The 2016 Policy Address (Extract)
III. Belt and Road Initiative
At the end of March 2015, our country issued a document entitled “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”, outlining the development ideas and blueprint of the Belt and Road Initiative. The proposed “five areas of connectivity” – policy co-ordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond – will foster the concurrent development of the Belt and Road countries and strengthen co-operation on the political, economic and cultural fronts.
As a highly open economy with extensive and strong external connections, Hong Kong uniquely demonstrates the characteristics of “two systems” among our country’s many cities. The HKSAR Government will play an active role to facilitate the implementation of the Belt and Road Initiative.
Hong Kong has strong complementarity with the Belt and Road countries, and great potential to create synergy with them. Our most internationally competitive pillar industries, namely financial services, trade and logistics, high-end services and tourism, and even our emerging industries, can all complement the national strategies to “go global” and “attract foreign investment”.
Apart from the priority industries which belong to tertiary production, Hong Kong enterprises also own or administer many primary and secondary business operations in areas such as agriculture, forestry, fishing, mining, as well as light and heavy industries in the Mainland and overseas. With solid experience and enormous capabilities, including quality management teams, these enterprises are ready to engage in joint ventures with countries along the routes.
Platform for Capital Formation and Financing
Hong Kong can provide various countries with the capital required for infrastructure construction. We have a diversity of financing channels in place, including equity listing, syndicated loans, private equity funds, ordinary bonds, dim sum bonds and Islamic bonds (sukuk).
On infrastructure investment and financing, the Asian Infrastructure Investment Bank (AIIB) is an integral part of the Belt and Road Initiative. In addition to its initial capital, the AIIB will need to obtain project financing such as loan syndication or bond issuance. Hong Kong is actively participating in the preparatory work for establishing the AIIB. We have indicated to the Central Government our intention to join the AIIB, and provide mediation and arbitration services in Hong Kong.
Stronger economic and trade ties between the Mainland and the Belt and Road countries will render the RMB more widely accepted. Given the enormous demand for RMB-denominated trade and investment, the Belt and Road regions will be in need of a full-fledged international centre for offshore RMB business to cater for their RMB settlement, financing and fund management needs. Blessed with well-developed RMB payment and settlement infrastructure, Hong Kong has been providing reliable and efficient services for various RMB inflow and outflow transactions in the Mainland and offshore markets. Moreover, Hong Kong’s vibrant offshore RMB foreign exchange market offers an array of financial products. It serves as an ideal platform for RMB capital and risk management for Mainland and international enterprises and financial institutions.
To complement the Belt and Road Initiative, Hong Kong will continue to promote the offshore RMB business. We will further upgrade and bring into full play our functions and services as a global hub for offshore RMB business. For example, we will strengthen market infrastructure and financial platforms, enhance RMB business links with countries along the routes, and promote RMB business between Hong Kong banks and international financial institutions and enterprises. We will step up efforts to stage roadshows abroad to encourage overseas financial institutions and enterprises to conduct transactions on our RMB financial platform.
As a centre for international asset management, risk management and multinational corporate treasury services, Hong Kong is well-positioned to capture the wealth of the Belt and Road and meet the demand for risk management services. The implementation of the Mainland-Hong Kong Mutual Recognition of Funds in July 2015 has further promoted the mutual access of the Hong Kong and the Mainland capital markets, enabling both places to enhance competitiveness and influence in the international asset management arena. Hong Kong boasts a number of large-scale major insurance companies and international reinsurance companies, talented professional teams, well-developed laws and regulations, as well as rich experience and knowledge of insuring major infrastructure (e.g. airports and express rail links). We can therefore provide professional insurance and reinsurance services for major Belt and Road infrastructure. Furthermore, as more and more Mainland enterprises seek to “go global” under the Belt and Road Initiative, Hong Kong will continue to encourage Mainland enterprises to establish captive insurance companies in Hong Kong, make insurance arrangements and enhance risk management for their overseas businesses expanded under the Belt and Road Initiative.
