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Love for Hong Kong

After the passage of the Senate version of the "Hong Kong Human Rights and Democracy Act" and another act (“The Acts”) on Hong Kong by the House of Representatives of the United States (US) Congress last week, Hong Kong's financial market reacted calmly and operated as usual. Hong Kong exchanges and interest rates were stable, and no large-scale capital outflow could be observed. The impact of the Acts on Hong Kong would depend on the attitude of the US government, which hinges on the subsequent development of the social incidents and political conditions in Hong Kong, as well as China-US relations and US’ local politics. The HKSAR Government will closely monitor and evaluate the situation.

We stated clearly that the passage of the Acts were unwarranted. The US government should not interfere in any form in the internal affairs of the HKSAR, and we expressed strong opposition. The US has enormous economic interests in Hong Kong, including earning over the past ten years from Hong Kong the largest bilateral trade surplus amongst US’ trade partners in the world, at over USD 33 billion last year. Moreover, more than 1 300 US companies have set up offices in Hong Kong, many of which are regional headquarters. We believe that the US government should act prudently to avoid damaging the interests of both sides.

Over the past decade, with the rapid development of Mainland and other developing economies in Asia, the market landscape of Hong Kong enterprises has shown significant changes. In terms of total trade in goods, Mainland is our largest trading partner, and the Association of Southeast Asian Nations (ASEAN) has replaced the European Union (EU) to be Hong Kong's second largest trading partner, accounting for 12% of the total in the last year. Although US still ranks fourth, the percentage of total trade has dropped to 6.6% in 2018 from 8.7% in 2008.

Last week, I represented the HKSAR Government to sign the Agreement Concerning Amendment to the CEPA Agreement on Trade in Services (“Amendment Agreement”) with the Vice Minister of Commerce, Mr Wang Bingnan, which assists Hong Kong enterprises and professionals to expand business in the Mainland more conveniently. The Amendment Agreement covers a number of important services sectors such as financial services, legal, construction and engineering, testing and certification, film and tourism. The new liberalisation measures includes removing or relaxing restrictions on equity shareholding, capital requirement and business scope in the establishment of enterprises, relaxing qualification requirement, etc., thus making it easier for Hong Kong enterprises and professional to enjoy the first mover advantage in developing businesses in the Mainland. Some of the measures in the Amendment Agreement would be for pilot implementation in Guangdong Province or the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area), which will further facilitate the liberalisation of trade in services in the Greater Bay Area.

Taking legal services as an example, the Amendment Agreement removes the restriction on the minimum capital input ratio of the Hong Kong side for partnership associations set up by Hong Kong and Mainland law firms. The measure is beneficial to small and medium-sized law firms in entering the Mainland legal services market by way of partnership associations. For testing and certification sector, the scope of testing of products under the China Compulsory Certification (CCC) System that can be undertaken by qualified testing organisations in Hong Kong in cooperation with designated Mainland organisations will be extended to CCC products processed or manufactured in any place, providing huge business opportunities to the testing organisations in Hong Kong.

For cultural and creative industries, the Amendment Agreement has removed the restriction on the quantity of Hong Kong-produced television dramas and animation television programmes imported by television stations, and relaxed the restriction of broadcasting times and duration, etc. The measures will facilitate the entry of Hong Kong-produced television dramas and animation television programmes into the Mainland market.

For motion pictures co-produced by Hong Kong and the Mainland, there will be no restriction on the percentage of Hong Kong principal creative personnel and artistes as well as the Mainland-related content. The restriction on the number of Hong Kong people participating in Mainland film productions will be removed and the fees for establishing co- production motion pictures projects will be waived. These measures will help enhance the flexibility of producing co-productions, and promote the cooperation between film industries in the two places. Although the above measures were announced earlier in April, since the measures provide Hong Kong service suppliers with more preferential market access treatment than other external investors, they are included under CEPA so as to comply with the requirement of the World Trade Organisation (the WTO).

We believe that CEPA can assist Hong Kong enterprises from different sectors to grasp development opportunities across Mainland, while the regional cooperation in the Greater Bay Area can facilitate Hong Kong enterprises to establish a deeper footprint in the market and provide them with solid support. The Mainland's middle-class consumer market has a population of more than 400 million, with an annual increase of 5% to 6%. The demand for quality services and goods has been growing rapidly. The huge potential of the market provides Hong Kong enterprises with vest development opportunities and shapes Hong Kong as the preferred platform and springboard for foreign companies wishing to explore the Mainland market, which helps to strengthen Hong Kong's competitive edge. At the time of economic recession, I believe the Amendment Agreement can provide substantial support for Hong Kong enterprises and professionals.

It is clear from the various economic indicators, GDP and unemployment rate, etc that our economy has been experiencing a rapid decline. While external unfavourable factors are beyond our control, local social events and violent attacks indeed has dealt a greater blow to our economy. Repeated blockages of major roads and railways, malicious nuisances and criminal damages targeting shopping malls and shops, fatal attacks such as throwing bricks and even petrol bombs have caused concern of personal safety of tourists and citizens. As a result, the number of inbound tourists and business travellers has dropped sharply, which severely hit the retail, catering, tourism and other related industries, and destroyed respect between people and also protection of private properties. Turning a blind eye to violence would trample on rule of law and harm our economy as well as people’s livelihood.

If the riots continue, it will certainly hurt Hong Kong's core competitiveness and the confidence of the international community towards Hong Kong, and lead to higher chances of wage cut and unemployment. I hope that everyone could focus on the wider picture, stop the violence, protect Hong Kong, maintain Hong Kong’s strengths and competitiveness, and the opportunities for sustainable development. What we need most today is not battle, but to set aside differences and work with each other to resolve the problems. It would be in the best interest of the 7 million people in Hong Kong to support the stable development of the city and enjoy good livelihood

24, November 2019