The Belt & Road Initiative is giving us a long-term promise of transnational and intercontinental connectivity and will give rise to rewarding business prospects. They will take different permutations and shapes, including new air, sea and land routes, additional ports, rails and roads connecting isolated regions, economic and trade pacts, and increased investment flow. Hong Kong, being the world’s freest economy and China’s most international city, is destined to play a significant role in the Belt & Road Initiative.
Last December, I signed on behalf of the Hong Kong Special Administrative Region an arrangement with the National Development & Reform Commission for advancing Hong Kong’s full participation in and contribution to the Belt & Road Initiative. The arrangement covers six key areas ranging from finance and investment to people-to-people bonds. An annual Joint Conference mechanism was also agreed upon. The conference gives Hong Kong a unique and direct dialogue with central authorities regarding the Belt & Road Initiative and our participation in it. I’m pleased to say that the first meeting of the Joint Conference was held in Beijing just over two weeks ago.
While the details are being worked out, I can tell you that Hong Kong will contribute to the initiative across all areas of its wide-ranging connectivity, from policy coordination, financial integration and trade, to infrastructure and people-to-people bonds.
One country, two systems a boon
Hong Kong’s singular most important advantage in playing an active role in the Belt & Road Initiative is, of course, the “one country, two systems” framework that has propelled our development in the past 21 years. It allows us to expand our traditional strengths as an international financial, trade and logistics centre, while deepening our economic integration with the Mainland.
An international financial centre, and one of the world’s great trading economies, Hong Kong has long served as a regional hub and a business bridge connecting the Mainland, Asia and the rest of the world. We also embrace the free flow of capital, of goods, information and talent. That fluid connectivity will prove indispensable long down the Belt & Road, a point driven home at a seminar held at the Great Hall of the People in Beijing in February this year, the theme of which is “Strategies & Opportunities under the Belt & Road Initiative – Leveraging Hong Kong’s Advantages, Meeting the Country’s Needs”. Some 380 chief executives and senior management from more than 170 state-owned enterprises took part, along with four state leaders and 80 other central officials. Such an impressive turnout would not have been possible without the strong support of Chairman Xiao Yaqing of the State-owned Assets Supervision & Administration Commission of the State Council. I am extremely grateful to Chairman Xiao for taking time out of his busy schedule to attend the summit today, along with his colleagues, Vice Chairman Ning from the National Development & Reform Commission and Vice Minister Gao from the Ministry of Commerce.
Coming back to that February seminar on the Belt & Road, I led the Hong Kong delegation. With me were three policy secretaries and a number of professional and prominent players from our finance and investment sector, as well as legal, arbitration and construction professions. At the seminar, Mr Zhang Dejiang, then Chairman of the Standing Committee of the National People’s Congress, emphasised Hong Kong’s indispensable role in the Belt & Road Initiative, adding that, and I quote him, “the country will continue to need Hong Kong, as well as incorporate Hong Kong in the Belt & Road.”
HK a natural capital hub
Capital formation will be critical to that role. With liquid capital flow and a deep pool of global financial talent, Hong Kong is the natural centre from which to raise funds for infrastructure, investment and production projects. We are also ideally suited to provide the risk management, insurance and dispute-resolution services that Belt & Road partners and their projects may need.
Similarly, I envision an increasing role for Hong Kong as a fundraising hub for green projects, particularly in promoting sustainable Belt & Road development. Earlier this year, my Government announced a three-year Pilot Bond Grant Scheme. I’m confident it will encourage more Belt & Road investors and issuers to participate in the Hong Kong bond market.
A Hong Kong Government green bond issuance programme – with a borrowing ceiling of US$13 billion (HK$100 billion) – is also in the pipeline. It will support green projects under the Government’s public works programme. We believe the programme will help provide benchmark pricing and stimulate market development.
In addition, the Hong Kong Quality Assurance Agency launched its Green Finance Certification Scheme in January this year. The programme provides third-party conformity assessments for issuers of green bond instruments. Eligible green bond issuers using the scheme will be subsidised, with a view to supporting green development financing.
