CGCC Forum 2019 Examines China’s 40 Years of Reform and Opening-up
Exploring Macroeconomic Outlook and
Hong Kong’s Roles and Opportunities in the New Reform Era
The Chinese General Chamber of Commerce, Hong Kong (“CGCC”) hosted CGCC Forum 2019 under the theme of “40 Years of Reform and Opening-up: Beginning of a New Era Embracing New Opportunities” on 10 January 2019 at JW Marriott Hotel Hong Kong. The forum was supported by the Hong Kong SAR Government in celebration of the 40th anniversary of China’s reform and opening-up. Financial Secretary Paul Chan delivered a keynote speech at the forum examining Hong Kong’s development prospects in the new era of China’s reform and opening-up. George Leung, HSBC Asia Pacific Advisor, and Liu Shijin, Vice-Chairman, China Development Research Foundation, gave talks on Hong Kong’s financial development and macroeconomic trends respectively. In the panel discussion session, Liu engaged in dialogues with E Zhihuan, Chief Economist, Bank of China (HK) Ltd; Herbert Chia, Member of the Board of Directors, Hong Kong Science and Technology Parks Corporation; and Larry Hu, Head of China Economics, Macquarie Group on the directions of China’s development in the new era and the opportunities available to Hong Kong.
Jonathan Choi: Hong Kong can play the role of a two-way bridge
In his welcome remarks, CGCC Chairman Dr Jonathan Choi noted how at a time of external complexities and uncertainties, President Xi Jinping had reiterated China’s determination to push through reform and opening-up to the end, driving the Mainland’s further opening-up through the Belt and Road initiative, the Guangdong-Hong Kong-Macau Greater Bay Area (“GBA”) development and other regional cooperation platforms, which would bring about huge development opportunities for domestic and overseas business partners. Indeed, Hong Kong businesses have played the roles of both witnesses and participants, and both beneficiaries and contributors in the nation’s reform and opening-up. With our unique advantages under the “One Country, Two Systems”, Hong Kong could serve as a two-way bridge to help Mainland enterprises in attracting foreign investment and expanding overseas. At the same time, Hong Kong has also realised industrial transformation and established itself as a centre for international finance, shipping, legal arbitration and professional services. Dr Choi further pointed out that of the five Hong Kong and Macau citizens among the 100 Reform Pioneers commended by Beijing last month, three were former chairmen of CGCC, namely Wong Kwan-cheng, Henry Fok and Tsang Hin-chi, which suggested that the Central Government fully recognized CGCC’s active participation in the nation’s reform and opening-up.
Paul Chan: Government to support enterprises, secure employment and stabilise economy
Financial Secretary Paul Chan said that 2018 had seen highly unpredictable and volatile market movements, and he expected many more challenges to come in the new year. The US-China trade friction, contraction of various advanced economies, Brexit negotiations and other geopolitical risks remained the major risk factors globally. Nevertheless, the Mainland’s economy as a whole remained relatively stable despite its trade conflicts with the US, and it was expected to achieve GDP growth of around 6.5% this year, which could provide important support for Hong Kong’s economy. Given the threats from protectionism and unilateralism, the Hong Kong SAR government would continue to closely monitor the situation and adopt a multi-pronged approach to developing external trade, for example negotiating and signing more free trade agreements and investment protocols, building stronger bilateral ties with trade partners and promoting economic cooperation with various regions.
In the Q&A session moderated by CGCC Vice-chairman Connie Wong, Mr Chan and the forum attendees exchanged views on the economic development of Hong Kong and the world, Belt and Road opportunities and other issues. Mr Chan revealed that the upcoming government budget would focus on supporting enterprises, securing employment and stabilising the economy, and would seek to leverage the GBA development and the Belt and Road initiative to integrate Hong Kong with the nation’s overall development and inject new momentum into the local economy.
George Leung: Establishing Hong Kong as a fintech hub
In his talk on “Hong Kong’s Financial Development and Prospects”, Mr Leung asserted that the banking industry would undergo disruptive changes in the next 10 years, so much so that virtual banks would become mainstream and the world would enter an era of cashless transactions. On the major development trends in artificial intelligence (AI) and mobile payments, he suggested that Hong Kong could establish itself as a fintech hub and overcome regional constraints with the Mainland to provide integrated financial services for the GBA and strengthen cross-border connections, thereby capturing the huge opportunities from China’s further opening-up.
