Hong Kong will have the best of both worlds by moving up the value chain and cultivating deeper economic and trade integration with the Asia-Pacific region. Opportunities will abound once the SAR joins the Regional Comprehensive Economic Partnership, Secretary for Commerce and Economic Development Edward Yau Tang-wah told China Daily’s Su Zihan.
A barrier-free trade environment would be conducive to the businesses of every party involved — producers, suppliers, logistics operators, traders and, ultimately, consumers — while bilateral or multilateral free trade agreements have created the momentum for better and freer trade, especially for the Hong Kong Special Administrative Region, a gateway to the Chinese mainland and a recognized trade and financial center.
Signed in November last year, the 15-member Regional Comprehensive Economic Partnership agreement brings together some of the region’s biggest economies. It comprises Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand and Vietnam, accounting for about one-third of the global economy.
The Asia-Pacific region that embraces the 15 RCEP countries is like an hourglass, with Hong Kong right in the middle. What we could offer is the best locality for trade in this region, plus the fact that Hong Kong is also a financial, trading, navigation and aviation hub.
Edward Yau Tang-wah, secretary for commerce and economic development
Experts say the RCEP, which will come into force on Jan 1, 2022, is expected to boost exports of member economies by 10.4 percent above the baseline by 2025.
The 10-member Association of Southeast Asian Nations is also Hong Kong’s second-largest trading partner. Despite the impact of the COVID-19 pandemic, merchandise trade between the HKSAR and ASEAN had gone up by 21 percent year-on-year to HK$589.7 billion ($75.6 billion) in the first half of this year.
Although Hong Kong has yet to join the RCEP, 13 of the group’s economies have signed free trade agreements with the city.
“The Asia-Pacific region that embraces the 15 RCEP countries is like an hourglass, with Hong Kong right in the middle,” Edward Yau Tang-wah, HKSAR’s secretary for commerce and economic development, told China Daily. “What we could offer is the best locality for trade in this region, plus the fact that Hong Kong is also a financial, trading, navigation and aviation hub.”
The RCEP is of great significance in promoting the restructuring of industrial production value chains and the development of economic and trade integration in the region. Having been an advocate and practitioner of free trade, Hong Kong is well positioned to join the free trade accords serving the region and beyond.
“Fundamentally, all the (RCEP) ministers I have talked to so far have no objection to Hong Kong joining the trading bloc because Hong Kong has the advantage of being a founding member of the World Trade Organization. It’s also a separate customs territory within this multilateral trading regime, as well as a separate member of the Asia Pacific Economic Cooperation forum,” Yau says.
Besides commodities trading, Hong Kong offers a lot of professional services, all of which are supportive sectors that Hong Kong can bring to the RCEP.
“Hong Kong is definitely ready to join the high-quality, truly free trade agreements, particularly the RCEP, which emphasizes goods of common origin, removal of trade barriers and achieving long-term zero tariffs,” Yau says. All these factors sound good for the business community.
Service sector matters
With trade and commerce as the first virtue, some other sectors, particularly services, will also be very important as Hong Kong moves up the value chain.
“Hong Kong’s role as a professional services hub provides a full range of support and services for business activities on a regional and global basis. For those countries involved in the Belt and Road Initiative, Hong Kong can also offer services concerning engineering construction, infrastructure building, contract signing, risk assessment, insurance provision and even arbitration services,” Yau says.
According to the World Trade Organization, Hong Kong was the world’s sixth-largest exporter of merchandise trade last year — up from eighth position in 2019. The service sector is very important to Hong Kong’s economy, contributing 93 percent of the city’s GDP in 2019 and accounting for 89 percent of total employment last year.
The nation’s 14th Five-Year Plan (2021-25), approved by the National People’s Congress in March, has defined Hong Kong’s new position in eight areas, including serving as an international financial center (covering offshore renminbi business, international asset management and risk management), an international business center, and a global center for shipping, as well as legal and dispute resolution services for the Asia-Pacific region.
For the first time, the national development blueprint pledged support for turning Hong Kong into a world aviation hub, an international center for innovation and technology, a regional intellectual property trade center, and an emerging pivot for cultural and artistic exchanges between China and other countries and regions.
“Hong Kong has been a premium hub providing a symbiotic relationship among these eight centers. The market is not just confined to the nation, but also to the region and the world,” Yau says. “It points to a very bright future for our nation in scaling new heights.”
