September 08, 2011

Chief Executive Donald Tsang

In the short time since I arrived in Belgium I have dined with royalty, met with a regional Minister-President and held talks with the head of the European Union - and I only arrived about lunchtime!
 
Add to this the splendid surroundings we are enjoying tonight, and you know that all this extraordinary hospitality could only be possible in Brussels.
 
So, first of all, thank you for such a warm welcome. It is always a pleasure to visit our Belgian friends. This year we have every reason to celebrate the strong links between our two communities.
 
For one thing, we are celebrating the 25th Anniversary of the Belgium-Hong Kong Society. Since 1986, the Belgium-Hong Kong Society has been promoting strong economic, social and cultural ties between Hong Kong and Belgium.
 
Today, Belgium is an important trading partner among the EU states. Last year, the value of our bilateral trade reached 3.5 billion Euros. What's more, in the first half of this year, our bilateral trade soared more than 42% compared to the same period last year. So we must be doing something right!
 
Switching gears, this year also marks the 100th anniversary of powered flight in Hong Kong.
 
It was in 1911 that Belgian pilot Charles Van den Born first flew his fragile bi-plane at a beach in Hong Kong. It was a feat that captured the imagination of our community and added fuel to the "can do" spirit of our people.
 
Since Van den Born's pioneering flight, aviation development has become a symbol of Hong Kong's spirit of adventure, progress and success.
 
A third landmark worthy of mention was the 14th Anniversary of the Establishment of the Hong Kong Special Administrative Region, which we celebrated on July 1.
 
Fresh opportunities
Our reunification with China in 1997 continues to bring fresh opportunities to Hong Kong and by extension our international partners, Belgium included.
 
Although these are three separate anniversaries, together they showcase some of the key ingredients of Hong Kong's success story.
 
First, aviation. After a century of aviation development, our airport is consistently ranked as one of the best and busiest airports in the world for both passengers and air cargo. It connects Hong Kong to over 150 destinations worldwide and facilitates the growth of our core industries including trade, logistics and tourism. In Hong Kong, you are within five hours flying time of half the world's population.
 
Our second ingredient for success is also linked to international connectivity, and relates to the work of the Belgium-Hong Kong Society. The society, and similar organisations around the world, are instrumental in promoting opportunities for foreign businesses in Hong Kong. They highlight Hong Kong's business-friendly environment based on the rule of law, low-tax regime and zero tolerance of corruption.
 
Of course, Belgium is a special case. That's why our Economic & Trade Office in Brussels also serves as Hong Kong's European "headquarters".
 
In the other direction, we were pleased to welcome the new Belgian Consul General in Hong Kong. Evert Marechal took up his post in July and I am sure he will settle in quickly to life in Hong Kong. Belgium's diplomatic presence in Hong Kong is very important to our bilateral relations.
 
The third, and perhaps most important, ingredient of Hong Kong's continued prosperity has been our successful reunification with China 14 years ago.
 
‘One country, two systems’
Under the ‘One country, two systems’ principle, we have been able to leverage our strengths as an international city with the benefit of closer integration with the Mainland of China. This has enhanced Hong Kong's reputation as the location of choice for overseas companies in Asia, and for major Chinese companies looking to extend their global reach.
 
Our closer integration with our nation is highlighted in the National 12th Five-Year Plan, which runs from 2011 to 2015. The plan was adopted by the Central Government in Beijing earlier this year, and is the roadmap for economic and social development over the next five years.
 
For the first time, Hong Kong and Macau have been included in a five-year plan under a separate chapter. This is a pivotal moment for both the Hong Kong and Macau SARs.
 
The chapter stresses the need to enhance Hong Kong's competitive advantages, including our position as an international financial, trade and shipping centre, and supports our development as an international asset management centre and an offshore renminbi business centre.
 
It also supports Hong Kong's emerging industries to extend their scope of co-operation and services in the Mainland. This will help us further improve the structure of our industries and provide a broader source of economic growth.
 
Competitiveness enhanced
All of this will not only help expand Hong Kong's economic hinterland, it will boost the development of the services sector and enhance the overall competitiveness of the Pearl River Delta and beyond.
 
This is also a very clear manifestation of ‘One country, two systems’ at work which is also a tremendous vote of confidence in Hong Kong - in what we have achieved for Hong Kong so far, but more important in what we can achieve for the nation in moving forward together.
 
It also underscores Hong Kong's role in our nation's rapid development, and the opportunities it offers. And what's good for Hong Kong is also good for our business community.
 
During a visit to Hong Kong last month, China's Vice-Premier Li Keqiang announced a number of new initiatives that will further enhance our city's competitiveness.
 
These include expanding our unique free trade pact with the Mainland, what we call the Closer Economic Partnership Arrangement, or CEPA. The measures will give Hong Kong companies greater access to markets in the Mainland, particularly for services sectors. And because CEPA rules are nationality-neutral, Belgian firms can enjoy the same benefits as local companies. The goal is to completely liberalise trade in goods and services between the Mainland and Hong Kong by 2015.
 
Global financial hub
Other measures will boost Hong Kong's role as China's global financial centre and as an offshore centre for business using the Mainland currency, the renminbi.
 
