Chairman's Message
Chairman's Message - Strengthen Regional Cooperation to Meet New Trade Challenges

Dr Jonathan CHOI Koon-shum (Chairman of the 50th terms of office) April 2018


Industrial and commercial businesses in Hong Kong must quickly evaluate the impact of a trade war on short- and mid-term business activities and take steps to prevent and deal with those changes.


The United States announced that it would begin collecting trade tariffs on Chinese goods, creating worry on both sides of a possible trade war. As an important entrepôt for trade between these countries, Hong Kong will inevitably be affected. Hong Kong has many business exchanges and investment connections between the two economies, and many Hong Kong businesses participate in the United States export supply chain to varying degrees. We must pay attention to developments that may affect Hong Kong’s economy and business operations, while at the same time make preparations. In the long term, we should also explore opportunities in markets related to the “Belt and Road Initiative”, the Guangdong-Hong Kong-Macao Bay Area and ASEAN in order to create room for a more diversified business development.


Evaluate impact on Hong Kong’s economy

Mainland China and the US are Hong Kong’s two biggest trade partners. If trade conflict between China and the US continues and worsens, it will undoubtedly weaken Hong Kong’s role in entrepôt and off-shore trade. Hong Kong businesses involved in entrepôt trade between the two economies, especially those with factories carrying out assembly for export trade in the Pearl River Delta, will feel the initial blows. An entire range of trade support services will also be affected, further impacting Hong Kong’s position as a free trade port as well as its ability to function as such.


At the same time, escalation of a trade war between China and the US would also result in less direct investment by American investors in certain Mainland and Hong Kong-based industries. This, along with rises in interest rates, may result in a reverse in capital flows and spur adjustments in asset prices. This would hamper the stability of Hong Kong’s financial markets and banking system, increasing loan and operating costs for companies and even affect the real economy.


Increase openness to drive stable trade growth

Trade wars are essentially counterproductive to economic globalization, hurting the interests of both businesses and consumers, and ultimately negatively impacting global economic growth, the business environment and even labor markets. While there may be opposition in the American business community to recent measures taken by the Trump administration, American companies that have invested heavily in the China market are especially worried about their business there and concerned about it affecting the overall industry supply chain, ultimately resulting in inestimable damage to trade exchanges and mutual investment.


In fact, Chinese leaders emphasized the importance of free trade and openness multiple times during the recent “Two Sessions”. President Xi Jinping reiterated that China’s open door would not close and that the country must work to stay open to the world. Premier Li Keqiang also stated that on the verge of 40 years of reform and opening-up in Mainland China, the country will maintain a national policy of open trade and open the country’s doors even wider. He also hopes that the US will ease export restrictions on high-technology and high value-added products, working to develop a more balanced trade regime between China and the US that will ensure more stable growth in the global economy.


Explore new opportunities in regional partnership

As a highly open free economy, Hong Kong is affected considerably by any form of trade protectionism. Industrial and commercial businesses in Hong Kong must quickly evaluate the impact of a trade war on short- and mid-term business activities and take steps to prevent and deal with those changes, making necessary adjustments to operational strategies and investment plans in order to minimize the risk and losses associated with a trade war.


China’s full implementation of the “Belt and Road Initiative”, the announcement of specific plans for the Guangdong-Hong Kong-Macao Bay Area and Hong Kong’s official signing of a free trade agreement with ASEAN last year are exemplar of new models for regional economic cooperation that will provide businesses with more diversified and emerging markets, and in the long term create more growth points for economic development in Hong Kong. We hope that the SAR Government will provide more comprehensive support for Hong Kong businesses to participate in regional economic partnerships and expand emerging markets. The CGCC will also continue to utilize its network and act as a bridge to support our member companies and sectors to explore more opportunities for business development in markets within the Bay Area, in ASEAN as well as along “Belt and Road”.