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Hong Kong Plugs Close Relationship With Singapore

by Mary Swire,, Hong Kong

27 July 2015

During her recent visit to Singapore, Hong Kong's Chief Secretary for Administration, Carrie Lam, spoke of the synergies and opportunities to cooperate that exist between the two major international financial centers.

Apart from being each other's fifth-largest trading partner, the two territories invest in each other's economies, she said. Based on the latest figures, Singapore was the seventh-largest source of Hong Kong's inward direct investment, while Singapore was the eighth-largest destination of outward direct investment from Hong Kong.

With the latest Global Financial Centers Index putting Hong Kong behind only New York and London, and just ahead of Singapore as a global financial center, she noted that Hong Kong was also named the world's freest economy for the 21st consecutive year by the Washington-based Heritage Foundation earlier this year, with Singapore in second place. She noted how Hong Kong attracts businesses with its low and simple tax system, with no goods and services tax or value-added tax and the absence of an inheritance tax or a capital gains tax.

In addition, she pointed out that Hong Kong "has one great advantage which offers tremendous opportunities. This is our unique positioning under 'one country, two systems.' This has given Hong Kong her singular role as the 'super-connector' between Mainland China and the rest of the world. It brings us business and financial advantages that no other economy can match."

For example, she said, the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), Hong Kong's free trade arrangement with the Mainland, "allows Hong Kong products and services to enjoy preferential treatment in Mainland markets. Nationality neutral, CEPA gives the same preferential access to companies from around the world, including Singapore and other Association of Southeast Asian Nation (ASEAN) countries."

Lam added that an ASEAN-Hong Kong Free Trade Agreement has been under negotiation since last July, and that the fourth round of negotiation has recently been concluded.

The Government looks forward to the FTA's successful conclusion in the coming year, and confirmed that it "will undoubtedly create a win-win result for businesses in Hong Kong and ASEAN, including Singapore of course."

Hong Kong has also become the most important source of investment flowing in and out of Mainland China, she continued. Last year, nearly 70 percent of inward direct investment to the Mainland originated in Hong Kong; and about 60 percent of the Mainland's outward direct investment is destined to or routed through Hong Kong.

"No less important," she concluded, "Hong Kong enjoys first mover status when it comes to the Mainland's continuing financial liberalization. That singular distinction goes back more than a decade, beginning with renminbi (RMB) trade. Today, Hong Kong is the world's largest offshore RMB center." As a consequence, "we can help companies from ASEAN realize RMB opportunities in international trade settlement and investment."

TAGS: tax | investment | business | free trade agreement (FTA) | international financial centres (IFC) | tariffs | China | Singapore | offshore | agreements | Hong Kong | currency | trade | Association of East Asian Nations (ASEAN) | services | business investment

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