huge financial commitment in each others' future.
Currently around 7 000 Mainland and overseas firms have operations in Hong Kong. Of these companies, over 1 000 are Japanese firms, which is second only to companies from the US.
Many of these enterprises take full advantage of Hong Kong's proximity to the Mainland, modern infrastructure, free market principles and cross-boundary collaboration to tap the China market.
A key feature of our cross-boundary collaboration is a unique free trade pact, what we call the Mainland and Hong Kong Closer Economic Partnership Arrangement, or CEPA.
CEPA was signed in 2003 and fully implemented in 2004. It has been expanded each year since then, all along breaking down barriers to cross-boundary trade and investment.
Under CEPA all Hong Kong products can enjoy zero import tariffs into the Mainland provided that the relevant CEPA origin rules are agreed and met. The litmus test is to produce goods meeting CEPA origin rules to enjoy the zero-tariff benefits.
For trade in services, CEPA covers 47 service areas. This gives Hong Kong companies the first-mover advantage in the Mainland and provides greater access to markets throughout China.
The great thing for Japanese companies is that CEPA is nationality-blind. In other words, Japanese firms that are incorporated in Hong Kong can enjoy the full benefits of CEPA in accessing Mainland markets.
Turning to my third topic, which is Hong Kong's role as a global financial centre in the Asian time zone.
Thanks to the "One Country, Two Systems" formula that I mentioned earlier, Hong Kong enjoys both the China advantage and the global advantage.
On the one hand, our city is deeply linked with the Mainland, which is the world's second largest economy. On the flip side of the coin, our city is an international financial centre on par with London and New York. Around 70 of the world's largest 100 banks operate in Hong Kong and our city is home to a deep and broad pool of local and international financial talent.
We maintain a highly open and internationalised market. Hong Kong's regulatory regime is aligned with major overseas markets and we take a zero-tolerance approach to corruption.
As China's global financial centre, Hong Kong is fully engaged in the internationalisation of the Mainland currency, the Renminbi. We are an effective testing ground for our nation's financial reforms, including offshore Renminbi banking, which was launched in Hong Kong in 2004. In 2007, Hong Kong became the first place outside the Mainland to have a Renminbi bond market. More recently, our city has become the leading centre for offshore Renminbi trade settlement.
Japanese companies can take advantage of each of these financial developments.
I encourage Japanese firms to consider issuing Renminbi bonds in Hong Kong to raise capital for their Mainland operations.
Up to the end of March this year, there were a total of 148 Renminbi bond issuances with a total value amounting to RMB206 billion (US$33 billion). Last year alone, Renminbi bonds worth a total of RMB107 billion (US$17 billion) were issued in Hong Kong. So far, six banks and corporates from Japan have issued Renminbi bonds in Hong Kong.
As at end January 2012, there were a total of 187 banks participating in Hong Kong's Renminbi clearing platform. Among these participating banks, 12 were branches and subsidiaries of Japanese banks. Our efficient and reliable clearing platform provides an ideal opportunity for Japanese enterprises to settle trade transaction payments with their business partners in Mainland China using Renminbi.
Another area is Hong Kong's role as a capital formation centre.
Hong Kong has one of the most vibrant securities markets in the world. As at end-February this year, market capitalisation of the Stock Exchange of Hong Kong (SEHK) was over US$2.6 trillion. That ranks the SEHK as the sixth largest in the world and second in Asia by market cap. On this front, I should also mention that we still have some catching up to do with the Tokyo Stock Exchange.
In terms of funds raised through initial public offerings, or IPOs, Hong Kong has led the world for the last three years. In recent times, more overseas companies have listed in Hong Kong to raise capital and strengthen the presence of their brands in our region, and especially in Mainland China. In the past few years, leading brands from France, Italy and the US have successfully launched IPOs in Hong Kong. We welcome top Japanese brands to list on our stock market.
My fifth and final area today is Hong Kong's role as an asset management centre. On the strong foundations of our free market principles, Hong Kong has firmly established itself as a major asset management centre in Asia. Our fund management business has reached new heights in recent years. As at the end of 2010, Hong Kong's combined fund management business reached a record US$1,298 billion. Over the years, our fund managers have developed a great deal of expertise in investing in Asia and in particular in Mainland China.
Also, according to a survey by our Securities and Futures Commission, the value of assets managed in Hong Kong and invested in Japan increased 111 per cent in 2010 compared to 2009, reaching HK$258 billion or some US$33 billion.
Ladies and gentlemen, I have mentioned some of the areas where Japan and Hong Kong enjoy close and strengthening links. I have also highlighted some of the opportunities to build on our robust bilateral relations.
I encourage you all to make full use of this Symposium to explore ways that Hong Kong can benefit your business including capital raising, brand building and market access. So please do "Think Global, Think Hong Kong".
Thank you very much.
Tuesday, May 15, 2012