HK gateway to Asia
September 13, 2011
Chief Executive Donald Tsang
These are testing times for businesses around the world. But when you think of Asia many people think of strong economies, vibrant emerging markets and increasingly affluent consumers. And Hong Kong is the perfect entry point to the huge Asian market - as hundreds of British companies already know.
Hong Kong's unique evolution was of course influenced deeply by more than 150 years of British administration. And since reunification with China in 1997, almost all of these systems, and our way of life, have been retained and are protected by law.
This is the great beauty of One Country, Two Systems - the cornerstone of Hong Kong's continued success as a city in China but outside the Mainland.
That means Hong Kong remains a free and open economy. We pride ourselves on our efficiency and reliability. We have superb infrastructure and are fully connected to the global, regional and Mainland China markets. And, we have an abundance of well-educated and hard working people who are full of energy and fresh ideas.
Like London and New York, Hong Kong has consistently ranked as one of the world's top three financial centres in the City of London Global Financial Centres Index. All three cities have thrived because of the superb connectivity required to compete and survive in the 24-hour trading cycle stretching from Asia to Europe and the US.
But as well as being an international player, Hong Kong has an indispensable role to play as China's global financial centre.
Under One Country, Two Systems, Hong Kong maintains its own freely convertible currency. We have a free flow of information and ideas, and a transparent regulatory regime. Around 70 of the world's largest 100 banks operate in the city. And we have a broad, deep pool of financial, legal and business services talent.
All of this supports Hong Kong's role as a testing ground for new products and ideas as the Mainland continues to open up, reform, and liberalise its markets. This is particularly the case for the internationalisation of the Mainland currency, the renminbi.
Financial integration
Renminbi banking was launched in Hong Kong in 2004. Today, almost 130 authorised institutions are engaged in renminbi business. This includes deposits, remittances, credit cards and chequing accounts. Total deposits in Hong Kong at end-July topped 570 billion renminbi, or about 55 billion pounds.
A more recent major development has been the expansion of the renminbi trade settlement scheme. Businesses in Britain and around the world are now able to settle their Mainland trade using renminbi with companies in the whole of China. Renminbi trade settlement through Hong Kong's banking system reached 953 billion renminbi, or almost 93 billion pounds in the first seven months of this year.
Hong Kong is also the first and only place outside the Mainland to have a renminbi bond market. Companies around the world have been using this initiative as a way to raise capital for their Mainland operations.
In the first half of this year there were 38 renminbi bond issuances, which raised a total of almost 43 billion renminbi, or four billion pounds. Just last month, the Central Government successfully issued 20 billion renminbi worth of sovereign bonds in Hong Kong. This was an encouraging vote of confidence in Hong Kong's role as the Mainland's international financial hub.
Our deeper financial integration with Mainland China is just one reason for foreign companies to "Think Asia, Think Hong Kong".
Trade door
Our city has long been the premier international gateway for trade with the Mainland. Think of Hong Kong as a corridor of opportunity for goods and services as well as ideas and new innovations to reach Mainland markets.
We are constantly strengthening ties and breaking down barriers to trade and investment between Hong Kong and the Mainland.
Often, this process starts with pilot initiatives between Hong Kong and our immediate neighbours in Guangdong Province, before going nationwide. And because Guangdong alone has a population of around 100 million, this is already quite an ambitious start.
Last year, we signed a Framework Agreement on Hong Kong-Guangdong Co-operation. It is the first agenda on Hong Kong-Guangdong co-operation to be endorsed by the Central Government's State Council. In other words, another vote of confidence in Hong Kong.
The Agreement reaffirms Hong Kong's status as a global financial, trading and logistics centre. It also supports expanded co-operation between Guangdong and Hong Kong as well as nearby Macau. By combining our strengths we aim to establish the Pearl River Delta as one of the most competitive regions in the world by 2020.
Naturally, we will need some fairly impressive infrastructure to make this happen.
Cross-boundary infrastructure projects under construction include the Hong Kong-Zhuhai-Macao Bridge. As well as linking three of the major cities in region, the bridge will help to open up the less developed western part of the Pearl River Delta. We are building a new boundary crossing to boost links between the fast-growing metropolis of Shenzhen.
Another project is the Hong Kong-Shenzhen-Guangzhou Express Rail Link. This will connect Hong Kong to the Mainland's fast-expanding high-speed rail network and make train travel much more efficient
British presence
All this may sound rather ambitious for a small city such as Hong Kong. However, it is a familiar tune for around 1,000 British companies already operating in Hong Kong. These include some of the world's largest banks, best known retailers, top motor car brands, media and telecoms giants and leading airlines. It also includes many more small and medium enterprises which are ideally suited to Hong Kong's business-friendly environment.
In 2010, the UK was Hong Kong's second largest European trading partner, with bilateral trade amounting to HK$100 billion, or close to eight billion pounds. Not surprisingly, the UK is one of the largest investors in Hong Kong, with realised investments of $127 billion, or more than 10 billion pounds, by end-2009.
Apart from being right on the doorstep of Mainland China, Hong Kong is also a springboard to opportunities throughout Asia. In fact, we are within five hours flying time of half the world's population. But if you ask businesses why they choose Hong Kong over other places, our surveys show that almost all of them place taxes at the top of the list - or perhaps I should say a lack of taxes.
In Hong Kong there is no VAT or GST, no inheritance tax, no capital gains tax and even zero duties on wine. Profits tax is no more than 16.5%, and salaries tax is capped at 15%. Only income sourced in Hong Kong is taxed in Hong Kong.
Another reason why British businesses prefer Hong Kong is that ours systems are very familiar. Our common law legal system is based on the English system and is upheld by an independent judiciary. English is the language of our business community, and we share common values of fair play and equality under the rule of law. We have a free flow of news and information, and an unfettered media.
For new start-ups or expanding businesses we have highly experienced professionals who can walk you through every step of the way. Our inward investment agency, Invest Hong Kong, handles a steady stream of new or expansion projects at a rate of about one every working day. The UK is its third largest source of projects.
The Hong Kong Trade Development Council is also very effective at connecting foreign firms with the right partners in Hong Kong and Mainland China. I encourage you to try out their business match-making services, or to attend their trade fairs that take place all year round.
Finally, I cannot talk about Hong Kong without mentioning all that we have to offer outside of the business world. Art and culture, leisure and sport, fine dining and local delicacies, retail therapy and street market haggling, East and West, ancient and modern - all of this is part and parcel of the Hong Kong package. We understand that "all work and no play makes Jack a dull boy" - and I can guarantee that if and when you decide to come to Hong Kong, life outside of business and work is anything but dull.
Ladies and gentlemen, I have barely brushed the surface of what Hong Kong has to offer businesses from the UK and around the world. I hope that you will make the most of this symposium and learn more about the opportunities that Hong Kong has to offer in our city, in our country and within Asia.
I can assure you that there are many reasons to "Think Asia, Think Hong Kong".
Chief Executive Donald Tsang gave this speech at the Think Asia, Think Hong Kong Symposium in London on September 13.
