**********************************************************
Following is the speech by the Chief Executive, Mr C Y Leung, at a business luncheon in Seoul, Korea, hosted by the Hong Kong Economic and Trade Office (Tokyo) of the Hong Kong Special Administrative Region Government and the Korea International Trade Association today (November 27):
Chairman Han (Chairman and CEO of the Korea International Trade Association, Mr Han Duck-soo), distinguished guests, ladies and gentlemen,
Annyeonghaseyo. ("Good afternoon" in Korean.)
That, I'm afraid, is the only Korean expression I've been taught so far. I will try to learn more. Dr Han, it is my pleasure to have met you at the APEC Business Leaders' Summit three weeks ago in Beijing. It was definitely an honour for me to have the opportunity of meeting your President, President Park, twice in three weeks. First at the APEC Economic Leaders' Meeting and again yesterday in the Blue House.
This is my first official trip to South Korea since becoming Chief Executive. And I am very pleased to be here in Seoul, delighted to have the opportunity to catch up on my K-pop, K-dramas and K-videos. Korean cool is my goal. The goal, I might add, of most of Hong Kong and much of the world, particularly the young people.
Hong Kong Economy: An Overview
Yes, getting up to warp speed on the rise of Korean culture and technology is high on my to-do list here. So too is boosting business co-operation between us.
Allow me to begin with a brief update on Hong Kong's economic performance. Our economy grew 2.7 per cent in real terms in the third quarter, up from 1.8 per cent in the second quarter. Real GDP growth for 2014 is forecast at 2.2 per cent, which obviously is not good enough for all business people and Hong Kong people at large.
The medium-term outlook for the Hong Kong economy is positive. We are well positioned to ride Asia's - especially Mainland China's - economic strength. That said, the legacy of the global financial crisis, and uncertainties in monetary policy among the advanced economies, may weigh on global economic performance in the medium term.
Hong Kong: An International Financial Centre
Financial services remains one of Hong Kong's great strengths, and advantages. More than a global financial centre, Hong Kong is China's financial and international financial capital, which means that we are the major provider of financial services for Mainland enterprises, and for international firms bound for Mainland China. I should add that in my meeting with President Park, the question of Hong Kong's financial services and legal services as the core strengths of Hong Kong's economy were discussed. We also play a unique role in contributing to our nation's financial reform, providing international expertise and experience.
Hong Kong's Recent Financial Developments
Our deepening economic integration with the Mainland brings us significant opportunities as well which we share with our international business partners. The most recent example of this is the Shanghai-Hong Kong Stock Connect, which began trading just last week. With the launch of Stock Connect, institutional and retail investors in Hong Kong and from overseas can now invest directly in eligible Mainland A-shares, while eligible Mainland investors can invest in eligible Hong Kong stocks, again directly.
Hong Kong banks have also implemented a new arrangement whereby the Renminbi (RMB)'s, the Mainland Chinese currency's, daily conversion limit for Hong Kong residents has been lifted. This will help Hong Kong residents participate in Stock Connect and other Renminbi financial transactions.
The Stock Connect scheme expands investment sources for both stock markets, boosting their competitiveness. It also enables the gradual opening of the Mainland's capital account and the continuing internationalisation of the Renminbi as an investment currency for global investors. And that will only reinforce Hong Kong's position as an international financial centre, propelling the development of the offshore Renminbi business in Hong Kong to new heights.
Our Renminbi business began in earnest a decade ago. Today, it is perhaps the most vivid illustration of Hong Kong and the Mainland of China working together to mutual benefits. It also illustrates the success of the "One Country, Two Systems" principle, under which Hong Kong has its own fully convertible currency. The convertibility of the Hong Kong dollar has given rise to a very large and active Renminbi market. Over the past 10 years, this offshore Renminbi business has showcased Hong Kong's unique position as a "super-connector" between the Mainland and the rest of the world.
At the end of September, Hong Kong banks held RMB1.1 trillion, that is RMB1,100 million, in deposits and certificates of deposit. In the first nine months of this year, Renminbi trade settlement handled by banks in Hong Kong totalled RMB4.5 trillion. From 2007 to last month, more than 460 Renminbi-denominated bond issuances had been held in Hong Kong, with an outstanding amount exceeding RMB360 billion. All these are colossal figures.
And, of course, the internationalisation of the Renminbi has just begun. We have much to look forward to.
