Hong Kong Circle
Hong Kong Economic and Trade Office in Washington D.C. Newsletter (Text Only Version)
March - April 2010
Hong Kong Economy Continues to Make Strides
2012 Electoral Methods Package Published
Further Trade Liberalization Measures between Hong Kong and the Mainland of China under CEPA
Hong Kong Enters New Phase of Tax Policy
Testing and Certification in Hong Kong
Hong Kong Economic and Trade Office Welcomes New Colleague
The 15th Annual Hong Kong Film Festival
I am pleased to report that Hong Kong’s economic recovery is becoming increasingly entrenched.
In the first quarter of the year, GDP grew 8.2 percent in real terms, having resumed positive year-on-year growth of 2.5 percent in the previous quarter.
With the strong momentum of growth in Hong Kong and among our regional trading partners, our GDP is expected to grow by 4 percent to 5 percent for 2010 as a whole.
Illustrating confidence in Hong Kong’s economic prospects, Hong Kong and the United States recently signed a Memorandum of Understanding on Cooperation in Wine-related Businesses (MOU). The MOU would further foster joint efforts by Hong Kong and the U.S. to promote U.S. wine exports in Hong Kong and via Hong Kong into the massive Mainland of China market. In addition, it would promote American wine-related goods and services as well as culinary tourism.
The MOU was signed in Hong Kong in May by our Secretary for Commerce and Economic Development, Rita Lau, and visiting Secretary of Commerce of the United States, Gary Locke.
As one of the world’s leading wine producers and exporters, the United States is Hong Kong’s fourth largest wine importer. Wine imports from the U.S. amounted to US$49 million in 2009-2010, representing a five-fold increase over 2007, the year before Hong Kong had completely exempted the wine duty.
Following the signing of the Hong Kong-U.S. MOU, Hong Kong signed similar cooperation agreements with the State of Oregon and the State of Washington on wine promotion in May as well. With these new opportunities, we welcome wine companies from the U.S., including the Pacific Northwest, to tap the booming wine markets in Asia, particularly the Mainland of China.
These recent developments follow the February announcement that Hong Kong and the Mainland of China signed a cooperation agreement on customs measures for wine entering the Mainland market through Hong Kong.
Under the measures, registered wine traders may request Mainland Customs to conduct valuation of wine duty 10 working days before the shipment is exported from Hong Kong to the Mainland of China. When the shipment arrives at a Mainland boundary point, Mainland Customs will normally complete the procedure within one working day. The measures also expedite the clearance process at Mainland ports to normally three or seven working days. This new initiative commenced in June 2010 as a pilot project in Shenzhen ports.
These developments should be encouraging news for our American friends as new export opportunities to Hong Kong and the Mainland markets arise for American vineyards.
Hong Kong Economy Continues to Make Strides
Hong Kong’s Gross Domestic Product grew 8.2 percent in real terms in the first quarter, having resumed positive year-on-year growth of 2.5 percent in the previous quarter, the government announced.
On a seasonally adjusted quarter-to-quarter comparison, GDP rose 2.4 percent in real terms in the first quarter – the fourth consecutive quarter-to-quarter expansion.
Recession recoil
Government Economist Helen Chan said with the Hong Kong economy bouncing back for four quarters in a row, by the first quarter this year GDP had largely returned to its early 2008 peak, recouping all the lost ground in the 2009 financial turmoil.
Given the strong growth momentum in Hong Kong and the region, and if no major external shocks occur, real GDP growth for 2010 as a whole will very likely exceed the forecast of 4 percent to 5 percent as announced in the budget, she said.
However, recognizing the prevailing uncertainties in the external environment, the forecast GDP growth is being maintained in the current round.
Exports, consumption
In the first quarter, merchandise exports rebounded strongly from the exceptionally low base in the same quarter last year thanks to vibrant growth on the Mainland of China, the resurgence in intra-regional trade and a gradual return of import demand from the United States and Europe.
“For the first quarter as a whole, exports surged 21.6 percent in real terms over a year earlier, and had by and large returned to the level prior to the global financial tsunami,” she said.
Exports of services were likewise robust, up 17.9 percent year-on-year in real terms in the first quarter.
Exports of financial and business services continued to thrive along with the surge in the financial market and commercial activities. Transportation and trade-related services staged a visible turnaround on the reviving trade flows. Inbound tourism was likewise vibrant, with visitors from most major sources showing rapid growth.
