SCED's speech at opening of "Think Asia, Think Hong Kong" symposium in Los Angeles
Following is the speech by the Secretary for Commerce and Economic Development, Mr Gregory So, at the opening of the "Think Asia, Think Hong Kong" symposium organised by the Hong Kong Trade Development Council in Los Angeles, the United States, on June 14 (Los Angeles time):
Mr Jack So (Chairman of the Hong Kong Trade Development Council), Mr John Chiang (California State Controller), Mr Michael Antonovich (Supervisor, Fifth District, Los Angeles County), distinguished guests, ladies and gentlemen,
I am delighted to be back here in the City of Angels.
It is great to see so many people here today. Thank you for your keen interest in the business opportunities in Hong Kong. Also, congratulations to the Hong Kong Trade Development Council on staging this "Think Asia, Think Hong Kong" symposium here in LA.
When you think of the business opportunities in Asia's emerging markets and especially in the Mainland of China, we want you to think of Hong Kong first. That is because the shortest route for business between the Mainland of China and anywhere else in the world is the route through Hong Kong.
In the next few minutes I will tell you why this is the case and why US companies are such an important part of this channel for trade, investment, information and ideas.
Naturally, the US is no stranger to the opportunities as well as the challenges of doing business in China and throughout Asia. We already have around 1,400 US companies operating in Hong Kong, more than from any other overseas country. Over half of these companies use Hong Kong as a base for their regional operations. There is plenty of space, and opportunity, for more US firms to come to Hong Kong and experience Asia's world city first-hand.
US entrepreneurs choose Hong Kong because they know how the system works, and they know how to work the system. It is a system familiar to the US, a system based on a free flow of capital, goods and services. A system that is open to new ideas and an unfettered exchange of information. It is a system based on international standards and a level playing field for all, where local companies, Mainland enterprises and foreign firms compete side by side.
Although we are a relatively small city of 7 million people, Hong Kong is the 10th largest export market for US goods exports. This trade has tripled in value over the past decade to US$37.5 billion last year. Also in 2012, the US was our largest overseas trading partner with bilateral trade valued at almost US$70 billion (US$69.6 billion).
Put simply, Hong Kong is a premium showcase for American firms to promote their high-quality goods and services in our part of the world. We have a prime location in East Asia and strong connectivity with the rest of our region. We also welcome tens of millions of visitors to our city each year. Last year alone, 48 million people visited Hong Kong, of whom about 35 million were from the Mainland of China. Many come to shop for the latest brands and fashions from the US and other Western markets. In other words, a ticket to Hong Kong is also a ticket to the vast China market for the "Made in USA" label.
Since Hong Kong's return to China in 1997, we have been able to preserve and enhance our unique corner of the country under the principle of "One Country, Two Systems".
Under "One Country, Two Systems", we continue to maintain our own currency. The Hong Kong Dollar is fully convertible and has been linked to the US Dollar since 1983. We have no restrictions on the flow of capital. We also maintain our own tried and trusted common law system with an independent judiciary. And we have our own low and simple tax regime.
Low taxes include profits tax of no more than 16.5 per cent and salaries tax capped at 15 per cent. There is no capital gains tax, no inheritance tax and no VAT or GST in Hong Kong. In the spirit of fair play, international firms, including American firms, enjoy the same low tax rates as local companies.
US companies can also take advantage of our free trade pact with the Mainland of China: what we call the Closer Economic Partnership Arrangement, or CEPA. Under CEPA, products that meet some straightforward rules of origin criteria enjoy tariff-free entry to the Mainland.
CEPA also gives preferential access to Mainland markets for companies in 48 services sectors including key sectors such as financial services, legal, tourism, information technology and trade and logistics services, just to name a few.
Because CEPA rules are nationality-neutral, US firms incorporated in Hong Kong can enjoy the same benefits of CEPA as local companies in reaching the China market and its 1.3 billion potential consumers.
As we prepare to celebrate the 16th anniversary of the establishment of the Hong Kong Special Administrative Region of China on July 1, it is business as usual for Hong Kong, and that also means business as usual for our companies.
