Hong Kong To Capitalize On China's Economic Plan

by Mary Swire, Tax-News.com, Hong Kong

18 January 2013

In his 2013 Policy Address on January 16 to the Legislative Council, Chief Executive, C Y Leung stressed that economic development is the government's primary goal, and that China's 12th Five-Year Plan provides huge opportunities for Hong Kong's development as an international center for finance, trade and shipping.

In general, the government, he said, intends to strengthen Hong Kong's external trade and economic co-operation with the Mainland. Hong Kong will have a role to play as an international financial center for, and a business hub of, China, and will also foster co-operation with other provinces and municipalities in the Mainland.

Leung pointed out that the 12th Five-Year Plan specifically ensures China's support for Hong Kong's development as an offshore RMB business center and an international asset management hub. Hong Kong is to be an ideal "testing ground" for market reforms of China's interest rate and exchange rate regimes, and its gradual realization of RMB capital account convertibility.

In the space of just a few years, he confirmed, Hong Kong has become the largest and most liquid RMB business center outside the Mainland. Hong Kong will therefore continue to "consolidate and expand its offshore RMB business, especially in the areas of cross-border RMB trade settlement and issuance of offshore RMB bonds and securities products."

Hong Kong will also aim to develop into a more comprehensive fund and asset management center, while consolidating its traditional strengths, such as providing a platform for initial public offerings, Leung said.

Hong Kong will, he added, "look out for new growth areas, one of which is the development of the commodity futures market. Hong Kong is set to play a crucial role in the internationalization of the Mainland's commodity futures market, given the Mainland's huge demand for commodities and the gradual internationalization of its commodity futures trade."

Leung confirmed that he would immediately establish the Financial Services Development Council (FSDC), as proposed in his Manifesto, to "provide a high-level and effective platform (to) facilitate the further development of Hong Kong's financial services industry, including advising the government on areas related to diversifying the financial services industry and enhancing Hong Kong's position and functions as an international financial center in the region."

With regard to business and professional services, he noted that Hong Kong's Closer Economic Partnership Arrangement with China provides preferential treatment for business and professional services sector to enter the Mainland market.

To achieve the goal of liberalizing trade in services between the Mainland and Hong Kong by the end of the 12th Five-Year Plan period, the government and the relevant Chinese ministries have embarked on studies with a view to formulating as soon as possible a specific work plan.

Leung also notes that the International Court of Arbitration of the International Chamber of Commerce, the China International Economic and Trade Arbitration Commission and the Hague Conference on Private International Law have all set up their regional offices in Hong Kong. The government will strive to further attract suitable international legal organizations, as well as arbitration and mediation institutions, to set up offices in Hong Kong and enhance its position as a legal services hub in the Asia-Pacific region.

As provided for in the 12th Five-Year Plan, the government will also continue to improve Hong Kong's aviation, maritime and land transport facilities, and reinforce and enhance its role as a regional hub for passenger and cargo traffic. In conjunction with Hong Kong's financial and legal systems, the government will reinforce its maritime services, such as ship management, shipping agency, ship finance, marine insurance, ship registration and legal services, to develop further high value-added maritime services.

Finally, as Hong Kong is an externally-oriented economy, the government is "to strengthen economic and trade exchanges with emerging markets and participate actively in the World Trade Organization's negotiations to create a more favorable trade environment." Leung promised that it would also endeavor to enter into more free trade agreements with trading partners. In particular, Hong Kong is seeking to join the China-ASEAN Free Trade Area so that its goods, services and investments can access the ASEAN market under more favorable conditions.

In addition, the government is to pursue Investment Promotion and Protection Agreements with overseas countries, so as to help secure better protection of overseas investments by Hong Kong business people and attract foreign investors to Hong Kong. It has already been agreed with Russia and Chile respectively to negotiate such an agreement.