Driven by the Belt and Road Initiative, Mainland enterprises will expand their overseas business, and there will be a greater demand for business services to lower corporate financial costs and enhance treasury risk management. Hong Kong is an ideal location to set up corporate treasury centres. To further attract multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong, the Government proposes, under specified conditions, interest deductions under profits tax for corporate treasury centres, and profits tax reduction by half for specified treasury activities. For this purpose, a bill was tabled in this Council last month.
We also strive to set up a platform conducive to the development of Islamic finance. Our efforts include enhancing the related market infrastructure, providing manpower training, and promoting the development of Islamic financial products and co-operation with other Islamic financial markets.
Trade and Logistics Platform
Hong Kong has developed an extensive network of business connections, and is the most important Meetings, Incentive Travels, Conventions and Exhibitions (MICE) centre, sourcing centre and business matching centre in Asia. As such, Hong Kong may help governments and enterprises identify business partners, and serve as a major platform to promote trade and logistics under the Belt and Road Initiative.
The Belt and Road Initiative will expedite co-operation in the fields of highways, railways and maritime transport, and build a secure and efficient economic and logistics corridor connecting core cities and ports along the Belt and Road. At the same time, it attaches importance to infrastructure standards and safety to meet the requirements for sustainability and environmental protection. Hong Kong may provide support services such as project feasibility studies and risk assessment, research and development, financing and management.
Of the 60 or so Belt and Road countries, Hong Kong has signed Air Services Agreements or international Air Services Transit Agreements with 40 countries. The Government will continue such efforts and seek to discuss Air Services Agreements with other aviation partners along the routes. This will reinforce Hong Kong’s position as an international aviation hub.
At the government-to-government level, Hong Kong will, by fully leveraging our advantages under “one country, two systems” and a high degree of autonomy, strengthen economic and trade ties with our major trading partners along the Belt and Road, promote visits by senior officials and conclude Free Trade Agreements (FTAs) as well as Investment Promotion and Protection Agreements with these countries.
In 2014, half of Hong Kong’s 20 major trading partners were Asian countries and regions, of which five are members of the Association of Southeast Asian Nations (ASEAN). Among the countries along the routes, Hong Kong has established an ETO in Singapore. The three Hong Kong ETOs in Europe, on the other hand, are responsible for liaison with 32 European countries. The Government has decided to set up ETOs in countries along the routes. A new ETO will be set up in Indonesia this year and another in Korea as soon as possible.
Our negotiations with the 10 member states of ASEAN on an FTA are progressing smoothly and the FTA is expected to be concluded this year. The Government seeks to protect the investments of Hong Kong businessmen in ASEAN countries through the FTA. Other key issues include reduction of tariffs and liberalisation of trade in services. Moreover, we will continue to explore the possibility of joining the FTAs signed, or to be signed, by our country with its trading partners, including the Belt and Road countries.
In addition, Hong Kong will expand its networks of investment protection agreements, comprehensive avoidance of double taxation agreements and agreements on double taxation relief arrangements for shipping income, with a view to protecting and facilitating business co-operation between Hong Kong and the Belt and Road countries. For this purpose, we will seek to negotiate as soon as possible with those countries which have yet to sign these agreements.
The Government will step up research efforts and establish databases for the reference of the business sector. The Trade Development Council (TDC) launched a Belt and Road Portal last month, and the Government is also considering building a platform for Hong Kong’s construction-related professional sector to participate in the infrastructure projects relating to the Belt and Road.
Platform for Professional and Infrastructure Services
There is a strong demand from regions along the Belt and Road for professional and infrastructure services. Hong Kong enjoys advantages in various areas including accounting, legal, investment environment and risk assessment, environmental consulting, construction and project management. Among these, Hong Kong meets advanced international standards in the operation and management of infrastructure, such as railways, airport, port, electricity supply and gas supply. Local professions also have experience in exporting such services. We may provide consultancy services for regions along the Belt and Road and participate in the operation and management of their projects. Hong Kong enterprises may, having regard to their own strengths, make sole or joint investment in suitable projects, or participate in the construction of industrial parks.