I say "business as usual" because Hong Kong continues to be rated as the world's freest economy. We have been ranked number one by the Heritage Foundation in the US and the Fraser Institute in Canada for each of the past 19 years.
We are also one of the most business-friendly cities in the world, rated as the second easiest place to do business by the 2013 World Bank Doing Business Report.
In terms of financial connectivity, Hong Kong ranks alongside London and New York as a leading hub for finance. Importantly for us, we are also designated by the Central People's Government in Beijing as China's global financial hub.
So we have a very high stake in, and huge commitment to, promoting international financial stability and, at the same time, leading the smooth process of financial liberalisation in the Mainland of China, the second largest economy in the world after the US.
With a transparent regulatory regime, free capital flows, the rule of law and international connections, Hong Kong is a testing ground for the internationalisation of the Mainland currency, the Renminbi.
We have taken the lead in successfully introducing the three key areas of offshore Renminbi banking, bond issuance and trade settlement.
What does this mean for companies here in the US?
First of all, American firms doing business in China can use Hong Kong's expertise as an offshore Renminbi centre to settle trade with their partners in Mainland China using Renminbi.
Also, US companies can issue Renminbi bonds in Hong Kong to raise capital for their operations in the Mainland.
And investors can take advantage of our city's world-class financial hub to expand their Renminbi portfolios for themselves and their clients.
Our focus is now two-fold.
First, we are working with the Ministry of Finance in Beijing to broaden the range of Renminbi-denominated products. We welcome new revised rules for the Renminbi Qualified Foreign Institutional Investor pilot scheme. The expansion of the pilot scheme will help to enhance Hong Kong's position as an offshore centre for Renminbi business.
Second, we are working with other financial centres, most notably in Australia and London, to facilitate the wider use of Renminbi overseas. Ultimately, the widespread use of the Renminbi is crucial for it to become a true international currency. We will continue to work with our financial counterparts here in the US to achieve this goal in a smooth and sustainable manner.
In this post-financial crisis era, stability and sustainability can only be achieved through much closer collaboration between our partners around the world. We also need a new mindset that puts international financial commitments above, or at least on par with, domestic interests.
Hong Kong is generally ahead of the curve in implementing new global guidelines. This includes the latest Basel III standards for capital adequacy and disclosure requirements of banks. Our regulators strive to achieve the latest G20 requirements and we are serious about commitments to tackling money laundering and financing of terrorism.
All this contributes to Hong Kong's edge as a reliable and efficient international financial hub in the Asian time zone.
My final topic today is about ideas, more specifically about how your ideas are protected in Hong Kong.
Yesterday I visited Silicon Valley, a place known not only for its great ideas but also for being able to turn ideas into viable commercial solutions. Intellectual property (IP) is indeed the next "gold rush" as it becomes more widely traded across borders.
It is big business for IP brokerages, auctions, clearinghouses and exchanges looking to match IP buyers and sellers and monetising IP rights.
Taking a lead from their counterparts in the West, Chinese firms are increasingly seeing IP as a core business asset that should be built, managed, valued and leveraged strategically to drive innovation and growth.
As a regional platform for technology transfer, Hong Kong exported US$1.1 billion worth of technology to Mainland China in 2010.
We have a large pool of bilingual and experienced professionals who provide a comprehensive range of IP services and have their finger on the pulse of changing market demands. We have put in place a robust IP regime to protect the fruits of creativity and innovation, in full compliance with the requirements of international IP treaties.
With our sound financial and legal regimes under the principle of "One Country, Two Systems", Hong Kong is well suited to connect buyers and suppliers of IP in the Mainland of China and here in the US.
Ladies and gentlemen, I have outlined some of the ways that Hong Kong is working to fine-tune its position as the shortest and most effective route for business, finance, ideas and innovation between the US and Asia, including the Mainland of China.
I hope that this "Think Asia, Think Hong Kong" symposium will inspire more US companies to come to our city to test the water for their ideas, brands and innovations.
You would be most welcome.
Thank you very much and have a great day.
Saturday, June 15, 2013