The implementation of the National Security Law and the new electoral system brought stability to Hong Kong last year, but its economic development was hampered to some extent. The annual CGCC Forum, which was held online again this year, discussed global challenges and opportunities.
Paul Chan: Hong Kong’s economy is on growth trajectory
Paul Chan, Financial Secretary, pointed out that the pace of economic recovery has been hit by the COVID-19 pandemic. In the US, interest rate hikes are likely this year amid rising inflationary pressures. In Europe, following a marked improvement last year, its economy is set to continue to recover this year, but resurgence of the pandemic remains the biggest threat.
For our country, Chan expects economic growth to remain within a reasonable range. Economic activity in the rest of Asia would generally continue improving, but the pace of recovery in some economies could be weighed down by resurgence of the pandemic.
As for Hong Kong, Chan said that it will stay on the path of economic and social development in 2022. Hong Kong’s economy should remain on a growth trajectory in 2022 if it succeeds in stabilizing the local pandemic situation as soon as possible without notable deterioration in external environments.
He stressed that as Hong Kong has heralded a new chapter of good governance, the HKSAR Government will work better together with the Legislative Council to solve Hong Kong’s deep-seated problems. Hong Kong should also always be vigilant against the continuing suppression of the Mainland by the US and other Western countries, and make adjustments and adapt itself to the situation accordingly.
Hong Kong actively pushing forward the development of the Greater Bay Area will enable it to be a “participant” in domestic circulation and a “facilitator” of international circulation to strengthen its role and functions as an intermediary to facilitate connectivity with the Mainland and international markets.
Justin Lin: Hong Kong can leverage its comparative advantages in finance, trade and technology
Justin Lin, Dean of the Institute of New Structural Economics at Peking University, shared his views on the “14th Five-Year” Plan, dual circulation and Hong Kong’s functional orientation. He pointed out that to achieve its goal of rejuvenation in the middle of this century, the Mainland must strive to achieve an average annual GDP growth of 6% during the “14th Five-Year” Plan period. Right now, China should move towards the development of capital and technology-intensive industries. The “14th Five-Year” Plan stresses to drive regional development that covers the Greater Bay Area, which will help the relevant industries to form effective clusters.
Regarding dual circulation, Lin believes that this is the way to raise the people’s income level. China’s superior products must be sold to international markets. He added that China should import those industrial products that it does not have comparative advantages in terms of resources and capital. China’s economy can develop better only if there is mutual reinforcement between domestic and international circulation. At the same time, he pointed out that integrated cooperation across regions, prefectures, provinces and districts can turn comparative advantages into competitive advantages.
Therefore, when it comes to Hong Kong’s functional orientation, Lin said that Hong Kong, as an international financial, trade and technological talent centre, should combine with the Mainland’s manufacturing industries, such as those in the Pearl River Delta, as well as the Mainland’s huge market and labour force, to get the best of one another’s strengths. Hong Kong’s contribution to the development of the Greater Bay Area will drive further development of its economy.
Edward Yau: RCEP has huge potential as centre of gravity for global trade shifts eastward
Edward Yau, Secretary for Commerce and Economic Development, said that from after World War II to the end of the last century, Europe and the US were major exporters and consumers, while there were the signing of the General Agreement on Tariffs and Trade (GATT) and the establishment of the World Trade Organization (WTO), forming the mainstream of economic development. China’s accession to the WTO in 2001 added new impetus to this mainstream.
However, the trade war started by the US in 2018 marked a turning point, with China and the US, which are major trading partners with each order, imposing tariffs of 18% to 20% on each other. Free trade began to be dominated by an increasing number of non-trade elements, making it difficult to reach consensus on many WTO issues, with even such international organizations facing challenges themselves.
However, Yau stressed that free trade will remain the driving force behind economic development. In particular, global trade has now gradually shifted eastward. The share of Asia in global trade has risen from 26% to 36% in the past two decades, during which China enjoyed rapid growth, while ASEAN, Japan and South Korea also showed impressive growth. This is why the RCEP, which entered into force this year, is getting especially wide attention.
The RCEP covers 15 economies in Asia, accounting for nearly 30% of the world’s total economic value and over 30% of the world's total trade volume. Because its core focus is on free trade, the RCEP is very appealing to Hong Kong as a regional trade centre. Yau noted that there is a consensus among the public on Hong Kong’s early accession to the RCEP which will help expand its local trade and professional services to play an active role in driving trade between the Mainland and the rest of the world.
Ba Shusong: Hong Kong can serve as a hub for internal and external circulation
Ba Shusong, Managing Director and Chief China Economist of Hong Kong Exchanges and Clearing Limited (HKEX), believes that the use of digital currency can help reduce the complexity of market regulation, and Hong Kong can leverage its unique strengths as an international financial centre and prepare for participation in driving digital RMB.
Regarding the recently launched Cross-boundary Wealth Management Connect Scheme, Ba believes that it is an important milestone that will help further open up the Mainland’s capital account. He expects cross-border investments to become an important driver in shaping the new landscape of China’s asset management industry in the future.
Regarding the development of the Greater Bay Area, Ba noted that the Greater Bay Area is characterised by coexistence of multiple systems, market orientation and openness, which provide sound conditions for financial innovation and development. He suggested that the Greater Bay Area could learn from the EU system to realize integration of intellectual property rights and integrated development of financial services in Guangdong, Hong Kong and Macao.
As the Greater Bay Area is entering an important stage in the development of modern service and financial industries, Hong Kong, which has always held a leading position in the debt financing and IPO markets, is well-positioned to show the way in innovation during its development, serve its real economy, and drive its development of green finance. Going forward, Guangdong, Hong Kong and Macau should actively explore how to jointly promote the sustainable development of finance in the Greater Bay Area through the sharing and application of big data.