The local segment was highly resilient in the first quarter, with private consumption expenditure up 6.5 percent year-on-year in real terms amid the improving labor market, with the government’s relief measures providing additional support. The distinctly low base of comparison in the same quarter last year was also relevant.
Business sentiment continued to strengthen, with overall investment spending seeing another quarter of double-digit growth at 10.5 percent.
Job, income prospects
The seasonally adjusted unemployment rate has successively come down since mid-2009 to 4.4 percent in the first quarter of 2010. Wages and earnings in overall terms also rose towards the end of last year.
The stock market turned more volatile recently, as sentiment was heavily dominated by market concerns over rising fiscal deficits and public debt in a few European economies.
The property market gained further momentum during the first quarter but has steadied due to government measures to ensure its stable and healthy development.
Locally, the results of the latest “Quarterly Business Tendency Survey” conducted in March and early April confirmed a broad-based rise in optimism among the large enterprises surveyed, and an increasing number of firms have indicated their intention to reactivate hiring plans.
“Better job and income prospects should in turn render the key driver for consumption growth in the quarters ahead. Investment as a whole should show further growth, with private sector investment recovering further in addition to the expected pick-up in public sector works,” Mrs. Chan said.
Fragile recovery
Externally, the global recovery proceeded well in the first quarter, with Asia taking the lead while the U.S. economy also churned out a better-than-expected performance.
However, the European economies are still sluggish under the drag of high unemployment and fiscal deficits. The Greek sovereign-debt problem and the need for some European economies to implement austerity measures may pose a drag to the recovery in Europe and increase financial market volatility.
Given the latest developments in the external environment, and the already fragile nature of the global recovery, Mrs. Chan said the export outlook for Hong Kong has turned somewhat more uncertain, more so in the latter part of the year upon the waning of the exceptional fiscal boosts in the advanced economies.
Consumer prices
Consumer price inflation, which was once negative for several months last year, inched up in the first quarter of 2010.
Underlying consumer price inflation was 0.8 percent in the first quarter, up from -0.1 percent in the preceding quarter.
“Looking ahead, inflation may creep up modestly further in the coming quarters, being part of the reflationary process as the economic recovery proceeds,” Mrs. Chan said.
“With the movements of consumer prices so far largely in line with earlier expectations, the forecast rates of the headline and underlying consumer price inflation this year as a whole remain unchanged at 2.3 percent and 1.5 percent.”
Hong Kong economy: http://www.hkeconomy.gov.hk/
2012 Electoral Methods Package Published
In April, the Hong Kong government published a package of proposals on the methods for selecting the Chief Executive and for forming the Legislative Council in 2012, setting out detailed proposals for the two electoral methods and summarizing the views collected during the three-month public consultation.
Unveiling the package at the Legislative Council (LegCo), Chief Secretary Henry Tang said out of the more than 47,200 submissions and 1.6 million signatures received during the consultation period, as well as various opinion poll results, a few common threads were obvious.
There is a common wish to see progress in the 2012 constitutional arrangement, he said. More than 60 percent of respondents support the key elements concerning the two electoral methods set out in the consultation document and more than half support LegCo’s passage of the government’s proposed package.
Chief Executive selection
Mr. Tang said after carefully analyzing the views received, the Hong Kong government had identified the appropriate point of balance amid the various viewpoints expressed by the community and put forth this latest package.
On the method for selecting the Chief Executive, the government proposes:
* Raising the number of Election Committee members from the current 800 to 1,200;
* Raising the number of members of the Election Committee’s four sectors by the same proportion, that is, the number of seats for each sector be increased by 100;
* Allocating 75 out of the 100 new seats in the fourth sector (the political sector) to elected District Council members. Together with the existing 42 seats, the District Council sub-sector will have a total of 117 seats. Appointed members will not take part in the election.
For the remaining 25 new seats, aside from the 10 seats to be allocated to the LegCo, 10 will be allocated to Hong Kong members of the National Committee of the Chinese People’s Political Consultative Conference and five to Heung Yee Kuk – indigenous inhabitants of the New Territories, Hong Kong;
* Maintaining the current nomination threshold at the ratio of one-eighth of the Election Committee’s total membership. No upper limit on the number of subscribers should be set at this stage; and
* Maintaining the requirement that the Chief Executive should not have any political affiliation for the 2012 election, although this may be reviewed in the longer term.