“The Chinese mainland has offered the best market for all, and Hong Kong will naturally be the first to take full advantage of it,” Yau says. He believes that with further interaction with the mainland, Hong Kong is again at the forefront, not only in helping to bring Chinese goods to beyond the wider world, but also acting as a two-way street, where goods and services can meet in the city.
Hong Kong’s Kwai Tsing Container Terminals. (PHOTO PROVIDED TO CHINA DAILY)
The Guangdong-Hong Kong-Macao Greater Bay Area is the central government’s blueprint to promote this 11-city cluster area as the nation’s economic growth engine. Hong Kong has a role in promoting the Greater Bay Area’s functions in international finance, transport, trade, aviation and professional services to develop the region. But Hong Kong as an international finance center isn’t just a single growth engine for the region.
Inno-tech potential
The Greater Bay Area has become an important agglomeration of the nation’s innovation resources, with the Chinese mainland ranking 14th and Hong Kong 11th worldwide, according to the Global Innovation Index 2020 published by the World Intellectual Property Organization. The top 100 global innovation clusters include 17 innovation regions on the mainland, with the Shenzhen-Hong Kong-Guangzhou innovation cluster ranking second.
According to the Global Innovation Index, China’s global ranking in innovation has risen from 35th in 2013 to 12th in 2021, making the nation the highest-ranked upper middle-income economy.
“Hong Kong’s innovation and technology sector is emerging and rising quite rapidly, with one-third of the startups coming from outside of Hong Kong, indicating the city’s strong attraction for budding enterprises,” Yau says.
“We are seeing very handsome growth of the mainland’s economy in areas like innovation and technology. And the Greater Bay Area is, in fact, a very strong cluster of innovation and technology, where it can leverage Hong Kong’s advantage as an international innovation and technology hub and use the city to raise funds and facilitate deeper research collaboration and connect with the world.”
According to Yau, the Greater Bay Area has the best ecosystem for both traditional and new industries, aided by a strong manufacturing base, as well as its innovation and technology strengths.
The latest statistics released by the Guangdong provincial authorities and the Hong Kong and Macao special administrative regions show that the Greater Bay Area’s total population exceeded 86 million last year, with a combined GDP of $1.67 trillion.
“The 11-city cluster’s population, efficiently linked by urban traffic and the high-speed railway, lends itself to be a very strong economic entity. The 86 million people also have the highest earnings and savings power in the nation,” Yau says.
“The biggest challenge is how to make the Greater Bay Area ecology open to the widest world possible on a level playing field, attracting the best talents and also economic input to make it a global economic center. There are still plenty of hurdles to overcome to better integrate the flow of capital, people and technology, and strengthen synergy.”
Hong Kong’s Kwai Tsing Container Terminals. (PHOTO PROVIDED TO CHINA DAILY)
Many international enterprises have set foot in the Greater Bay Area, but it may not be easy for some small startups or small and medium-sized companies to reap the region’s full potential.
As the bedrock of Hong Kong’s economy, SMEs account for 98 percent of enterprises operating in the city and employ 45 percent of the workforce in the private sector.
The Commerce and Economic Development Bureau has a special program to provide funding through the Trade Development Council, specifically to help SMEs obtain commercial loans and explore new markets. It also provides business information and technical advice through the Trade and Industry Department and other government-subvented organizations.
Despite the pandemic’s impact on Hong Kong’s economy, a survey by the SAR government’s direct investment promotion agency InvestHK shows that more start-ups have begun operations in the “Pearl of the Orient”, reflecting the city’s continued business appeal.
Foreign direct investment has not stopped because of the pandemic. Instead, it has reached new heights, with Hong Kong ranking third globally in terms of FDI destinations last year, Yau says.
Total inward and outward direct investments reached HK$15.88 trillion and HK$16.42 trillion by the end of 2020, equivalent to 591 percent and 611 percent of the city’s GDP, respectively, according to the Census and Statistics Department.
Hong Kong has a highly internationalized and rule-of-law business environment and a worldwide business network, making it one of the freest economies in the world and the best place for foreign companies to expand their business to the mainland.
“Money has been flowing into Hong Kong, partly due to the various connect schemes we have rolled out in the past few years,” Yau says.
The Ministry of Commerce says the Chinese mainland became the world’s largest source of FDI for the first time last year, with total FDI reaching $153.7 billion — an annual increase of 12.3 percent. During the same period, 58 percent of the mainland’s FDI was channeled through Hong Kong, mostly using Hong Kong’s business platform as a springboard to Asia and other overseas destinations.
Oswald Chan contributed to this story.
Contact the writer at suzihan@chinadailyhk.com