Suggestions for Hong Kong’s Integration into Greater Bay Area Development
The Forum featured a dialogue session, where Justin Lin, Edward Yau, Annie Choi, Permanent Secretary for Innovation and Technology; Wang Tianyi, Chairman of the Board of China Everbright Environment Group Limited and Stephen Wong, Senior Vice President and Executive Director of Public Policy Institute of Our Hong Kong Foundation were invited as guests to discuss how to further advance the Greater Bay Area’s development and Hong Kong’s planning and development in the current economic and social situation.
Justin Lin: Mainland’s development is the biggest opportunity for Hong Kong
Lin noted that the Mainland’s development is bound to be the biggest opportunity for Hong Kong. During the “14th Five-Year“ Plan period, the Mainland is likely to grow by about 6% per annum, which means it will contribute 1% to global growth, or based on a global annual growth of only around 3%, China could contribute about 30% of the world’s growth every year.
In addition, with the world undergoing profound changes unseen in a century and faced with the US wanting to contain China’s development, many outstanding Chinese companies have to delist from Wall Street. Despite delisting, these companies still need international financial services, and Hong Kong’s status as an international financial centre will further be strengthened if such companies prefer Hong Kong to be their destination to get listed again.
Thirdly, Lin believes that Hong Kong must look for other growth drivers besides finance to leverage its strengths in technology, trade and tourism to create more jobs and improve living standards. He suggested that Hong Kong should actively participate in the development of the Greater Bay Area, which is a national initiative.
Edward Yau: International character is Hong Kong’s biggest strength
Yau noted that a major feature of Hong Kong is its international character. In his view, Hong Kong’s international status is not only reflected in its trade, airport or intellectual property rights, but also its overall international character. For example, currently over 9,000 international companies have their regional office in Hong Kong, and Hong Kong also adheres to international standards and seamlessly interfaces with international trade rules.
Giving another example, he said that the first three chapters of the Outline Development Plan for Guangdong-Hong Kong-Macau Greater Bay Area stated that the development of the Greater Bay Area highlighted our country’s determination to continue reform and opening-up, and specifically mentioned the use of “one country, two systems” as a framework to take it forward. These unique elements of Hong Kong make it clear to people that Hong Kong still retains a good international character and is well-placed to leverage such a quality.
Annie Choi: Resolving issues of land use is top priority
Choi said that the current-term Government has its focus on the development of innovation and technology (I&T), and so has invested HKD130 billion in this area. She revealed that the HKSAR Government and Shenzhen have made a breakthrough in mutually agreeing to use the Lok Ma Chau Loop for I&T development, which is now moving forward.
Choi stressed that for Hong Kong to develop into an I&T hub, the top priority is to resolve the issues of land use. The Lok Ma Chau Loop and the San Tin Technopole together provide a total of 540 hectares of land for I&T development, and Hong Kong’s seven universities either have plans or have already set up branch campuses in other Greater Bay Area cities, bringing together the area’s forces for innovation to strengthen Hong Kong’s I&T cooperation with the Mainland, especially the rest of the cities in the area.
She also mentioned that the Hong Kong Government is encouraging more Mainland or foreign R&D activities or production activities in re-industrialisation to continue to develop or set up base in Hong Kong through different funding schemes. It also has policy incentives for the Science Park and to drive the development of the Lok Ma Chau Loop and the San Tin Technopole, which is a future priority of the Hong Kong government.
Wang Tianyi: Drive Hong Kong’s I&T development via three-pronged approach
In the area of I&T, Wang Tianyi believes that Hong Kong has four major strengths, including: The Greater Bay Area which is a world-class bay area, Hong Kong’s several world-class universities, Hong Kong’s excellent systems and low tax rates, and the Hong Kong Government’s proactive leadership.
Nevertheless, Wang also pointed out that Hong Kong is not without challenges in the area of I&T: First and second are inadequate market capacity and mainstay entities since I&T in Hong Kong is currently only dominated by universities and start-ups; third is short of connection with the Mainland because of Hong Kong’s insufficient interaction with the Mainland in the area of I&T; and fourth is inadequate greening as Hong Kong’s development in I&T is weak in green and low-carbon aspects.
Therefore, Wang suggested “three focuses” for consideration: First, focus on green and low-carbon aspects as Hong Kong should be selective instead of all-inclusive in the area of I&T; second, focus on the development of I&T enterprises as enterprises are the mainstay of technological innovation; third, focus on large enterprises since start-ups do not have high success rates and so need support and assistance through large enterprises.
He hopes for the HKSAR Government to proactively entice world-class high-end manufacturing enterprises to Hong Kong for investment, effectively drive green and low-carbon development, and set up fully-equipped industrial parks, as well as attract some of Shenzhen’s industries that are suitable for development in Hong Kong to come here.
Stephen Wong: Set development target for output value of over HKD100 billion
Wong gave an analysis of why the opportunities in the Greater Bay Area are important to the development of Hong Kong and the Northern Metropolis. In his view, the Northern Metropolis should have a huge GDP output value like the Harbour Metropolis and Shenzhen.
He believes that to achieve the desired effect of I&T development, it is necessary to first set a target for output value and then drive the development of I&T enterprises. He suggested that the HKSAR Government provide backing for local start-ups to enter the Greater Bay Area and support start-ups to thrive and grow in the Mainland market.
Wong said that the Northern Metropolis must drive the development of diversified industries, such as connect with financial technology development in Qianhai, biotechnology in central region and food technology in Liantang, in order to raise the overall output value of the area. The development of the Northern Metropolis can be consolidated by using technology to upgrade the existing industries to become profit-making industries.