Legislative Council formation
For forming the LegCo, the package proposes:
* Raising the number of LegCo seats from 60 to 70 – 35 seats returned by geographical constituencies through direct elections and 35 by functional constituencies (FCs);
* Returning the five new FC seats and the existing District Council FC seat through election by elected District Council members from among themselves;
* Returning the six District Council FC seats under the “proportional representation system”; and
* Maintaining the existing arrangement that Hong Kong permanent residents who are not of Chinese nationality or who have abode right in foreign countries can stand in the elections for the 12 FC seats.
“The advantage of the package is to inject new democratic elements into the two electoral methods through the participation of elected District Council members who have a broad electorate base,” Mr. Tang said. “In particular, for the LegCo FC elections, no more ‘traditional’ FC seat will be created, and 41 seats, that is, close to 60 percent of all seats, will be returned through direct or indirect geographical elections.”
Mr. Tang added that enhancing District Council members’ participation in the two elections would not transform the councils into organs of political power, nor would it change their powers and functions. District Councils are consultative bodies that advise the government on district affairs.
Noting there were considerable views during the consultation that the District Council appointment system should be abolished, Mr. Tang said the government adopted an open and constructive attitude toward the abolition. It will, after LegCo passes the proposed election package, introduce as soon as possible proposals for the community’s deliberation.
On how the FCs should be dealt with when universal suffrage for the LegCo is implemented, Mr. Tang said the community still had diverse views and more time was needed to discuss the issue thoroughly and forge consensus.
Since the current-term Hong Kong government had been authorized by the National People’s Congress Standing Committee to deal only with the 2012 elections, it recommends the next-term Hong Kong government follow up the issue actively and consider the relevant proposals seriously.
Legislative timetable
The Hong Kong government aims to table to LegCo the two motions amending the two electoral methods and put them to vote before the LegCo recess starting mid-July this year.
“This is to allow sufficient time to complete the reporting to the Standing Committee for approval or record, and to deal with the relevant local legislation between autumn this year and the second quarter of 2011, as well as to put in place the detailed implementation arrangements before the end of 2011. As for the specific timing of voting on the two motions, this will depend on the progress of LegCo’s scrutiny of the proposals,” Mr. Tang said.
Mr. Tang stressed that the Hong Kong government had strived for maximum latitude to enhance the democratic elements of the two elections in 2012 and to pave the way for implementing universal suffrage under the framework of the Standing Committee decision.
“We believe the proposed package stands the best possible chance of being accepted by the majority of the public, the LegCo, the Chief Executive and the Central Authorities, which can allow Hong Kong’s constitutional development to be rolled forward,” Mr. Tang said, adding the package could also determine the directions for attaining universal suffrage. No traditional FC will be created for LegCo, and LegCo’s democratic elements will be further enhanced with all registered voters as the electorate base.
“I sincerely hope [LegCo] members can set aside differences, place the overall interest of the community ahead of personal interests and support our proposed package which will take forward our democratic development. We firmly believe, if we are willing to exercise our collective wisdom and endeavor, Hong Kong will be able to reach consensus on democratic development and take the city towards attaining universal suffrage according to the principles of universality and equality.”
Package of Proposals for the Methods for Selecting the Chief Executive and for Forming the Legislative Council in 2012: http://www.cmab-cd2012.gov.hk/
Proposal highlights: http://www.cmab-cd2012.gov.hk/doc/package/highlights_e.pdf
Further Trade Liberalization Measures between Hong Kong and the Mainland of China under CEPA
The Hong Kong Special Administrative Region Government (HKSARG) and the Central People’s Government reached agreement on further liberalizing trade in services and enhancing cooperation in trade and investment facilitation under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).
Witnessed by Hong Kong Chief Executive Donald Tsang, Hong Kong Financial Secretary John C. Tsang, and the Vice-Minister of Commerce, Jiang Zengwei, signed the Supplement VII to CEPA.
The Supplement VII to CEPA provides for 35 market liberalization and trade and investment facilitation measures in 19 sectors. Among them, 27 are liberalization measures in 14 service sectors, and of which eight are measures for “early and pilot implementation.”
The Supplement VII further relaxes the market access conditions in 14 service sectors, which include the following: construction; medical services; technical testing, analysis and product testing; specialty design; audiovisual services; distribution; banking; securities; social services; tourism; cultural services; air transport; qualification examinations for professionals and technicians; and individually owned stores. Among them, “technical testing, analysis and product testing” and “specialty design” are new sectors, bringing the total number of liberalized service sectors under CEPA from 42 to 44.
