Hawaii Global Links Newsletter
“How’s Hong Kong doing?” “Very well, indeed!”
Friday, 04 December 2009
HK Commissioner discusses business opportunities.

Hong Kong is alive and doing well; in fact, “very well”, according to Donald Tong, the Hong Kong Commissioner for Economic and Trade Affairs, USA. On October 20, he spoke to a group of Hawaii businesspersons at the Willows Restaurant who were interested in learning more about trade opportunities in “the gateway to China.” The event was sponsored by DBEDT, the Hong Kong Economic & Trade Office in San Francisco and the Hong Kong Business Association of Hawaii.

Image 
Donald Tong at the podium.

Tong has had a wide range of experience with Hong Kong government. Prior to his appointment as Commissioner, he served as Deputy Secretary for Home Affairs. His duties included developing social enterprise, promoting human rights, legal aid and religious and data privacy matters.

A long history of free trade

For many centuries, Hong Kong has been a bastion of free trade, and is the world’s 13th largest trading economy. Last year, it was ranked the freest economy in the world by the Heritage Foundation and the Wall Street Journal. This was the 15th consecutive year it has achieved that honor.

Looking back, before the British handed Hong Kong back to China on July 1, 1997, there were significant doubts about “HK’s” free trade future. But since that date, Mainland China, itself, has turned to free trade “with a vengeance” and the “Special Administrative Region” has not been lost in the dust. It has excelled in what it has always done well: making many individuals and businesses a lot of money.

Hong Kong today

Today, more than 6,500 international companies have offices in Hong Kong, with over 1,200 of these from the U.S.—a 100% increase in a decade. Moreover, HK is America’s 2nd largest trading partner; its 5th largest import source ($21.6B) and 2nd largest export destination ($6.5B).

Much of this success can be attributed to the wisdom of the People’s Republic of China in guaranteeing HK a high degree of autonomy.

“Hong Kong people run Hong Kong,” said Tong, “Except in the areas of foreign policy and national defense."

Tong emphasized that “Hong Kong’s way of life, economic and monetary policy, currency and taxation system are completely separate from its Mainland neighbor. Its legal system is a continuation of British Common Law, with an independent judiciary.” And, he continued: “It also has separate participation in international forums, such as the World Trade Organization and the Asia Pacific Economic Council. In addition, it enjoys separate immigration, customs, police and anti-corruption authorities.”

Hong Kong has greatly benefitted from the meteoric economic rise of China, without the growing pains. Indeed, Tong’s PowerPoint presentation revealed that it is now casting itself (once again) not as an important part of China, but as “Asia’s World City.” And what’s not to like?

HK’s 7 million people enjoy a per capita GDP of $30,000, with a simple, low-tax system which caps the salaries’ tax at 15% and the profits’ tax at 16.5%. And there are no sales or capital gains taxes. Its workforce is well-educated, and to prevent a flood of uneducated, unskilled immigrants from the Mainland, it maintains a rigorous entry system, where only “the best and the brightest” are allowed to be residents.

Facing the financial crisis

But, certainly, Hong Kong’s shining progress was dimmed by the current financial crisis?

Not as much as one may think.

Tong pointed out that, yes, “There was a 7.8% contraction in Hong Kong’s economy in the first quarter of 2009, but this slowed to a 3.8% decline in the second quarter. Consumer and business sentiment is improving and the unemployment rate has stabilized at 5.3%.”

“The outlook for 2009,” Tong went on to say, “is a negative growth rate of 3.5% to 4.5%. Importantly, our financial industry remains healthy and sound, with no bank bailouts or rescues needed.”

A prudent fiscal policy has much to do with the fact that Hong Kong didn’t take a serious “hit.” It has fiscal reserves of $57B and foreign currency reserve assets of a respectable $227B.

In addition, HK does not intend to be caught flat-footed. Roughly $11B (or 5.2% of HK’s GDP) has been earmarked for economic relief measures that will stabilize the financial market; create and preserve jobs; and support enterprises.  Through various stimulus measures, Hong Kong hopes to create more than 120,000 jobs.

The four pillars of HK’s economy

“To maintain competitiveness and create quality jobs,” Tong said, “We need to strengthen the four pillars of our economy.” He listed these as:

• Financial Services

• Tourism

• Trading and Logistics; and

• Professional Services.

Among the initiatives in the Financial Services category is positioning Hong Kong as a capital-raising center for Mainland companies. Tong also wants to expand links between Mainland and HK financial markets.

In the area of Tourism, Tong mentioned that the old (and once challenging for pilots to demonstrate their landing skills) Kai Tak Airport is being transformed into a cruise ship terminal and there will be a 100-acre “cultural hub” in West Kowloon, with 15 performing arts venues, a museum, an exhibition center and galleries. In addition, there are plans to expand the popular Disney Theme Park.

Typical of Hong Kong’s efforts to continually “reinvent itself,” it is now going all-out to become a hub for wine-related businesses—including auctions--following the elimination of the duty on wine. In 2008, the value of imported wine increased by 80% to $350M, with $18M in wine from the U.S. alone.

Among its initiatives in Logistics, HK is expanding its Lantau Island airport and working closely with the Mainland to maintain its position as a supply chain.

And under Professional Services, Tong explained, "We have a free trade pact between between HK and the Mainland, namely Closer Economic Partnership Arrangement, in place to give overseas companies easier access to the Mainland market.”

Developing new industries

Which industries would Hong Kong like to see developed that would take advantage of its considerable resources? Tong reported:

• Testing and Certification (e.g., for consumer/industrial foods and goods);

• Medical Services (e.g., medical tourism);

• Innovation and Technology (e.g., biotechnology, IT and telecommunications, precision engineering, and electronics);

• Environmental Industry (e.g., electric vehicles); and

• Educational Services (e.g., higher education services for Mainlanders).

Tong ended his talk by zeroing in on Hong Kong’s trade relations with Hawaii. In 2008, HK was Hawaii’s 12th largest export destination. A number of companies have set up offices there, including architecture/engineering firm Belt Collins and hotel giant, Outrigger.

Responding to questions

In the Q & A, session that followed, Tong noted that HK’s flagship airline company, Cathay-Pacific, has recently introduced a direct air cargo flight to Dallas. He was optimistic that such an arrangement might someday be reached between HK and other U.S. cities, such as Honolulu.  “The opportunity is always there,” he said. “We just have to find the right time.”

In response to another question, Tong stated that the Hong Kong government owns all the land, but leases have been long (99 years) and “when leases expire, the lessee can pay another land premium to continue the use of the land. This is not a major concern.”

Is Hong Kong afraid of losing trade to booming Shanghai?

“No,” Tong answered. “Consider the U.S. with a population of more than 300 million. There are many thriving cities with large harbors.”

Image 
From l to r, Jeff Wing-yan Leung, DBEDT's Dennis Ling,
Mr. Tong, Senator Clarence Nishihara and Shirley Lau.  

Jeff Wing-yan Leung, Director, and Shirley Lau, Deputy Director, from the Hong Kong Economic & Trade Office in San Francisco, were on hand to answer questions and provide additional information to Hawaii businesses. The office website is www.hketosf.gov.hk. An additional link is: www.hongkong.org.

In sum

In summing up, Tong urged audience members to take advantage of Hong Kong’s location, excellent connectivity, low tax system, free flow of capital, independent judiciary, clean and efficient government, and educated and hardworking populace--many of whom are familiar with doing business on the Mainland.

Hong Kong—one of the world’s great commercial centers--is ready for business, trade and investment.

Last Updated ( Friday, 11 December 2009 )
 
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