Hong Kong in the 21st Century

Head Table Guests

Duncan Jackman, Investment Officer, National Trust and a Director, The Empire Club of Canada; The Rev. Timothy Elliott, Minster, Christ Church Deer Park; Evelyn Huang, Author of Chinese Canadians--Voices from a Community and a Director, The Canadian Club of Toronto; C. M. Leung, Director, Hong Kong Economic and Trade Affairs; Daniel Hung, President, Hong Kong Canada Business Association; Mary Lou Benotto, Partner, Chappell, Bushell, Stewart and a Director, The Empire Club of Toronto; Herbert Phillipps Jr., President, The Canadian Club of Toronto; and Calum Johnston, Executive Vice-President, International Banking, The Bank of Nova Scotia.

Introduction by John Campion

What Marco Polo Knew

With the fall of the Berlin Wall, the command economies of the world, be they Communist or otherwise, were exposed as being unable to provide goods and services to their peoples in a way that could be favourably compared to the market economies of the world. The practical impact of the success of the market economy with its liberal form of participatory government has spread around

the world and become the new ideology for world governance, business and trade. Some have speculated that the rise of market-driven liberalism is the end of history. It certainly seems to be the end of competing ideology. The economic and political theories of Marx and other command economy theorists are now exposed as leaky lifeboats in which to navigate the competitive waters of the new world economic order.

I would like to reflect upon one surprising factor; that is, the inaccuracy of the Euro-centric view of the origins of trade.

We in North America were taken by surprise as the people of Hong Kong and the Far East began after World War II to enter our markets with their goods. The people of Hong Kong and other Asian places seemed to enter the marketplace by stealth, starting small and growing rapidly. We now know the impact of Hong Kong on the world markets and trade is both striking and significant.

The Euro-centric view of this success is that trade began by European expansion, starting as early as Marco Polo in the late 13th and 14th centuries. It was continued with the success of explorers such as Diaz, Columbus, Magellan and others. As a result of their efforts, world trade became an increasing possibility. From the Eurocentric view of trade, contacts with China began with the Portuguese at Macau in the 16th century and with the British and others in the 19th century.

But this Euro-centric view of trade illustrates a blindness to history. The rise of long-distance commerce in Europe was paralleled with an equally powerful rise of long-distance commerce in China. There is no doubt that trade over great distances had its origins in Mesopotamia. The Moslems of the 7th century similarly brought trade to the Mediterranean and beyond. But the impulse to broader market behaviour over long distance was broadened remarkably by the Chinese commercialization of the 11th century. While China did not invent market articulation across long distance, it did affect the scale of which this behaviour would affect human lives. China acted as a great bellows fanning smouldering coals into flame in that early time. New wealth arising from 100 million Chinese began to flow across the seas and along the caravan routes and added new vigour and scope to market-related activity. The same upsurge of commercial activity took place in the Mediterranean in the 11th century as Italian merchants sailed from Venice and Genoa.

Both commercial successes struck at the rulers of old-fashioned command societies which were unable to dominate the behaviour of their peoples as thoroughly as they had in earlier times.

Thus, while history of trade would take a different course in Europe than it did in China in the ensuring centuries, the Chinese were early participants and contributors to the type of long-distance trade that now so dominates our world economic success. Coming full circle over 10 centuries, the City State of Hong Kong has rivaled and surpassed the success of those early traders.

The Honourable Mrs. Anson Chan, Chief Secretary of the Hong Kong government not only represents the commercial success of Hong Kong, but is also the first Chinese and first woman to ever hold the position. She is principal advisor to the Governor and Head of Hong Kong's 190,000 strong civil service. As such, she is responsible for the effective implementation of a whole range of government policies.

Anson Chan began her public service career in 1962 and has held many senior positions in the government of Hong Kong from that day to this, including cabinet-level posts on a wide variety of portfolios. She was awarded the Commander of the Most Excellent Order of the British Empire in 1992 and was appointed to the Executive Council in October, 1992. Please welcome The Honourable Anson Chan.