This is a timely and important strategy for us.
 
The global financial crisis has brought into sharp focus the shifting economic centre of gravity from West to East.
 
Mainland China is now the world's second largest economy. As China's global financial centre, Hong Kong can, and will, take full advantage of this new economic landscape.
 
The establishment of a renminbi bond market in Hong Kong in 2007 gives foreign firms, including Belgian enterprises, an opportunity to raise capital in renminbi. In the first half of this year, there were 38 renminbi bond issuances in Hong Kong. The total amount raised was almost RMB43 billion, or about 4.7 billion Euros. That exceeds the total amount for the whole of last year.
 
Last month, the Ministry of Finance in Beijing issued 20 billion renminbi of sovereign bonds. This was a huge boost to Hong Kong's renminbi bond market and an encouraging vote of confidence in Hong Kong from the Central Government.
 
Money magnet
Also, companies listing on the Hong Kong stock market attract investors not only from Hong Kong but also from the Mainland and the rest of the world. At the present our market capitalisation is about US$2.7 trillion, and there are about 1,500 firms listed in the market. The Hong Kong listing helps to raise the profile of their brands in one of the world's most dynamic markets. Prada of Italy and L'Occitane of France from Europe have taken this advantage in listing on the Hong Kong market.
 
In each of the past two years, Hong Kong has led the world in terms of funds raised through initial public offerings. Last year alone, total IPO funds raised reached 40 billion Euros.
 
Another opportunity is renminbi trade settlement. Hong Kong's deep liquidity pool and broad experience with renminbi business make the city a reliable platform for overseas firms to settle their Mainland trade using renminbi. Let me cite you an example. Few years ago, say five to six years ago, hardly any trade from China was conducted in renminbi. The entire trade portfolio was in US dollars. Over last few years, more and more trade was now conducted in renminbi. Almost 8% now is conducted in renminbi. And 90% of them are cleared and settled in Hong Kong. Hong Kong has emerged, quite clearly, as the money changer and the foreign banker for the nation as a whole.
 
These are a few examples of how closer financial co-operation between Hong Kong and the Mainland is good for our city, good for our nation and good for all our trading partners.
 
Belgian SMEs welcome
I encourage Belgian entrepreneurs to explore ways they can benefit from Hong Kong's growth sectors. I see opportunities for Belgium's creative expertise in Hong Kong and huge potential markets for your ideas and innovations in Asia.
 
Earlier I briefly mentioned our encouraging bilateral trade figures. I am sure it will come as no surprise to anyone here that the majority of this trade revolves around jewellery and precious stones.
 
Later this month, the world's diamond merchants will once again descend on our city for the Hong Kong Jewellery & Gem Fair. It is the most important annual event of its kind in Asia.
 
Last year, Belgium had the largest pavilion with more than 80 Belgian diamond companies taking part in the event. You could say it was a glittering success.
 
The fair is an ideal platform enabling buyers and sellers from around the world, and particularly from Mainland China, to do business.
 
And if you are not in the diamond trade, I encourage you to take part in a wide variety of other major international trade fairs that take place in Hong Kong all year round which cover a huge range of products - from watches and clocks, to household goods and gifts, to wine and spirits, food and beverages and teas from around the world.
 
Wine duty abolished
Talking about wine, I cannot avoid saying this. We abolished the duty on wine three years ago. There was a huge debate in Hong Kong: why should we tax these things that people drink? But we discovered the amount of duty we collected on wine was roughly less than $1 billion dollars.And we thought we have been babbled with all wine-producing countries, France, Italy, Australia, the US, all babbling about that we have the highest duty on wine. So we decided to abolish it. Suddenly, Hong Kong now becomes the number one wine auction centre in the world. I have lost about $900 million in terms of wine duty, I think we have billions and billions more in terms of profit tax. That’s not bad. In other words, cutting taxes does not necessarily lead to losing revenue.
 
Participations in these fairs is one of the most effective and economical advertisements in the huge China market for these firms.
 
Today, more than ever, there is enormous potential for close co-operation between our two economies.
 
Economy recovers
Hong Kong made a full recovery from the recent global financial crisis and our economy is moving ahead at a healthy pace. In 2010, our economy expanded a robust 7%. In the first half of this year, Hong Kong's GDP grew 6.3% year-on-year. And our unemployment rate has come down to 3.4% - close to full employment level.
 
Belgium and Hong Kong - working together as premier gateways to Europe and Asia - can open the door wider to bilateral trade and investment between our nations and our regions.
 
My term as Hong Kong's Chief Executive ends on June 30 next year. This is my last official visit in this capacity to Brussels, the "Capital of Europe".
 
For many decades Hong Kong has enjoyed a close relationship with Europe. This relationship has continued to thrive and prosper over the 14 years since Hong Kong's reunification with Mainland China. I have no doubt that Hong Kong's close links with Europe and its administrative heart of Brussels will continue to flourish for many years to come.
 
Chief Executive Donald Tsang gave these remarks at a gala dinner co-organised by the Hong Kong Economic & Trade Office in Brussels and the Belgium-Hong Kong Society to mark the society’s 25th anniversary.