Moreover, Hong Kong has a sound legal system and adopts the common law regime which is very familiar to the international business community. In establishing economic and trade ties with the Belt and Road countries and helping competitive enterprises “go global”, we may provide professional international legal and dispute resolution services for our country, and assist in developing a sound risk management system for overseas business.
Our professional services can fully demonstrate their strengths during the implementation of the Belt and Road Initiative. The Government will allocate $200 million to support the professional services sector in enhancing exchanges and co-operation with the Belt and Road countries and other regions outside Hong Kong (including Mainland China), and promote related publicity activities.
Strengthening People-to-people Bond
Among the “five areas of connectivity”, the HKSAR Government will first of all initiate work to foster “people-to-people bond” with the Belt and Road countries. We will join quasi-governmental organisations and various community bodies in Hong Kong to connect with the people of these places. As a highly international city with the widespread use of English, Hong Kong can provide a platform for educational, cultural and youth exchanges.
Hong Kong is home to world-class universities which use English as the medium of instruction. This has attracted students from all around the world. Currently, many students from the Belt and Road countries study in Hong Kong. Since the 2012/13 academic year, the Government has offered dedicated scholarships in the nine government-funded institutions. The scope of scholarships will be expanded to cover the whole Belt and Road region. The Government will promote Hong Kong’s tertiary education in the Belt and Road countries to recruit students for undergraduate courses in Hong Kong. This will encourage the interaction of Hong Kong people with those of the Belt and Road countries.
To attract more students from the Belt and Road countries to study in Hong Kong, the Government will increase the number of offers under the Targeted Scholarship Scheme, currently 10 per year, by about 100 in phases, and inject $1 billion into the scholarship fund for this purpose. The Government will also encourage schools to include content about the Belt and Road countries in relevant subjects and student activities. At the same time, a priority theme will be introduced under the Quality Education Fund to encourage students to learn more about the Belt and Road Initiative and have more exchanges with the relevant regions, during which they may introduce the contributions that Hong Kong can make.
On the cultural front, Hong Kong offers the freedom and an environment conducive to artistic creation and cultural diversity. Coupled with our efficient immigration control policies, we can attract artists, art groups and cultural organisations from all over the world to perform, exhibit works or participate in seminars and forums in Hong Kong. Over the past years, Hong Kong has had cultural exchanges at different levels with some Belt and Road countries. Hence, we can play an active role in cultural exchanges under the Belt and Road Initiative.
On youth, various exchange programmes under the Home Affairs Bureau, such as the International Youth Exchange Programme and the Summer Exchange Programme organised in collaboration with the Commission on Youth, provide opportunities for two-way exchanges between young people from Hong Kong and other places. These programmes enable young people to broaden their horizons, enrich their life experience and learn how to think from multiple perspectives. To tie in with the Belt and Road Initiative, the Government will explore the feasibility of expanding these programmes to cover more Belt and Road countries.
Many community organisations in Hong Kong, such as trade associations, youth bodies, social organisations and non-governmental organisations (NGOs) are energetic and flexible in their operation. They organise many high-quality activities every year, and will be able to align with the Belt and Road Initiative by establishing and enhancing their connection and co-operation with counterparts in the Belt and Road countries.
Belt and Road Office
The HKSAR Government will set up a steering committee for the Belt and Road. I will chair the committee, which will be responsible for formulating strategies and policies for Hong Kong’s participation in the Belt and Road Initiative. A Belt and Road Office will also be established to take forward related studies, and co-ordinate work between government departments and other organisations, such as the TDC and the HKTB. It will also liaise with the central ministries, provincial and municipal authorities, as well as various sectors, professional bodies and community organisations in Hong Kong.