Anson Chan

Ladies and gentlemen,

I want to say, first of all, how much I value this invitation to speak to you today. I think it is a measure of the powerful links between our two communities that The Empire Club of Canada and The Canadian Club of Toronto have joined with The Hong Kong-Canada Business Association to organise this splendid lunch. I am very grateful to you for that.

The last time I was in Toronto on official business was in 1992, when I attended a Festival Hong Kong Business Seminar. In those days, I was Secretary for Economic Services, and I was able to report that business prospects in Hong Kong were very good. Happily, they are still very good, and I hope you will go away today with the conviction that they will remain so well into what we all believe will be the Pacific century.

Today I want to talk about why Hong Kong matters to Canadian business, and to speak from the perspective of someone who fully intends to stay and be a part of the post-1997 Hong Kong community. There are three reasons and, while they may be familiar to some of you here today, I think it is important to keep them in focus; to keep our eye on the ball, so to speak.

Firstly, Hong Kong is a good customer for Canadian goods and services. We are only six million people, but our imports from Canada are worth nearly $1 billion Canadian annually. We are the most open market in the world and we import more per capita from North America than anywhere else in Asia or in Europe. What is more, we are growing faster than other developed markets, at a rate of over five per cent per year. Our per-capita GDP has just overtaken those of Canada, the United Kingdom and Australia. And thanks to our very low taxes, Hong Kong consumers have much greater spending power than those in many other developed countries.

Secondly, Hong Kong is for Canada the pre-eminent gateway for business with China, as for every other country. Most of China's trade goes to or through Hong Kong. Hong Kong provides two-thirds of all the outside investment in China. In Southern China, Guangdong, the percentage is even higher. If you want to do business with China, Hong Kong has the connections, the local joint-venture partners, the experiences and the expertise that you need. So most Canadian companies doing business with China do so via Hong Kong.

Thirdly, Hong Kong is the most important international business centre in the Far East. Companies from all over the world, even from other countries in East Asia, conduct their regional business from Hong Kong. Seventy per cent of North American companies which have Far-East headquarters have those headquarters in Hong Kong. At last count, there were over 200 of them. And the same is true for Europeans and others. Indeed, there are some 80 Canadian companies with branch or subsidiary companies in Hong Kong. Another 500 Canadian firms are represented by distributors, agents or joint-venture partners. There is a very large and active Canadian Chamber of Commerce. In short, you will feel just as much at home in Hong Kong as I do in Toronto.

Hong Kong is the communications hub for the region, ideally placed for business with Southeast Asia, Taiwan, Korea and Japan as well as China. Most recently, we have been seeing businessmen coming to Hong Kong to explore new business opportunities in nearby Vietnam, for which--as for Guangdong--Hong Kong is the natural gateway. We are at the centre of the fastest growing region in the world, a region that is set to boom well into the 21st century.

It is worth examining in some detail how Hong Kong has been able to position itself as a place of such importance and attractiveness for international business. It is not, of course, simply a matter of geographical good fortune--a deep water port at the centre of the East Asian region. There are a host of reasons for Hong Kong's success in attracting international business.

We have efficient, open, honest and unobtrusive government. We provide the infrastructure within which business can flourish--the physical, educational and legal infrastructure. But we leave the rest to market forces. We do not hobble investors with Byzantine bureaucratic requirements. We do not seek to guide business. We seek to give business maximum freedom to make its own decisions.

Our immigration policies allow pretty well anyone in the world who can get a job in Hong Kong permission to work, to reside there, and to come and go freely. Procedures are simple. Companies can assign expatriate staff to Hong Kong with a minimum of bureaucratic hassle. There are now 18,000 Canadians living in Hong Kong.

Our tax rates are among the lowest in the world. We have just reduced our profits tax to 16.5 per cent for corporations (15 per cent for unincorporated businesses). We impose no tax on profits from the sale of capital assets and no tax on offshore trading activities. Salaries tax is a maximum of 15 per cent, and it is based only on salaries, and not on income from other sources, as is often the case elsewhere.