Liu Shijin: Chinese economy is switching to a slower tempo
Mr Liu gave an analysis on “Macroeconomic Trends and New Growth Momentum”. He said that the Mainland economy was now at the juncture of transitioning from the previous high-speed growth to medium-speed growth. Such transition would be marked by successive adjustments in the demand structure, the supply structure and the financial structure. With initial adjustments in these areas being made, the Mainland economy would achieve more stable growth and improve its quality.
Panellists discussed Hong Kong’s multiple advantages for joint development and shared prosperity with the Mainland
During the panel discussion session, Liu Shijin, E Zhihuan, Herbert Chia and Larry Hu examined the opportunities and challenges faced by Hong Kong and the Mainland in the course of reform and opening-up, as well as related issues such as Hong Kong’s positioning and roles therein.
Mr Liu opined that a great achievement of the four decades of reform and opening-up was the establishment of a market economy system. Going forward, China could make further progress in establishing a market economy of even higher quality. With improvements in the market economic level, quality and standards, China could propel its economy to a new stage.
Dr E said that as China pushed through a new round of opening-up and marked a new starting point in its reform, it was imperative for Hong Kong to further strengthen its unique roles and integrate actively into the nation’s development, so as to seek new opportunities from the Mainland’s structural developments in the long term. Under the Belt and Road initiaitve and the GBA development, Hong Kong could capitalize on its familiarity and seamless connection with foreign markets to help different enterprises seize new expansion opportunities.
Dr Hu said that China would continue opening-up even against the backdrop of the trade war. In the next 40 years, the nation could open up unlimited development opportunities if it could optimize its resources for more effective allocation.
Mr Chia suggested that talents, resources and incubators were all indispensable for Hong Kong to become an international centre for technological innovation. While we were based in Hong Kong, we should set our sights on the world and leverage China’s resources to connect with the global market. This was how we might become the next Silicon Valley and attract talents from all over the world.
On the whole, the panel discussion moderated by Dr Choi covered topics such as the Belt and Road initiative, the GBA construction and the development of tech industries. The panellists acknowledged the considerable advantages of Hong Kong industries. They called on the business sector to work together in seizing opportunities from the nation’s new round of reform and opening-up, thereby contributing further towards the economic development in Hong Kong and the Mainland.
Reform and opening-up: reviewing the bridging role played by CGCC
To commemorate the 40th anniversary of China’s reform and opening-up, the forum featured a special exhibition reviewing how, over the four decades, CGCC has been committed to participating in the construction of New China. It has actively assisted its members in exploring the Mainland market, and endeavoured to deepen economic and trade connections between Hong Kong and the Mainland, playing an important bridging role in the nation’s “bringing in, going out” strategy. Looking forward, CGCC will continue to adhere to its mission of “taking roots in Hong Kong, gaining support from the Motherland and reaching out to the world” to realize the vision of “establishing a prosperous Hong Kong, integrating with the development of the Motherland and exploring business opportunities across the world”. CGCC will strive to be not only a chamber of commerce for the Hong Kong business community, but also for China as a whole, making further contributions to the nation’s new round of reform and opening-up in the next “40 Golden Years”.
Among the some 300 attendees at the forum were: Sun Xiangyi, Director-General of the Economic Affairs Department, LOCPG; Yuen Mo, Brandon Liu, Connie Wong, Tommy Li, Johnny Yu and Herman Hu, CGCC Vice-chairmen; David Fong and William Lee, CGCC Life Honorary Chairmen; Li Yinquan, Chairman of Commerce, Industry and Social Affairs Committee, CGCC; CGCC members, and representatives from local consulates, business organisations, finance and professional sectors as well as the media community.