The major market liberalization measures are as follows:
Medical services
On medical services, Hong Kong service suppliers (HKSS) are allowed to set up wholly-owned hospitals in the municipalities of Shanghai, Chongqing, and the provinces of Guangdong, Fujian and Hainan. They are also allowed to set up convalescent hospitals in the form of wholly-owned, equity joint venture or contractual joint venture in Guangdong Province.
No requirement is imposed on the total investment in setting up hospitals by HKSS on an equity joint venture or contractual joint venture basis in Guangdong Province, and no restriction is imposed on the ratio of capital investment between Hong Kong and Mainland partners in setting up hospitals in the form of equity joint venture or contractual joint venture in the municipalities of Shanghai, Chongqing, and the provinces of Guangdong, Fujian and Hainan.
Furthermore, 12 categories of statutory healthcare professionals who are registered to practice in Hong Kong (medical practitioners, Chinese medicine practitioners, dentists, pharmacists, nurses, midwives, medical laboratory technologists, occupational therapists, optometrists, radiographers, physiotherapists and chiropractors) are allowed to provide short-term services in the Mainland.
Tourism
On tourism, Hong Kong travel agents established on a wholly-owned or joint venture basis in Beijing and Shanghai municipalities are allowed to apply to operate, on a pilot basis, group tours to Hong Kong and Macao for residents registered with permanent residence of the Beijing and Shanghai municipalities.
Banking
On banking, a Hong Kong bank that has maintained a representative office in the Mainland for more than one year can apply to set up a wholly foreign-funded bank or a foreign bank branch. A Hong Kong bank’s operating institution in the Mainland can apply to conduct Renminbi business, if it has been operating for more than two years and profitable for one year prior to the application. Foreign banking institutions established in the Mainland by Hong Kong banks can establish specialized institutions to provide financial services to small enterprises.
Securities
On securities, the Mainland and Hong Kong will deepen cooperation in financial services and product development, and ETF (open-end index-tracking exchange-traded fund) constituted by Hong Kong listed stocks will be launched in the Mainland at an appropriate time.
Construction
On construction, Hong Kong professionals who have obtained Mainland’s class 1 registered architect qualification or class 1 registered structural engineer qualification, are allowed to act as partners to set up construction and engineering design offices in the Mainland, without restrictions on the ratio of the number of Hong Kong partners to the number of the Mainland partners, the ratio of the total capital contributed by the Hong Kong partners to that by the Mainland partners, or the Hong Kong partners’ period of residence in the Mainland.
Hong Kong professionals who have obtained Mainland’s class 1 registered architect qualification or class 1 registered structural engineer qualification through mutual recognition are also allowed to register and practice in Guangdong.
Air transport
On air transport, sales agencies set up by HKSS in the Mainland in the form of wholly-owned enterprises, equity joint venture or contractual joint venture, are allowed to operate air transport sales agency services in the domestic routes in the Mainland. HKSS can also operate aircraft repair and maintenance services in the Mainland in the form of wholly-owned enterprises or with majority shareholding in the enterprises.
Distribution
On distribution, distribution enterprises set up by HKSS in the Mainland are allowed to sell books published in Hong Kong.
Technical testing, analysis and product testing
On technical testing, analysis and product testing, testing organizations in Hong Kong can cooperate with designated Mainland organizations to undertake testing of products under the China Compulsory Certification (CCC) System on a pilot basis, in respect of selected products listed in the CCC Catalogue and processed in Hong Kong. These testing organizations have to be accredited by the accreditation body of the HKSARG to be capable of performing testing for the relevant products under the CCC System.
Audiovisual services
On audiovisual services, HKSS are allowed to set up enterprises on a wholly-owned, equity joint venture or contractual joint venture basis in the Mainland to produce video and sound recording products.
Specialty design
On specialty design, HKSS are allowed to set up wholly-owned enterprises in the Mainland to provide specialty design services.
Apart from benefiting the larger enterprises, measures in the Supplement VII to CEPA will also benefit individuals and small businesses, such measures include allowing registered healthcare professionals to provide short-term services in the Mainland, allowing Hong Kong permanent residents to take the qualification examination for real estate valuer in the Mainland, and allowing Hong Kong permanent residents with Chinese citizenship to set up individually owned stores in the Mainland to provide services in the areas of marriage, renting and leasing of comics books, and pet clinics.
All the services liberalization measures under the Supplement VII to CEPA will take effect from January 1, 2011.