Our legal system is well established and familiar to Canadian businessmen and lawyers. We have a comprehensive body of commercial laws, which provides effective enforcement of contracts and protection of rights. We have a comprehensive body of company laws, which makes no distinction between foreign and domestic firms. We have an independent and impartial judiciary, an efficient police force and a separate anti-corruption police force--the Independent Commission Against Corruption--which has helped make Hong Kong one of the cleanest places in the world to do business.

Hong Kong's social and educational infrastructure also supports its position as an international business centre. We have international standards of education with five universities offering internationally recognised degrees. There is a particular emphasis on business studies, and on science and technology. And emphasis on English and Chinese language studies--the language of international business and the language of the world's largest new market. And for Canadians, there is a Canadian International School.

Hong Kong residents enjoy international standards of human rights and freedoms, the kind of rights and freedoms that people enjoy in this country, in Japan and in Europe.

I could go on, but I hope my point is already clear. Hong Kong's position as an international business centre is founded on a multiplicity of factors, which together amount to its whole way of life. A way of life that is at the same time Asian and not alien to Westerners and others. A way of life that is international.

Will it continue to be so after 1997? On the part of the Hong Kong government, let me say at once that there is absolutely no doubt that all the factors that I have just listed must be maintained if Hong Kong is to flourish in the next century. They are not luxuries. They are essentials.

The Joint Declaration, signed by China and Britain in 1984, covers these points in detail. It says that Hong Kong will continue to have its own government, composed of Hong Kong people. It says that China will not send officials to work in the Hong Kong government, except for the 20 or so top posts. The Joint Declaration says that Hong Kong will continue to have its own freely convertible currency, that we will run our own economic, financial and fiscal affairs and that we will be autonomous in everything other than foreign affairs and defence, which is the case now under British sovereignty. The Joint Declaration guarantees that our laws will continue, as will our separate legal system, our independent judiciary (including a Court of Final Appeal), and the rights and freedoms that Hong Kong people now enjoy. So the Chinese recognised in 1984, when they signed the Joint Declaration, what was necessary to underpin Hong Kong's position as an international business centre.

I recall that there was a great deal of international surprise at the time, followed by quite a bit of scepticism as to whether the "one country, two systems" concept would really work. This was not surprising, given that it was such a unique concept. But those who in the mid-80s were predicting that Hong Kong was destined to run downhill well before 1997 have been proved wrong. And if they failed to put their money where their mouths were, they missed out on a great investment opportunity. Hong Kong's GDP has doubled since then. Our Stock Market capitalisation has increased thirteen-fold and the index is up 700 per cent. We are now the eighth-largest trading economy, even though in terms of population we rank only 89th in the league table.

With less than 1,000 days to go before the change of sovereignty, business confidence remains strong. Our economy remains robust. Polls repeatedly show that people are bullish about the future, and generally satisfied with the government's handling of future-related issues. As Chief Secretary, my top priority and my biggest challenge is to help make a success of the transition to Chinese sovereignty in 1997, to ensure that the Government is in the best possible shape to continue serving the community after the end of British rule. This means maintaining an efficient, dedicated, and honest administration. Civil service morale is good, though confidence cannot be taken for granted. Like myself, the great majority of my colleagues want to continue to live and to work in Hong Kong after 1997. They want to continue to work for Hong Kong, just as they work for Hong Kong now. For us it is not a matter of working for London now and working for Peking after 1997. It is Hong Kong now, and it is Hong Kong in the future.

