************************************************************
Following is the speech by the Financial Secretary, Mr John C Tsang, at the Business Seminar "Think Asia, Thank Hong Kong: Opportunities in a High-Growth Region" organised by the Hong Kong Trade Development Council in London today (November 19, London time):
Lord Sassoon (Chairman of China-Britain Business Council), Lord Wei (Chairman of All Party Parliamentary Group for East Asian Business), Margaret, your Excellencies, distinguished Guests, ladies and gentlemen,
Good afternoon.
I am delighted to join you for this "Think Asia, Think Hong Kong" Seminar.
Congratulations to the Hong Kong Trade Development Council on organising this event, and thank you all for coming. Your presence is a clear indication of the strong bond between Hong Kong and the UK, a bond that has been reinforced over many years by our shared spirit of enterprise and ambition.
The UK's Hong Kong connection has long been the most effective route for companies to reach markets in Asia. Currently, almost 1 000 UK firms operate in Hong Kong, making this country our third largest source of overseas companies in Hong Kong. Last year, the value of our bilateral trade with the UK was about 9 billion pounds compared to some 6 billion pounds a decade ago.
All this is rather encouraging, but this "Think Asia, Think Hong Kong" Seminar is also a chance for us to look to the future, and ask the question: what's next? With this in mind, I wish to share with you some reasons for more UK firms and UK talent to connect with Hong Kong and invest their time, people, money and ideas in our city.
When most business people think about Asia, their first thought is often about China and the huge possibilities for their products and services in the world's second largest economy with 1.3 billion potential consumers. And without any doubt, Hong Kong provides the shortest and most reliable route to connect with Mainland China.
First and foremost, financial connectivity.
The internationalisation of the Mainland currency, the Renminbi, is a clear and fast-moving trend. Serving as China's global financial centre, Hong Kong is at the centre of Renminbi liberalisation. In the first nine months of this year, about 80 per cent of China's offshore repayment, or over 2.6 trillion RMB, were handled by banks in Hong Kong. More than 200 banks, including subsidiaries and branches of foreign banks, are involved in Hong Kong's Renminbi clearing platform. We also have sophisticated financial infrastructure capable of handling huge volumes of offshore Renminbi business smoothly and effectively.
Foreign firms can gain a competitive edge by developing their Renminbi portfolios. They can become more attractive partners for Mainland companies that prefer conducting international trade using their own currency. Overseas firms can also reduce exchange rate costs and risks by settling their Mainland trade in Renminbi instead of a third currency.
During this visit to London, I have met with finance officials in your government to discuss ways to strengthen co-operation between Hong Kong and London to further promote the use of Renminbi by UK firms. Hong Kong stands ready to assist your companies in this endeavour.
Beyond Mainland China, Hong Kong is also a global financial centre in the Asian time zone. The City of London Global Financial Centres Index ranks Hong Kong third behind London and New York. Not only do we have strong financial links with China, we also have excellent financial connectivity throughout Asia. Around 70 of the world's largest 100 banks operate in our city. They provide businesses with the right services and "boots on the ground" information about emerging markets in our region and beyond.
Asset management companies from the UK and around the world have been quick to spot the opportunities from rapid wealth accumulation in Asia, including personal wealth and foreign exchange reserves in China and in other parts of Asia.
There is strong demand for world-class asset management services in Hong Kong. The value of total assets under management in Hong Kong reached US$1.6 trillion last year, which is a 40 per cent increase over 2011, the previous year.
With well over half of our investment funds coming from overseas, and with China as our hinterland, funds based in Hong Kong are well placed to tap into the investment opportunities in our region and to attract Asian capital.
But this alone is not good enough for us, especially in a high-growth and highly competitive region such as Asia. To maintain our competitive edge, the Hong Kong Government is constantly fine-tuning its policy initiatives to align them with the fast-changing environment.
We are exploring ways to enable open-ended investment companies to set up operations in Hong Kong. This would develop our fund industry and attract more funds to use Hong Kong as their base. We are formulating the relevant legislative proposals to accommodate such companies.
We are also planning to extend profits tax exemption for offshore funds to include transactions in private companies which are incorporated or registered outside Hong Kong. This would attract more private equity funds to domicile in Hong Kong.
Earlier this year, we amended our trust laws to attract more settlers to set up trusts in Hong Kong. When the new amendments take effect next month, settlers will be able to establish perpetual trusts in Hong Kong, which is a measure currently not available in most other major common law jurisdictions.