The two sides also agree to enhance trade and investment facilitation. For cooperation in cultural and environmental industries, Supplement VII fosters the joint development of the industries of both sides, mainly through strengthening exchanges and communication between relevant organizations and the trade of both sides.
For cooperation in innovation and technology industry, both sides agree to progressively involve Hong Kong research institutes and enterprises in the national innovation system, encourage Hong Kong research personnel and organizations to participate in national science and technology projects, and strengthen exchanges and co-operation between the two places in high technology research, development and application, fundamental scientific research, etc.
As regards cooperation on education, both sides agree to support the Mainland’s education institutions and Hong Kong’s higher education institutions to jointly provide education programs, to establish joint research facilities and to nurture talents at undergraduate or above level in the Mainland.
For testing and certification, both sides agree to strengthen cooperation between relevant authorities of both sides, and the Mainland will also assist Hong Kong’s testing laboratories to be recognized under the international multilateral systems on mutual recognition of testing and certification that are open to national member bodies.
On the whole, the Supplement VII to CEPA will expedite and facilitate Hong Kong service industries to enter and expand in the Mainland market, and foster service industries integration and professional exchanges of the two sides. Moreover, most of the market liberalization and facilitation measures cover the four pillar industries and the six economic industries that Hong Kong has an competitive edge, and as such will help consolidate Hong Kong’s status as an international financial, trade, shipping, logistics and high value-added service center, and lay the foundation for the two sides to jointly develop education, medical services, as well as testing and certification, environmental, innovative technology and cultural industries.
Separately, the HKSARG has just updated the assessment of the impact to the Hong Kong economy of liberalization of trade in services under CEPA and the implementation of the “Individual Visit Scheme” (IVS). The IVS allows Mainland visitors to visit Hong Kong on an individual basis. The assessment report reflects that CEPA has continued to benefit Hong Kong enterprises and the economy as a whole.
During 2004-09, cumulative business receipts obtained by service companies in Hong Kong due to CEPA from Mainland-related business reached US$7.9 billion. During 2007-09, CEPA-induced business receipts obtained by operations established by HKSS in the Mainland amounted to US$25.4 billion. During the same period, companies in Hong Kong obtained additional business receipts totaling about US$7 billion due to CEPA.
Under CEPA, the IVS has been extended to 49 Mainland cities. By March 2010, over 49 million Mainland visitors have come to Hong Kong under the scheme. In cumulative terms, during 2004-09, IVS visitors brought about additional spending totaling over US$10.8 billion.
As at end 2009, due to liberalization of trade in services and IVS under CEPA, a total of 54,700 jobs were created in Hong Kong, and 40,600 jobs were created in the Mainland.
Details on CEPA are uploaded to the Trade and Industry Department’s CEPA Web site: www.tid.gov.hk/english/cepa/index.html
Impact of CEPA: http://www.tid.gov.hk/english/cepa/statistics/statistics_research.html
Hong Kong Enters New Phase of Tax Policy
Hong Kong has entered a new phase in supporting the international effort to enhance tax transparency, said Commissioner of Inland Revenue Chu Yam-yuen.
Legislation which came into operation in March enables Hong Kong to enter into comprehensive agreements for avoidance of double taxation using the latest Organization for Economic Cooperation & Development (OECD) international standard on exchange of information.
The legislation, “Inland Revenue (Amendment) Ordinance 2010,” enables the Inland Revenue Department to collect and transfer a person’s information upon a legitimate and justified request from its comprehensive agreement for avoidance of double taxation partners, even if the department has no domestic tax interest in such information.
To ensure taxpayers’ privacy and confidentiality of the information exchanged, the Inland Revenue (Disclosure of Information) Rules also came into operation at the same time, Mr. Chu said.
The rules stipulate a notification and review mechanism, and only an Inland Revenue Department directorate officer can approve an information request.
The rules also set out the information a treaty partner must provide to ensure the information requests are justified, specific and relevant.
These rules came after the government consulted lawmakers, experts and business representatives.
Praise for Hong Kong’s efforts
An article written by Jeffrey Owens, the director of the OECD's Centre for Tax Policy & Administration in Paris, praises Hong Kong for its effort in building its position as an international financial center on the basis of free markets, low tax rates and a transparent tax system.
"Under the organization’s criteria, Hong Kong is not considered a tax haven," Mr. Owens says.
The passage of the legislation proves Hong Kong is taking a big step forward to align with the international standards on exchange of information, Mr. Chu noted. It will not only help the city expand its network of comprehensive agreement for avoidance of double taxation, but also significantly enhance its position as a transparent tax jurisdiction.