I have heard businessmen say that surely, in some way or other, standards will slip after 1997. Government will become more bureaucratic, less efficient, and perhaps corrupt. But a government is only the people who work in it. I can assure you that none of us have any intention of working less efficiently, less imaginatively, or less responsively than we have always worked. It is our culture, our way of life. As for corruption, we are determined that the battle that Hong Kong fought so successfully for 20 years should not be lost now, at a time when frankly, reports of corruption are on the increase. We are currently conducting a review of the powers conferred upon our Independent Commission Against Corruption and its system of accountability to ensure that it continues to function effectively with maximum public support. The ICAC is offering all possible assistance to the private sector. This assistance includes advice to an increasing number of PRC firms doing business in Hong Kong and practical help in drawing up a Code of Practice and introducing measures to minimise the scope for abuse. Within the administration, we shall continue to insist on the highest standards of honesty and openness. And in the legislature, we have recently enacted legislation to ensure that the next elections, in 1995, will be conducted cleanly and fairly. It was over these electoral arrangements that talks between Britain and China failed last year. The talks were not about democracy as such. The pace of democratic development had already been agreed upon and is set down in the Basic Law--China's mini-constitution for Hong Kong after 1997. The Basic Law stipulates a timetable for the increase in the proportion of the directly elected membership, effective until the year 2007, at which point Hong Kong may decide on its own whether to have a fully directly elected legislature. The purpose of our electoral proposals was not to challenge the Basic Law in any way, but merely to ensure that the arrangements for the elections themselves were open, fair and acceptable to the people of Hong Kong.

We have just completed the first round of elections under the new arrangements. And they were a considerable success, with about a quarter of a million more people voting than in the last local elections in 1991. Interestingly, but not altogether surprisingly, candidates who were directly or indirectly pro-China did very well. Overall, the election produced a relatively good balance of opinion within the community, which is surely a healthy development.

We believe, however, that co-operation with China in other matters affecting our economy and well-being can go forward. Governor Chris Patten announced a series of measures in his recent annual Policy Address to the Legislative Council with this aim in mind. We look forward to discussions with the Chinese on how to intensify cooperation on the many transitional issues that need resolution. Our view is that disagreement on one issue does not mean that we have to disagree on others. Talks between us are taking place on such vital matters as immigration and the financing of our new airport. On a range of day-today issues affecting our everyday lives, we already have regular and very good co-operation with our counterparts in China.

Our new airport is being built. Those of you who have visited Hong Kong lately will have seen that, in spite of the lack of an agreement with China so far on the financing arrangements, we have made remarkable progress. The new airport will be completed perhaps faster than any major airport ever has been, even faster than those that have been built on dry land rather than on land reclaimed from the sea. And it will have the capacity to be the world's busiest international airport in the next century. It is another example of Hong Kong securing its future as an international business centre.

I have heard it said, by some observers, that Hong Kong might somehow lose out to Shanghai over the coming years. As a Shanghainese myself, I hope that Shanghai does manage to develop itself into a great economic centre once again. And I would not see that as in any way a threat to my adopted home city, Hong Kong. Even if it were competition, and Shanghai continued to grow year after year at its present high rate of nearly 15 per cent, it would take 15 years for its GDP to reach the level of Hong Kong's GDP today. And Hong Kong, of course, is not standing still: we are growing at over five per cent a year. At that rate our GDP will more than double in 15 years.

But it is not, of course, competition. Hong Kong's investors are providing two-thirds of all the foreign investment in Shanghai. We see Shanghai's potential as an opportunity, not a threat. There is plenty of room for two prosperous cities within 800 miles of each other and plenty of business in China. Moreover, Hong Kong will provide for many years to come the kind of business services that Shanghai and other Chinese cities cannot provide for themselves. Shanghai companies are lining up for listings on the Hong Kong Stock Exchange because they recognise that point very clearly.

To sum up, Hong Kong in the 21st century will matter to China, to Asia and the rest of the world. It will matter to Canadian business as much as (if not even more than) it does now--as a prosperous, open and externally oriented market, as a gateway to China, and as business centre for East Asia as a whole. Canadian businessmen with keen noses for opportunities, will, I'm sure, not let this opportunity slip by.

On that entirely justifiable optimistic note, let me thank you, ladies and gentlemen for this opportunity to address you this afternoon.

The appreciation of the meeting was expressed by Herbert Phillipps Jr., President, The Canadian Club of Toronto.