Summary and Highlights of Speeches
Dr Jonathan Choi, Chairman, The Chinese General Chamber of Commerce
- Through regional cooperation platforms such as the Belt and Road initiative and the Greater Bay Area development, China is fostering trade and investment liberalisation and promoting the Mainland’s further opening up to the world, which will bring huge development opportunities for domestic and overseas trade partners.。
- Hong Kong businesses have been the witnesses, participants, beneficiaries and contributors in China’s reform and opening-up. With its unique advantages under the “One Country, Two Systems”, Hong Kong acts as a two-way bridge for Mainland corporations to bring in foreign investment and reach out to the global market. Through participating in the national development, Hong Kong has also realised industrial transformation and established itself as a centre for international finance, shipping, legal arbitration and professional services. • Hong Kong businesses have been the witnesses, participants, beneficiaries and contributors in China’s reform and opening-up. With its unique advantages under the “One Country, Two Systems”, Hong Kong acts as a two-way bridge for Mainland corporations to bring in foreign investment and reach out to the global market. Through participating in the national development, Hong Kong has also realised industrial transformation and established itself as a centre for international finance, shipping, legal arbitration and professional services.
- Three former CGCC chairmen were among the 100 Reform Pionners commended by the Central Government last month, which is a recognition of CGCC’s active participation in the nation’s reform and opening-up.
The Hon Paul Chan, Financial Secretary, The Government of the HKSAR
- The market was highly unpredictable and volatile last year, with rising risks on the global economic outlook and market status. The major risk factors around the globe include the US-China trade friction, contraction of various advanced economies, Brexit negotiations and greater geopolitical risks.
- Overall, the Mainland economy has maintained a steady momentum, with an expected GDP growth of around 6.5% this year. Through years of development, China has relied less on external demand and instead focused more on domestic demand for stable economic growth. China will continue to strive for high-quality development and deepen market reforms, pushing ahead with all-around opening-up and keeping its economy within a reasonable growth range. In terms of macroeconomic policies, China will strengthen counter-cyclical adjustments, including a more proactive fiscal policy and a prudent and neutral monetary policy, in order to stabilise "employment, finance, foreign trade, foreign investment, domestic investment and market expectations”.
- As a small and externally oriented economy, Hong Kong will be inevitably affected by the growing downside risks worldwide. The HKSAR government will continue to adopt a multi-pronged approach to developing external trade, explore business opportunities and facilitate investment in potential markets, and support local enterprises in seizing opportunities from the Belt and Road initiative and the Greater Bay Area development.
- The upcoming government budget will focus on supporting enterprises, securing employment and stabilising the economy. It will include counter-cyclical fiscal measures to alleviate the burdens on the citizens, and will seek to leverage the Greater Bay Area development and the Belt and Road initiative to integrate Hong Kong with the nation’s overall development and inject new momentum into the local economy.
Plenary Session – Hong Kong’s Financial Development and Prospects
Mr George S K Leung, Advisor, Asia-Pacific, HSBC
- The banking industry will undergo disruptive changes in the next decade. The reason for this is the popularity of the internet and mobile phones, as well as the development of big data, artificial intelligence (AI) and biotechnology. The era of “virtual banking” is approaching. AI can analyse users’ information to provide financial services that suit them the best, while the users can access all the information instantly through mobile phones. In the future, virtual banks will become mainstream, gradually phasing out the physical bank branches and ATMs.
- The most significant difference between the 20th and the 21st centuries is that information flow will replace cargo flow as the largest source of GDP growth. The influence of the internet is everywhere, and e-commerce helps bring the world even closer. Currently, 50% of global trade in services is done electronically.
- The world will enter the era of cashless societies with China and India being the major contributors. Alipay, WeChat Pay and India’s Paytm are the most popular payment tools nowadays. With more e-wallets launched and the Faster Payment System (FPS) of the Hong Kong Monetary Authority effectively connecting various payment platforms, Hong Kong will further speed up its transition towards a cashless society.
- Hong Kong should strive to establish itself as a fintech hub. Although it falls behind Singapore in terms of fintech investment and competitiveness at the moment, Hong Kong can provide integrated financial services to Mainland financial corporations and strengthen cross-border connections through the Greater Bay Area development, thereby grasping the enormous opportunities from the Mainland’s opening-up.
Plenary Session - Macroeconomic Trends and New Growth Momentum
Mr. Liu Shijin, Vice Chairman, China Development Research Foundation
- The Mainland economy is experiencing a period of stage transition – after more than 30 years of rapid growth, it is inevitable for the economy to slow down. During the transition period, the economy will show medium- to high-speed growth, driven by changes in the demand, supply and financial structures.
