DEC 2016 EDITORIAL – HKSAR 20TH ANNIVERSARY – REDEFINING HONG KONG’S ECONOMIC ROLE

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Hong Kong as an outward-looking city has a unique and significant economic footprint in the Asia Pacific region and globally. With its world-class infrastructure and talent, the city is a conduit linking the region with the rest of the world. Amid China’s rise to economic power and global significance, Hong Kong’s role has remained unique and irreplaceable as one of the most important Chinese cities with economic and cultural significance.

The value of Hong Kong lies in its role as a super-connector of influence, diversity, vibrancy and stability, safeguarded by its core values and cherished by the people of the city. For the past 20 years, “One Country, Two Systems” has been successful in maintaining its free, open and competitive economy – a “specialness” which should never be taken for granted. The rule of law, independence of judiciary, and fundamental freedoms enshrined in the Basic Law are all too important to the continuing success of Hong Kong.

Over the past 20 years, Hong Kong has grown from a series of economic and social challenges, but it has also learned from its strategic role in developing the Chinese as well as the global economy. The “Fourth Industrial Revolution” availed by smart technologies will continue to have an unprecedented impact on the way people produce, consume, communicate, live and interact with one another. It is a global phenomenon in which Hong Kong has fallen behind its Asian counterparts (Singapore, Japan and South Korea).

As a leading global financial center, Hong Kong has all the pre-requisites for a conducive policy environment and an ecosystem for innovation and “smart” growth. The city’s biggest asset is its hyperactive, multi-faceted relations with the US, China and the rest of Asia Pacific. By capturing the opportunity and synergy afforded in these economic relationships, Hong Kong will find itself riding the next wave of growth in line with China’s 13th Five-Year Plan and Belt & Road initiatives.

Hong Kong’s trade and cultural relations with the United States are some of the most significant in the world: it is the 10th largest export market of the US, and the US is Hong Kong’s second largest trading partner after Mainland China. These ties have laid an excellent foundation for supporting talent development and deepening industry-academic collaborations in the innovative and creative fields which are instrumental for “smart” growth.

Along China’s path towards higher quality growth, Hong Kong is well positioned to capture tremendous opportunities as a gateway for foreign direct investment (FDI) going into China, and as a test market for Chinese businesses going overseas. Other areas, including development in green finance, commercialization of eco-products, and economic transformation driven by innovative technologies are also opportunities for Hong Kong to export its professional services.

There is more: given its status as an international hub for the movement of capital, information and people, Hong Kong has a greater role to play in financing projects for China’s Asian Infrastructure Investment Bank (AIIB) and the Belt & Road initiatives, and Hong Kong should join the AIIB as a sub-sovereign member and pursue the opening of an AIIB office in the city. This will allow it to effectively leverage its investment expertise to facilitate investment from the newly formed institution throughout the region.

Hong Kong companies’ extensive investment experience throughout the APAC region strengthens the city’s key role as a facilitator of FDI into emerging markets like Vietnam, Cambodia, Myanmar and the Philippines. The Hong Kong-ASEAN Free Trade Agreement (FTA), scheduled to be concluded by the end of 2016, should only help in this regard. The key is to maintain Hong Kong’s simple tax framework, competitive banking industry and currency stability to preserve its pivotal role in FDI regional flows.

In view of Hong Kong’s unique role and substantial offerings in China’s overall economic development outlined in the 13th Five-Year Plan, it can and should continue to be an economic model for bringing international best practices and global standards, regulatory efficiency, service industry expertise, and intellectual property rights to the Mainland. The efficiency and transparency of Hong Kong is an assurance to the global business community that this is a good place to do business.

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