Financial Secretary John Tsang
At first glance, Budapest and Hong Kong seem worlds apart. That said, they do share some similarities. The views to Buda and Pest, rising in the hills along the Danube, remind me of Hong Kong and Kowloon, and Victoria Harbour’s stunning divide of those two faces of Hong Kong. And both cities are graced with elements of East and West, embracing all that modernity can offer, while maintaining rich architectural and cultural traditions.
Our bilateral trade looks pretty good too. Last year, total trade exceeded US$1.8 billion, up more than 16% over the 2013 totals. It’s worth noting that the last time a Hong Kong Financial Secretary visited Hungary was in 1999, and our trade then was valued at US$190 million – which means that, since then, our bilateral trade has increased almost tenfold.
The Hungarian trade community has been making good use of Hong Kong’s gateway role to reach the huge markets of Mainland China and across the Asian region. In 2014, some 20% of the total trade between Hungary and the Mainland was routed through Hong Kong. That was worth US$1.8 billion – about the same as the total trade between Hong Kong and Hungary last year.
The reopening of the Consulate General of Hungary in Hong Kong in late 2013 is testimony to the increasing importance we place on our bilateral relations. And I know that the re-established consulate has been working hard and effectively under the able leadership of a young and energetic Consul-General, to promote trade and investment between our two economies. Indeed, the trade figures reflect that good work.
I am confident that trade and co-operation between us will continue to expand in the coming years. That’s thanks, in part, to the ambitious concepts of the Silk Road Economic Belt and the 21st Century Maritime Silk Road, launched recently by President Xi Jinping in 2013. The linked initiatives put the 60-plus economies along the two corridors in the international spotlight as never before.
The Belt-Road was created to expand transcontinental connectivity, to promote economic, political and cultural co-operation from Asia through Africa and on to Europe. I believe that it has the potential to become the world economy’s driving force in this 21st century.
Broad participation in the establishment of the Asian Infrastructure Investment Bank, the AIIB, underlines that belief. In good time, the AIIB will become the key financial institution supporting Belt-Road infrastructural development, and more.
Hungary certainly seems to see the promise of the Belt-Road. In June, Hungary became the first European country to sign an MOU with Mainland China to promote trade and co-operation under the Belt-Road.
Your strategic location – on the eastern border of the Schengen Area – and long-standing relations with China put Hungary in an ideal position to play an active role.
Through the Belt-Road, we expect to see soaring investment in infrastructural facilities, deepening financial integration, expanding trade and the building of people-to-people bonds on a giant scale.
Hong Kong can help make it happen, thanks to the unique advantages presented by our “one country, two systems” arrangement. Among many other things, the arrangement allows Hong Kong to maintain our own social and economic systems. For example, Hong Kong has its own currency which is different from the Mainland Renminbi and is fully convertible. And capital, from the Mainland as well as capital from all over the world, flows freely in and out of Hong Kong on a fair and equitable basis.
Hong Kong is China’s international financial centre and we are also one of the world’s financial capitals. We have the experience, the expertise and the connections to serve as the fundraising and financial management hub for the Belt-Road.
Hong Kong’s financing options range from public offerings and loan syndication to private equity funds and the raising of funds through Islamic finance.
We run the world’s seventh-largest stock market in terms of market capitalisation, and we rank second, globally, in equity funds raised through initial public offerings.
Hong Kong is also the world’s largest offshore Renminbi business centre. Our Renminbi services range from cross-border trade settlement to bond issuance. As trade and other economic activities along the Belt-Road expand, so, too, will the demand for Renminbi trade settlement. And Hong Kong’s Renminbi trade settlement system is well placed to respond to that demand. After all, we have been handling the lion’s share of Renminbi trade since its beginnings in 2009.
Our Renminbi debt market has grown rapidly in recent years. It provides a reliable channel for companies issuing Renminbi bonds, so-called dim sum bond, to meet project funding needs. In 2014, the issuance of Renminbi bonds in Hong Kong totalled about RMB200 billion, a year-on-year increase of 69 per cent.
