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Following is a question by the Hon Jeffrey Lam Kin-fung and an oral reply by the Financial Secretary, Mr Henry Tang, in the Legislative Council today (June 7):
Question:
The Eleventh Five-Year Plan, which our country implements this year, has made specific reference to the Hong Kong Special Administrative Region's functions and its interaction with the Mainland. It has also stated that support would be given to Hong Kong's development on fronts such as financial services, shipping, tourism and information services. The Government will hold an economic summit before September to explore the subject. In addition, the Qualified Domestic Institutional Investors ("QDII") scheme has been introduced since April this year. In this connection, will the Government inform this Council of:
(a) the measures in place before the economic summit to assist the service industries of Hong Kong in accessing the Mainland market and to facilitate co-ordinated development of Hong Kong and Mainland provinces and cities; and
(b) the initiatives to be implemented in line with introduction of the QDII scheme to facilitate inflow of Mainland capital into Hong Kong and to assist the financial institutions of Hong Kong in providing their services in the Mainland?
Reply:
Madam President,
As the main south gate of the Mainland, Hong Kong plays a bridging role of connecting the Mainland with the rest of the world. As the Mainland market becomes more liberalised, the Mainland enterprises have a growing demand for various professional services. Recently, the State has clearly stipulated in the Eleventh Five-Year Plan that it would encourage the rapid development of the service industries, in particular the modern industries such as finance, insurance, logistics, information and legal services. These modern industries are where Hong Kong's niches lie. Hong Kong is well placed to become China's service centre and an ideal two-way business platform for Mainland companies.
(a) As regards the measures in place before the economic summit to facilitate co-ordinated development of Hong Kong and Mainland provinces and cities, there have been co-operation and exchanges through various mechanisms. High-level co-operation mechanisms have been established between the Government and the local governments in the Guangdong Province, the Pan-Pearl River Delta (Pan-PRD) Region as well as Shanghai and Beijing, providing a solid foundation for sustainable co-operation between Hong Kong and the Mainland. In particular, the Pan-PRD Regional Cooperation would create new opportunities for Hong Kong service industries. The Pan-PRD area is a well-known production base with a population of 458 million and a GDP of HK$5,700 billion. Meanwhile, the development of service industries, which accounts for 90% of our GDP, is mature in Hong Kong. In view of the highly complementary economic structures of Hong Kong and other Pan-PRD areas, Hong Kong can become the area's service centre. The Government will continue to assist our service industries to develop the Mainland market under the framework of the Pan-PRD Regional Co-operation.
In fact, the Government has all along been helping the Hong Kong service industries in gaining access into the Mainland market. Since the signing of CEPA, we have already secured advanced and enhanced preferential market access into the Mainland for 27 different service sectors and have also attained mutual recognition agreement and arrangements for a number of professional sectors. In accordance with the building block approach under CEPA, the Government will continue to discuss with the Mainland on further trade liberalisation with a view to incorporating the agreed measures under CEPA.
In addition, our new Economic and Trade Offices (ETOs) in Shanghai and Chengdu to be established within this year will help strengthen the links between Hong Kong and the provinces and municipalities concerned, thereby paving the way for more effective cooperation. The Mainland Affairs Liaison Office set up in April this year will also continue to take active steps to co-ordinate and promote co-operation and exchanges between Hong Kong and the Mainland.
(b) The Mainland authorities have introduced liberalisation measures allowing qualified (i) banks to offer offshore wealth management services; (ii) fund management companies to pool together foreign currency funds of Mainland entities and individuals to invest in securities overseas; and (iii) insurance institutions to convert renminbi funds into foreign currencies to invest offshore.
With regard to offshore wealth management services offered by banks on the Mainland, the Hong Kong Monetary Authority (HKMA) has been in discussion with the relevant Mainland authorities both prior to and after the introduction of the scheme. Such discussions served to (i) set out the various benefits for Mainland investors to invest in Hong Kong's financial markets and to make use of Hong Kong's financial platform to invest in other overseas markets; and (ii) convey the wish of Hong Kong banks to have their applications for offering offshore wealth management services to be processed in tandem with those of Mainland banks. For (ii), we have already secured the consent and confirmation of the China Banking Regulatory Commission that applications of Hong Kong banks would be processed in tandem with those of Mainland banks.
Furthermore, HKMA and the Treasury Markets Association organised a workshop and a seminar in May for industry participants to exchange ideas and views on opportunities arising from the introduction of offshore wealth management services by banks on the Mainland. These have helped the banking industry in Hong Kong to understand better the scheme, and Hong Kong banks are in the process of following up with the relevant authorities for launching the services concerned.
The Government has been providing assistance to Hong Kong financial institutions in expanding their services on the Mainland through various channels. For instance, through CEPA, we have successfully negotiated for more relaxed entry and operational requirements for Hong Kong banks over other foreign banks. To attract more funds to Hong Kong, the Government has already introduced measures such as exemption of offshore funds from profits tax to help Hong Kong provide an attractive financial intermediation platform for Mainland investors. In addition, Hong Kong, serving as a platform for Mainland investors, can provide a diversified range of investment products for the choice of Mainland investors.
Ends/Wednesday, June 7, 2006
Issued at HKT 14:16
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