“The agreement will eliminate double taxation instances encountered by investors doing business in each other’s jurisdiction, and bring about tax savings and certainty in tax liabilities in connection with cross-border economic activities,” Mr. Chu said.
“A treaty will help promote bilateral investment, and the exchange of technology, people and expertise between two places,” Mr. Chu continued.
Tax experts welcomed the government’s move. One of them is Marcellus Wong, who chairs Taxation Institute of Hong Kong’s Tax Policy Committee.
Partner network expands
He said the legislation would help Hong Kong expand its comprehensive agreement for avoidance of double taxation network and strengthen its competitiveness against other Asian countries, such as Singapore.
Mainland enterprises can also benefit from the agreements if they set up a business in Hong Kong and use the city as a stepping stone for their outbound investment, he added.
Mr. Chu said Hong Kong’s next hurdle was to sign at least 12 comprehensive agreements adopting the new standards soon to avoid sanction by the Group of Twenty (G20).
“We have been negotiating with our partners and achieved good progress. Recently we signed the agreement with Brunei, the Netherlands and Indonesia. We have also reached consensus with Austria, Hungary, France, Ireland, Liechtenstein and Japan.
“We have also started negotiations with Czech Republic, Denmark, Italy, Kuwait, Macau, Pakistan, Spain, Switzerland, United Arab Emirates and the UK. For the five existing treaty partners, we are negotiating with them to upgrade the Exchange of Information Article to the new version. Our target is to sign the new comprehensive agreement with all our trade partners,” he said.
“Our policy is not only to focus on exchange of information but we strive to negotiate the best deals for our taxpayers.”
Progress report
The G-20 finance ministers and central bank governors have said they would start to impose sanctions on uncooperative tax jurisdictions from last month. However, Mr. Chu said Hong Kong has been updating the OECD on the city's progress in signing agreements.
He said Hong Kong faces challenges when negotiating the agreement with other countries, such as differences in defining “resident” and limitation of benefits.
“But it’s encouraging to note some countries, having learned about the passage of our law to liberalize our exchange of information arrangement, have initiated or resumed negotiations with us. I am hopeful we will able to meet the organization’s 12-agreement threshold in the near future,” he said.
OECD's Centre for Tax Policy and Administration:
http://www.oecd.org/about/0,3347,en_2649_33767_1_1_1_1_1,00.html
Testing and Certification in Hong Kong
In laboratories across Hong Kong, from the New Territories to Kowloon, technicians in white lab coats poke, soak, hammer, drop, x-ray, measure and analyze a dizzying range of test subjects. They work in the background, out of the public eye. But what they do is vital to Hong Kong’s health, safety and peace of mind – as well as Hong Kong’s prosperity as a global trading hub.
The test subjects include toys, clothing, food, bottled water, pharmaceuticals, telephones and televisions, bitumen for road paving, steel reinforcing bars for construction, carbon emissions and countless other things. The objective: to ensure that they meet local or, for export, international quality and safety standards.
These technicians, working in Hong Kong’s testing and certification industry, are being pushed into an unaccustomed spotlight by two forces.
One is growing public awareness of the need for their services and new food and energy labeling requirements.
The other is the Task Force on Economic Challenges, which was set up to address challenges posed by the global financial downturn and find ways of diversifying Hong Kong’s economy from its four pillar industries: financial services, tourism, trade and logistics, and professional services.
Six new pillars
In his October 2009 Policy Address, Chief Executive Donald Tsang announced measures to promote six economic areas: testing and certification, education, medical services, environmental industries, innovation and technology, and the cultural and creative industries.
Since then, the government has set up the Hong Kong Council for Testing and Certification, chaired by Ching Pak Chung, Pro-Vice-Chancellor of the Chinese University of Hong Kong and former Chairman of the Accreditation Advisory Board. One of the council’s tasks is to draw up a three-year plan for the industry’s development.
The council’s brief is to recommend ways “to help the industry to grow steadily, create more financial impact and obviously create more jobs,” said Professor Ching, adding that it was exploring how to produce a “bigger pie” by expanding testing and certification in such industries as Chinese medicine and jade jewelry, which in turn, would help those industries grow by burnishing their international reputation.
Professor Ching said that testing and certification played a supporting role to many different trades and industries and in maintaining Hong Kong’s economic growth.
Reputation for integrity
Hong Kong’s testing and certification sector comprises more than 300 laboratories (mostly private), from small local companies to multinationals, employing an estimated 10,000 people.