In short, I believe green finance can only expand our financial diversity and formidable international standing. The Hong Kong Stock Exchange, to take one example, has been ranked among the top five, globally, in initial public offerings for the past eight years. Last year, funds raised through IPOs amounted to US$16.5 billion.
In April last year, our Securities & Futures Commission set out eligibility criteria for infrastructure project companies looking to list on our stock exchange. The criteria provide a clear pathway for Belt & Road projects and companies looking to Hong Kong for equity and debt financing.
Hong Kong is the world’s largest offshore renminbi centre, handling about 76% of offshore renminbi transactions. We are, as well, the leading centre for offshore renminbi asset management. Importers and exporters in Belt & Road countries can settle their trade in renminbi through our payment system, good at more than 200 banks from all over the world. And investors can tap our renminbi liquidity through bank loans or “dim sum” bond issuance. They can also invest their surplus renminbi liquidity in a wide range of renminbi products, all available right here in Hong Kong.
More than a financial capital, Hong Kong is the region’s logistical and transport hub. Hong Kong International Airport is the world’s busiest airport for international cargo. And we are determined to expand on that hub role, with construction of a three-runway system for the airport continuing. On completion, the new airport will have the capacity to handle 100 million passengers and nine million tonnes of cargo a year, compared to 70 million passengers and five million tonnes of cargo last year. To strengthen our air cargo hub position, earlier this month, the Hong Kong Airport Authority announced the granting of rights to develop a major logistics centre of 380,000 sq m GFA (gross floor area) at the airport.
Our land connectivity is also developing at an extraordinary rate. And the flow of people and trade, and opportunity between Hong Kong and the Mainland is about to soar, thanks to the opening, later this year, of the 42 km Hong Kong-Zhuhai-Macao Bridge and the 26 km Hong Kong section of the Guangdong-Shenzhen-Hong Kong high-speed rail. Each, in its own way, will slash travelling time between Hong Kong and the Mainland. Together, they will surely fast-track development of the Guangdong-Hong Kong-Macau Bay Area.
The bay area, another major national development priority, will serve as a powerful connection point for the Belt & Road. A cluster of nine flourishing cities in Guangdong province together with Hong Kong and Macau, the bay area unites a collective population of over 68 million and a combined GDP of some US$1.5 trillion, which is comparable to Australia’s GDP.
Taking advantage of the varying expertise that abounds in the 11 cities, the bay area is expected to rise as a global centre for finance, high-end services and innovation and technology. In doing so, it will also boost interaction and integration within the region, encouraging strategic partnerships between Hong Kong, Guangdong and the larger Belt & Road region.
Beyond all that promising business and investment, the “Silk Road spirit” will also thrive, with its emphasis on the promotion of community and people-to-people bonds. In this regard, Hong Kong, Asia’s world city, has much to offer. Culture, of course, will be central to this. But we will also be pleased to share our experience and knowledge in other areas as well, including corruption prevention, dispute resolution, city management involving firefighting, flood prevention, slope stabilisation as well as aviation safety, railway operations and more.
The Hong Kong International Aviation Academy, for example, is now forging closer ties with ASEAN countries. Sponsorships are being offered to students from Cambodia, Laos, Myanmar, the Philippines, Thailand and Vietnam to help develop expertise in regional air transport management. Our Independent Commission Against Corruption has been sharing its long experience in fighting corruption with regions and countries along the Belt & Road.
And my Government is committed to expanding educational cooperation and exchanges with Belt & Road countries. We have already launched a Hong Kong scholarship for Belt & Road students. It supports outstanding students from Indonesia, Malaysia and Thailand, helping them pursue undergraduate studies here in Hong Kong. We have also introduced a new subsidy scheme to encourage students in Hong Kong to participate in the Belt & Road region exchange programmes.
The Hong Kong Government, in short, is committed to being both a “facilitator” and a “promoter” of the Belt & Road – today, tomorrow and long down that road of transformative connections and boundless opportunities.
Chief Executive Carrie Lam gave these remarks at the Belt & Road Summit on June 28.