Business Ties between Hong Kong and Korea
I feel much the same about Hong Kong-Korean business too. Two of the world's great trading economies, we enjoy strong and long-standing ties. Our bilateral trade between 2009 and last year grew at an annual average rate of 11 per cent. Last year, you, Korea, were our sixth-largest trading partner, our total trade worth some US$28.7 billion. Our trade this year again looks promising, exceeding US$22.6 billion in the first nine months of the year.
The Hong Kong advantage, of course, is our gateway role for Korean exporters looking to tap the huge Mainland markets. In 2013, US$20.5 billion worth of trade between Korea and the Mainland was routed through Hong Kong. Each year, Hong Kong receives over 40 million tourists from Mainland China. Most of them are attracted to our shops. Whatever they buy, Mainland Chinese shoppers in Hong Kong are the best promoters of your products. And I say "what sells well in Hong Kong will sell well in the Mainland of China". And sometimes I do say tongue-in-cheek after that, "give Hong Kong some free samples".
Hong Kong may be small, but as the saying goes, we punch above our weight. Indeed, the Heritage Foundation and the Wall Street Journal have ranked Hong Kong the world's freest economy each year for the past 20 years. Companies over the world depend on Hong Kong's free flow of information and capital. They count on our infrastructure and on our professional services expertise. That's why more than 7 500 overseas companies operate in Hong Kong. About half of them see Hong Kong as their regional headquarters or regional offices.
The Korean business community in Hong Kong plays an important role in the city's economic development. To date, nearly 140 Korean companies have established offices in Hong Kong. They include such major players as Samsung, LG, Seoul Bank, the Korea Exchange Bank and Korean Air.
Korean consumer electronics products, food and beverages, and fashion and accessories are all popular in Hong Kong. Many Korean companies are also active in the services sector, from logistics to shopping. A good number of Korean small and medium enterprises flourish in Hong Kong as well. They're particularly visible in import/export and IT sectors. I have no doubt that other businesses will follow.
How Hong Kong Facilitates Trade and Business between China and Korea
The recent global recession has highlighted the importance of Asia as the engine for future global growth. Regional economic collaboration is vital if we are to take full advantage of the promise of Asia. Such collaboration helps build trust, pools resources, enlarges the market, and expands economies of scale.
Strategically located at the heart of Asia, Hong Kong is best positioned to foster regional economic development, as well as trade and investment flow. Our goal is to play a greater part in regional integration, both as a gateway to the vast markets of Mainland China and as a platform for Chinese investments looking to go overseas.
Korean companies are familiar with Hong Kong's user-friendly business environment, our effective rule of law, low and simple tax regime and free flow of capital and ideas. Our salaries tax is capped at 15 per cent. Our profits' tax ceiling is 16.5 per cent. There is no inheritance tax, no capital gains tax and no VAT or GST in Hong Kong. These fundamental strengths make us both a leading provider and a major recipient of foreign direct investment (FDI). Last year, Hong Kong was the world's fourth-largest FDI recipient, and the second in Asia after Mainland China.
As the natural gateway to Mainland China, Hong Kong has benefited enormously. We are happy to share our experience, to work with Korean investors. We can facilitate more investment from Mainland China to the region, while helping regional business invest in the Mainland. We are the "super-connector" between the rest of the country, that is China, and the rest of the world.
Korean companies can, for example, take advantage of our cross-boundary free-trade pact with the Mainland of China. And this is the Mainland and Hong Kong Closer Economic Partnership Arrangement, or CEPA. It was launched in 2003 to lower, or to eliminate entirely, barriers to trade in goods and services between Hong Kong and the Mainland. We expect to achieve full liberalisation in our services trade by the end of next year.
CEPA now includes more than 400 liberalisation measures and covers a wide range of services areas. Since CEPA is nationality neutral, Korean firms incorporated in Hong Kong can use it to gain tariff-free entry into the Mainland market for goods produced in Hong Kong and preferential treatment in accessing the Mainland's services sectors.
Concluding Remarks
Chairman Han, ladies and gentlemen, distinguished guests, the markets of Hong Kong are borderless. The people of Hong Kong have open minds and are welcoming. We believe in sharing markets and sharing opportunities with our overseas partners, definitely including our Korean partners. Together, I have no doubt that Hong Kong and Korea will go from strength to strength.
Thank you very much.
Ends/Thursday, November 27, 2014
Issued at HKT 14:08
NNNN
Windows Media format
Flash format