Over the past couple of decades, these labs have built a reputation for impartial testing of consumer products manufactured in the Pearl River Delta and for certifying the quality of those exports. Their work raises the confidence of overseas buyers and ensures that the products meet increasingly stringent safety standards in the U.S. and Europe.
“The strength of Hong Kong laboratories is the integrity of the test reports and certificates,” said Richard Fung, another council member. “Our technical know-how, our experience and our integrity are some of the strengths that could further develop this industry for the future of Hong Kong.”
Dr. Fung is Chief Executive of the STC Group, whose flagship, the Hong Kong Standards and Testing Centre, was founded in 1963 as the city’s first independent, non-profit testing, inspection and certification organization, beginning with textiles. STC has facilities in the New Territories large enough to test the electromagnetic compatibility of mobile phones and other electronic products, in addition to an array of toys, garments, chemicals, food and pharmaceuticals.
STC has expanded into the Mainland of China, setting up labs in Guangzhou, Shanghai and Dongguan.
“Basically, the whole world is fine-tuning and upgrading safety and quality requirements,” he said, noting that import regulations in the U.S. and Europe became more stringent after the 2007-2008 toy recalls.
Christina Law, Asia Pacific Vice President and Chief Financial Officer of Intertek Group PLC and Hong Kong Country Manager, concurs. “Regulation over product safety in the overseas markets that Hong Kong and Chinese products are exported to is increasing,” she said. “Last year, while most businesses were struggling, we, alongside other testing and certification companies, had exceptional growth in the first half of the year, caused by the spike in testing volume of children’s products requiring testing to comply with the U.S. Consumer Product Safety Improvement Act.”
Intertek is a United Kingdom-listed multinational employing more than 24,000 people worldwide, including 1,600 in Lai Chi Kok engaged mainly in testing consumer goods for export. Intertek entered the Mainland of China 20 years ago and now has more than 6,000 staff there, said Ms. Law.
“The major strategic growth area for Hong Kong’s testing, inspection and certification industry will be in China, and we believe China will continue to grow,” she said.
Heavy metals and melamine
The Mainland of China is also a major focus for Michael Lee, Executive Director of Castco Testing Centre Ltd. Castco engages 190 employees in the New Territories to test construction materials, including concrete, steel doors and gates, safety glass, paint, geo-textile material, ceramic wall and floor tiles, adhesives and sealants, water works and fire-resistant boards and coating.
“More and more of these materials are manufactured in China,” said Mr. Lee, “and Hong Kong has a very good reputation for the testing of these materials.”
He urges the government to sign more mutual recognition agreements with countries for the certificates issued by Hong Kong companies. “We’ve got to promote our image overseas to let them know we have a good quality system.”
Looking to serve overseas markets, Castco recently invested in equipment to help it diversify into such consumer products as garments, shoes and toys (testing for heavy metals such as lead, arsenic and mercury in paint) and into food, including testing Chinese tea for preservatives and dairy products for melamine, an adulterant that gives the appearance of added protein under traditional testing method.
Tantalizing potential
The industry sees plenty of potential. Dr. Fung identifies Chinese medicine as a growing Mainland export. “Because of the limited testing capability and [international] acceptance of the test reports, Hong Kong could play a significant role as the window,” he said.
“If the government can work in conjunction with the testing and certification industry on this, this could be a hub for the whole of Asia, if not the world, for testing Chinese medicine.”
In addition to Chinese medicine, nutrition labeling, pharmaceuticals and medical testing, the industry is exploring such tantalizing frontiers as the certification of professional wine cellars, as well as the testing of software and the environmental impact of new construction materials, according to Professor Ching. “We see huge potential, but much work needs to be done.”
Another market opportunity is precious stones. China Gems Laboratory Ltd (CGL), a member of Luk Fook Group accredited for certification of jadeite and diamonds, works with the group’s purchasing department, as well as outside traders and consumers, to test gems for authenticity and purity.
Equipped with spectrometers and other sophisticated equipment to test mineral structure, specific gravity, artificial color treatment and more, CGL employs about 10 gemologists in its Kowloon lab, is training more in Panyu, Guangdong, and recently opened a lab in Macau.
“Every year, Hong Kong exports a great amount of jewelry to America and Europe, so if Hong Kong has accredited laboratories, it will help the local jewelry business,” said Laboratory Director Tommy Tsui.