The growth of Islamic financial services should be equally promising, given the large Muslim population living along the Belt-Road. This past year, Hong Kong issued two Shariah-compliant sukuk, demonstrating our capabilities in this specialised financial offering, as well as revealing the confidence that international investors have in Hong Kong’s economic fundamentals.
Asset and risk-management services will also be needed once the Belt-Road projects start running. Hong Kong’s wealth and asset-management business, I’m pleased to note, has soared in recent years. Indeed, Hong Kong is ideally positioned to act as a global centre for asset management, risk management and corporate treasury functions.
Hong Kong also boasts a wide variety of insurance services and derivative products. They offer sound reasons for international companies to manage their risks by setting up captive insurers in Hong Kong.
Our pool of world-class professionals is deep and talented, offering expertise in finance, accounting, law, architecture, engineering management and more. They have the experience to lead consultancies, construction projects, and the operation and management of infrastructure projects under the Belt-Road.
Our legal professionals work with a world of business every day. They conduct due diligence, ensure contract enforcement and help resolve disputes, all done under the rule of law and our independent judiciary. That makes Hong Kong an ideal centre for resolving potential commercial disputes in business collaborations.
Logistics is also powering Hong Kong’s future as an international business centre. Indeed, Hong Kong boasts the world’s fourth busiest container port, providing some 350 services a week to more than 500 destinations worldwide.
About 700 shipping-related companies call Hong Kong home. They offer a wide range of services, from ship management, broking and chartering to finance, marine insurance, legal, arbitration, and other support services.
The Maritime Silk Road will create fresh demand for shipping services. As one of the largest intermodal logistics centres in the Central European region, Hungary is a hub for goods travelling east from major European seaports, as well as goods going west from rising manufacturing outsourcing hot spots. Hungarian logistics companies will find it advantageous to establish a presence in Hong Kong, using Hong Kong and our maritime services to tap into the markets of the Belt-Road.
In Hong Kong, air cargo is king. Hong Kong International Airport has been the busiest air cargo airport in the world for more than 15 years. Last year, we handled some 4.4 million tonnes of cargo, running about 1 100 flights a day.
From Hong Kong, you can reach all major Asian economies within four hours’ flight time. Half the world’s population is just five hours away. And we are now planning for the future – in the form of a third runway. It will increase our airport’s handling capacity to some 100 million passengers and 9 million tonnes of cargo a year by 2030.
In all, Hong Kong is home to about 14,000 logistics companies, most serving the trade between China and the world. All provide customised supply-chain solutions.
Hong Kong’s free-port policy and our efficient customs clearance, rule of law, strong intellectual property protection and level business playing field provide formidable support for our logistics sector, regardless of individual nationalities.
Tourism, too, will grow in the Belt-Road world. And Hong Kong is ready for that, expanding our cruise tourism market, promoting cruise itineraries in the region. This will lay a foundation for the development of long-haul sailing – from Mainland China all the way to Europe.
Beyond our pillar industries – trading and logistics, financial services, professional services and tourism – we see opportunity as a regional training hub in upgrading the quality of human resources and developing talent for the emerging economies.
And I believe that new markets will open up for our technology and creative sectors, including the film and cultural industries, education and healthcare services as well as product testing and certification.
Take advantage, too, of Hong Kong’s deep Asian ties. Consider, for example, CEPA, Hong Kong’s free-trade agreement with Mainland China. CEPA provides preferential treatment to Hong Kong service suppliers, again regardless of nationality, as well as tariff-free treatment for products of Hong Kong origin. Working with Hong Kong, Hungarian companies can gain the same access to the markets of the Mainland – your ticket to the massive Chinese consumer market that is becoming more middle-class in their preferences and consumption behaviour.
We are also strengthening Hong Kong’s trade and economic relations with our Asian neighbours, negotiating free-trade pacts and Investment Promotion and Protection Agreements. These serve to enhance the confidence of companies looking to invest in Asia and Hong Kong. Similarly, they help protect business people in Hong Kong when making investments in the region.
We welcome Hungarian investment and talent to come to Hong Kong, to take advantage of our low taxes, our world-class business environment and our reassuring legal framework.
The promises of the Belt-Road – and your business future – begin in Hong Kong.
Financial Secretary John Tsang gave these remarks at a business luncheon in Budapest on September 22.
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