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Firms urged to tap HK's super-connector role

June 10, 2015


Chief Executive CY Leung

Chicago today is one of the world's leading financial centres. And the AT Kearney Global Cities Index this year included Chicago as one of the world's 16 Global Elite cities. That measures both current performance and the future potential of cities to draw, and retain, global capital, people and ideas.


The world has long been attracted to Chicago. Some 21% of the city's 2.7 million people are foreign born. I've read, with interest, that more than 12,000 Chicago public school students are taking Putonghua classes - at elementary and high schools right across this city.


Chicago, and the state of Illinois in general, trades with the world. Last year, the state's exports to Hong Kong totalled some US$1 billion - up a remarkable 30% over the previous year.


That focus on Hong Kong, and Asia in general, is reflected in overall US-Hong Kong trade relations. Last year, the US was Hong Kong's second-largest trading partner after the Mainland of China. And, despite our modest size, Hong Kong was the 10th largest destination for US goods in 2014.


Overall, US-Hong Kong merchandise trade exceeded US$70 billion last year. And, through the first quarter of this year, our bilateral trade has climbed some 5%, year-on-year.


The US was our fifth-largest source of inward direct investment with a stock of some US$45 billion, as well as our 10th largest destination of outward direct investment with a stock of US$9 billion as at the end of 2013.


I've got one more number for you, and it's a telling one. In 2014, about US$49 billion in trade with the Mainland of China from the US side was routed through Hong Kong. That's about 9% of your total trade in goods with the Mainland. And super-connector Hong Kong made it happen.


Guangdong companies go global

That's why we're here with you today. Why I'm leading a delegation of more than 100 high-profile business leaders and government officials to visit Chicago. This Think Asia, Think Hong Kong delegation includes also 41 representatives from the government of prosperous Guangdong province of Mainland China neighbouring Hong Kong, as well as companies and investors from the Mainland in a variety of fields, such as construction, manufacturing, tourism and finance.


By taking advantage of Hong Kong's super-connector role and this Think Asia, Think Hong Kong platform, they are going global with Hong Kong for opportunities. I am sure you can find plenty of opportunities for partnership and collaboration, not just with Hong Kong, but also with our Guangdong and Mainland Chinese neighbours.


We're here to invite you to take advantage of Hong Kong's super-connector capabilities between the Mainland of China and the world - between the Mainland and of course, the US. I know you have direct flights also to other Chinese cities, but Hong Kong offers you the shortest, surest and safest route to business anywhere in China, thanks to our "one country, two systems" arrangement.


When you are in Hong Kong, you are of course in China, home of a fast expanding economy. At the same time, under the "one country, two systems" arrangement, Hong Kong is different from other Chinese cities - we practise the "other system". That unique arrangement gives us advantages no other economy in the world can match.


It's why nearly 7,600 overseas and Mainland Chinese companies keep offices in Hong Kong. Over 1,300 US companies, by the way, call Hong Kong home. They include the University of Chicago Booth School of Business, which opened its Asia campus in Hong Kong 10 months ago.


Growing education hub

Another notable example is Cornell University's College of Veterinary Medicine, the top-ranked veterinary school in the US. It is partnering with the City University of Hong Kong to offer postgraduate courses in veterinary medicine in Hong Kong, integrating human, veterinary and environmental research. It's in Hong Kong to take advantage of our "one country, two systems" platform again.


I should add that the University of Illinois at Urbana-Champaign - as well as Northwestern University and Illinois Wesleyan University - is also active in Hong Kong, partnering with several Hong Kong universities.


US educational institutions and companies do business with Hong Kong, and through Hong Kong with the Mainland of China and Asia, with confidence. Knowing that capital, information, trade and people flow freely through Hong Kong. Knowing that the playing field in Hong Kong is as even and as inviting as a doubleheader at Wrigley Field.


They do business in Hong Kong because our tax system is simple and our tax rate low, because our communications and logistics infrastructure are world-class. They count on Hong Kong because our legal system is based on common law, our judiciary independent, and our intellectual property regime robust. They know, and this is important, that the Government of Hong Kong does not compete with them.


Earlier this year, the Washington-based Heritage Foundation ranked Hong Kong top in its Index of Economic Freedom - the 21st year in a row it has done so. And Hong Kong placed second in this year's World Competitiveness Yearbook rankings, behind only the US.


Tech firms seize opportunities

Many US companies are already seizing the opportunities offered by Hong Kong. For example, those in the technology sector. Indeed, more than 30 US tech companies are now located in Hong Kong Science Park. They work in such promising areas as electronics, biomedical technology, material and precision engineering and many more.