- In the next two years, China will need an annual growth of merely 6.2% to achieve its centennial goal of build a moderately prosperous society in all respects by 2020. Thereafter, the GDP growth rate may be adjusted to 5-6% per year. Using Japan's development experience as a reference, the slowdown in growth is in line with the pattern of international development and does not indicate any problem in China’s economy. The growth rate itself is a relative concept, which is linked to the potential growth rate of the specific development stage. A 5% growth is already high in the medium-speed development stage, and China still tops the world in terms of economic expansion.
- After China’s economy bottomed out in 2016, some people have expected a U-shaped or V-shaped rebound to the previous high-speed growth. This is impossible; China’s economy will enter the medium-speed development stage in the future. Reasonably lowering our growth expectation is conducive to steady growth, as it helps prevent local governments from further debt-fuelled infrastructure expansion to prop up growth.
- China’s economy needs to find new growth drivers in the future. Infrastructure and real estate have passed their prime and there will be limited growth potential, reduced efficiency and increased risks in the future. The focus should be changed from rapid growth to quality growth. With the demand and supply suppressed by uneven resource distribution and administrative monopoly, the Mainland should urgently tackle administrative monopoly, open up the services industry, support private enterprises and replenish social security funds with state capital.
Panel Discussion - A New Start of Economic Reform and Opening-up
Mr. Liu Shijin, Vice Chairman, China Development Research Foundation
- After 40 years of reform and opening-up, China has established a market economy system with Chinese characteristics. Despite the fruitful results, there remains room for improvement.
- In the face of a new round of reform and opening-up, the next step should be developing a high-quality economy with a corresponding high-standard market economy system. It will involve issues on China's trade negotiations, fair competition, the role of state-owned enterprises, intellectual property rights, government subsidies and labour treatment.
- Reforms in the aforesaid areas will not be driven by external pressures but should be resolved by China autonomously according to its own development.
Dr Zhihuan E, Chief Economist, Bank of China (Hong Kong)
- Unpredictability in the US-China trade war and the strong trade links with both China and the US have made the external environment unfavourable for Hong Kong and posed certain challenges.
- Currently, the US’ influence on Hong Kong is less than that of the Mainland. Further economic integration with the Mainland in the future will give Hong Kong more policy support and development opportunities. The key to the new round of reform and opening-up lies in the services industry, which will also account for a large part of growth.
- The Belt and Road Initiative is China's market expansion both domestically and internationally. As for the Greater Bay Area, it has the highest level of opening-up and the highest GDP growth in China, instead of merely being a simple concept of 9+2 cities. With advantages in professional services such as financing, operating and risk management, Hong Kong can serve as a platform to help connect the Mainland with the rest of the world.
- • The trend of fintech is unstoppable, and Hong Kong is currently lagging behind China and Singapore. There are challenges to the traditional banking industry. Hong Kong must strive to catch up and leverage its late-mover advantages.
Dr Larry Hu, Head of China Economics, Macquarie Group
- Despite the trade war, China is not particularly concerned about macroeconomic risks, and administrative measures are still relatively effective.
- China’s short-term administrative measures are very favourable to commodity prices and real estate inventory. In the past few years, China has successfully reversed the expectations of US investors on its economy.
- In the next decade, it will be good if China can maintain an average growth of around 5%. Give the huge market in the Mainland, there is still potential for development.
- The stage of rapid economic growth in China is over. In the next forty years, China should tackle the mismatching of resources in areas such as education, healthcare, land and capital, and strive to achieve effective allocation.
Mr. Herbert Chia, Member of the Board of Directors, Hong Kong Science and Technology Parks Corporation
- The key elements of future technology development are AI, blockchain, big data and cloud computing. These also represent opportunities for the Greater Bay Area to develop into an innovative technology centre.
- Hong Kong's early technological development was in the “cold start-up” stage. Since last year, the HKSAR government has put great efforts into supporting local start-ups, which is a very important step. The biggest challenge to Hong Kong's innovation and technology development is talents. Nevertheless, talents will be attracted as long as there are opportunities. In recent years, the Science Park has become more like Silicon Valley, drawing many new laboratories, incubators and university cooperation projects.
- Technology is about “start small, think big”. R&D should not focus only on top-level projects, but may rather begin with smaller projects and expand later. While based in Hong Kong, the local industry should set its sights on the world and leverage China’s resources to truly connect with the global market.
- • The industry must strive to solve the problems brought by technology, for example personal privacy, data security and ethical issues, in order to achieve long-term development.