I encourage British companies to think of Hong Kong first when they think of the financial opportunities in Asia.
All UK companies in Hong Kong have high expectations of our city. Over the years, they have come to expect an efficient business environment with low and simple taxes; they expect effective rule of law and clean, efficient governance; they expect fast and reliable services; and because Hong Kong and Asia are evolving at a rapid pace, investors expect an environment tailored not just to the current trends and opportunities in our region, but also to the emerging future opportunities.
Allow me to share with you a few of the ways we are planning ahead to meet the expectations of businesses from the UK and elsewhere in the years and decades ahead.
Hong Kong is a relatively small city, so we are constantly working to expand our capacity for doing business in our region, and that means investing heavily in both our "hard" infrastructure and "soft" infrastructure.
Transport projects under construction include an Express Rail Link (XRL) that will connect us with the high-speed rail network in the Mainland. When the Hong Kong section is completed in 2015, the XRL will reduce travelling time from Hong Kong's city centre to the Mainland city of Guangzhou to about 50 minutes, which is less than half the time it takes right now.
Another project is a mega 29-kilometre bridge from Hong Kong deep into the western part of the Pearl River Delta region. The Hong Kong-Zhuhai-Macao Bridge is expected to be completed in late 2016.
Within our city's boundaries, we are planning to expand our airport to add a third runway to cope with anticipated traffic demand up to 2030. The landing point of Hong Kong-Zhuhai-Macao Bridge is right next to the airport. This makes the airport an ideal gateway for international travellers and goods to reach Macau and the western part of the Pearl River Delta.
And because we anticipate many more Mainland China and overseas companies joining local firms in Hong Kong, we are creating a whole new Central Business District (CBD) in Kowloon East. This will provide an additional 4 million square metres of premium office space, which is about twice the amount of office space currently available in our traditional CBD in Central.
Kowloon East will be a fully-integrated district with world-class residential, sports, leisure, cultural and transport facilities. The development also includes the site of our old airport at Kai Tak, which is now home to a brand new cruise terminal. The Kai Tak Cruise Terminal opened earlier this year and is capable of accommodating two QEIIs at the same time, adding a new dimension to our tourism industry.
We are also developing our "soft" infrastructure to help companies capture the opportunities in our region. This year is the 10th anniversary of the launch of our free trade agreement with the Mainland of China called CEPA.
CEPA continues to be the most liberal free trade agreement signed by China. Foreign firms incorporated in Hong Kong, including UK companies, can enjoy the full benefits of CEPA. These include tariff-free entry to Mainland markets for products with the "Made in Hong Kong" label. CEPA also provides preferential treatment for Hong Kong and Hong Kong-incorporated companies to access 50 service areas in the Mainland, including financial services, legal, logistics, tourism services and other major services sectors.
So when you think of doing business in China, I encourage you to think about ways to incorporate CEPA into your strategies.
ladies and gentlemen, Hong Kong has a special business relationship with the UK founded on our city's institutional strengths. These strengths, which are now guaranteed under the principle of "One Country, Two Systems", include our common law legal system based on the English system and underpinned by our independent judiciary. English continues to be the language of choice for our business community. Our robust regulatory regime is benchmarked against international standards, and we maintain a business-friendly environment with free flows of money, information, ideas and talents.
We keep our tax rates as low as possible with profits tax capped at a flat 16.5 per cent and a top rate of 15 per cent for our salaries tax. In Hong Kong, we have no capital gains tax, no inheritance tax and no VAT. We have even eliminated duties on wine and beer which has helped establish Hong Kong as a major wine trading and distribution centre in Asia.
As a city in China but with our own tried and trusted legal and financial systems separate to those in the Mainland, Hong Kong provides a familiar platform for UK companies to seize the opportunities in our high-growth region.
ladies and gentlemen, I have mentioned some of the ways that Hong Kong is looking to the future by expanding its economic capacity and creating more room and more opportunities for your companies to succeed in Asia.
So, please do think of Hong Kong as your ideal partner in Asia. Or better still, come visit Hong Kong soon and experience first hand the remarkable growth opportunities in our city and our region.
Thank you very much and have a great day.
Ends/Wednesday, November 20, 2013
Issued at HKT 05:57
NNNN