They're finding their future in Hong Kong alongside many of America's leading tech firms, including the likes of Apple, Intel, Facebook, and Twitter.


I invite you to join them. Our information and communications technology infrastructure are advanced and sophisticated. Our telecommunications regime is open and competitive. Our Government is supportive of entrepreneurship. You can count on Hong Kong for launching your start-ups, or expanding your business.


Hong Kong's super-connector role is strengthened by CEPA, our free-trade agreement with the Mainland of China. CEPA gives Hong Kong companies tariff-free access to the Mainland for goods produced in Hong Kong. It also gives our services suppliers preferential access to the Mainland. And, since CEPA is nationality neutral, US companies need only partner with Hong Kong to take advantage of its singular benefits.


Services trade liberalised

There's another piece of good news. By year's end, I expect Hong Kong will enjoy basic liberalisation of trade in services with the Mainland. The first big step in that development was set in motion just in April, when basic liberalisation of trade in services between Hong Kong and the neighbouring, very prosperous Guangdong Province was achieved.


I am sure many of you have a finance background. Chicago, after all, is one of the world's leading financial capitals.


Hong Kong equally excels in the financial services industry. We are both China's international financial centre and the world's China financial capital. More importantly, we serve as China's launching pad for its financial reforms, and as its gateway for the opening up of its financial markets. So we enjoy first-mover advantages, and we have first-hand knowledge and experiences. We are pleased to share them with US businesses and investors.


China's currency, the renminbi, is a prime example of our super-connector role in finance. Hong Kong is the world's largest offshore renminbi market. Recently, there's been considerable expansion in the range of renminbi bond issuers out of Hong Kong. They include Illinois-based McDonald's, which issued RMB200 million in renminbi bonds to finance its Mainland operations.


Initiative to spur funds flow

Our super-connector role between China and the rest of the world has been very much in evidence in recent months. Next month, Hong Kong and Mainland China will launch their mutual recognition of funds. It is yet another groundbreaking initiative for Hong Kong's financial markets. This is the first mutual recognition of funds arrangement between the Mainland and a market outside the Mainland.


The arrangement will open up a new channel to mutual traffic flow not only between the Mainland and Hong Kong, but also between the Mainland and the international markets through the Hong Kong platform. It gives Hong Kong another engine for growth in financial services sector, in particular the asset management industry.


This fund deal follows the launch, last November, of the Shanghai-Hong Kong Stock Connect, another significant move in the liberalisation of the Mainland's capital markets. And it was done through Hong Kong. Through Stock Connect, investors in Hong Kong, and around the world, can invest, directly, in over 500 Shanghai-listed shares through the Hong Kong Stock Exchange. And Mainland investors can trade in some 280 Hong Kong-listed shares via the Shanghai Stock Exchange using onshore renminbi funds.


Shanghai-Hong Kong Stock Connect has been a resounding success. In April, record-breaking trading days were rung up on both northbound and southbound turnovers, with a highest combined daily turnover hitting some US$5 billion. And that's daily turnover. Up next is the Shenzhen-Hong Kong Stock Connect. We expect it to open later this year.


Initiatives to broaden opportunities

Then there are the grand strategies of China's Silk Road Economic Belt and 21st Century Maritime Silk Road. One Belt, One Road, as it's called, will promote closer co-operation with countries across Asia, Europe and Africa. Thanks to these initiatives, we expect to see soaring investments in infrastructural facilities, deepening of financial integration, expanding flow of trade and the building of people-to-people bonds in Asia, Europe and Africa.


Hong Kong, as the unrivalled super-connector between the Mainland of China and the rest of the world, is well-positioned to take advantage of the Belt-Road initiatives. We have a powerful competitive edge in services, from trade, logistics and finance to legal, accounting and other professional services, together with infrastructural project management, environmental and risk assessment, and transport and tourism services. The Belt-Road initiatives will create immense demand for these and other high-level services, and extend the reach of Hong Kong's professional services.


Hong Kong is offering unprecedented opportunities for US businesses. Throughout today's event, you'll hear a great deal more about how Hong Kong can help explore these opportunities. In business we know "how" is important. For that, my thanks to the Hong Kong Trade Development Council.


I can summarise my message today in a few words - come to Asia, come to Hong Kong. I wish you all the best of business, and I hope to see you all, soon, in Hong Kong.


Chief Executive CY Leung gave these remarks in the opening session of the Think Asia, Think Hong Kong symposium organised by the Hong Kong Trade Development Council in Chicago.