Consumer confidence could be lifted higher if the government promoted such certificate services, assuring customers that the jewelry is of good quality and that the Hong Kong Laboratory Accreditation Scheme (HOKLAS) logo on the certificate guarantees international standards, said Mr. Tsui.
HOKLAS is administered by the Hong Kong Accreditation Service (HKAS), the governing body ensuring that local testing labs and certification bodies meet international standards. It has mutual recognition agreements with 55 countries and regions for testing reports and certifications.
Working behind the scenes, Hong Kong’s testing and certification technicians shoulder a great responsibility. Most of the seven-wire strands holding up the Tsing Ma Bridge, for example, were tested by Castco.
“We are a sector that’s overlooked by the public,” observes Castco Chief Executive and Lead Auditor Stanley Tse. “I’ve worked in this business for 30 years. When I tell people what I do, I tell them I’m an engineer, because I can’t explain to them in a few words what I’m doing.”
Article credit: Hong Kong Trade Development Council
Green-energy solutions, according to U.S. Secretary of Commerce Gary Locke, are the “defining challenge of our time.” In May, Mr. Locke kicked off the start of his clean-energy trade mission in Hong Kong, addressing a group of 500 business leaders at a luncheon organized by the Hong Kong Trade Development Council (HKTDC) and the American Chamber of Commerce in Hong Kong (AmCham).
“I want to talk about how the development of the clean energy and energy-efficiency technology that we need to curb greenhouse-gas emissions could spur one of the greatest economic opportunities of the 21st century,” he said.
The decision to make Hong Kong the mission’s first stop highlights Hong Kong’s role as a key partner for American companies looking to introduce their technology to the Chinese Mainland.
“There is no question that Hong Kong has worked hard to become a welcoming place for investment and innovation,” Mr. Locke said. “It has an efficient, transparent legal system that offers rigorous intellectual property-rights protection and an open government procurement process.
“When an American clean-energy company finds success here in Hong Kong and on the Mainland, it creates economic value throughout the supply chain here in Hong Kong, on the Mainland and in manufacturing towns across the U.S.,” he said.
Cutting-edge solutions
Mr. Locke’s clean-energy mission to China is the first cabinet-level trade mission of the Obama administration. Twenty-four leading U.S. firms, including the Boeing Company, DuPont and General Electric, are seeking export opportunities for their technology in clean energy, energy efficiency, and electric energy storage, transmission and distribution.
DuPont has already made inroads in the region by partnering with Hong Kong and the Mainland of China, basing its thin-film photovoltaic research center at the Hong Kong Science and Technology Park and a manufacturing center in neighboring Shenzhen.
“Many U.S. companies look to take advantage of the strengths Hong Kong has to offer as well as Hong Kong companies’ expertise and experience on the Mainland, to enter that dynamic market,” Mr. Locke noted.
The Asian trade mission builds on U.S. President Barack Obama’s economic initiative to double American exports by 2015, and takes advantage of opportunities in the Central Government’s policy of promoting clean energy in industries.
The Pearl River Delta region is a key market for clean-energy technology, thanks to the Hong Kong and Guangdong Cleaner Production Partnership Program, which offers subsidies to upgrade industrial plants in the region. Mr. Locke said mission delegates have scheduled 75 one-on-one business meetings in Hong Kong.
“You have come to the right place,” Hong Kong Secretary for the Environment Edward Yau told the U.S. delegation at a Clean Energy Forum held prior to the luncheon. “Hong Kong has positioned herself as a green city that strives to work with our neighboring province, Guangdong, to build a Green Pearl River Delta that will become the greenest part of our nation.”
Hong Kong’s first home-grown electric vehicle, mycar, meanwhile, is poised to hit the U.S. market after a deal was signed between Hong Kong company EuAuto Technology Ltd and U.S. automaker GreenTech Automotive during Mr. Locke’s Hong Kong visit.
EuAuto Technology and Hong Kong Polytechnic University jointly developed mycar, which launched in Hong Kong and in Europe last year. At last week’s event, EuAuto also signed a deal with Denmark to supply rental electric cars for tourists visiting the country’s Bornholm Island.
Hong Kong Trade Development Council: http://www.hktdc.com/
Article credit: Hong Kong Trade Development Council
It seems fitting that when Alan Siu sits down to talk about the work being done by Create Hong Kong (CreateHK), he does so within the confines of the historic Murray Building in Central.
The building is very much in the news these days, following a government decision to convert the longstanding government office building into a luxury hotel in the heart of town.
Demands change with time, and in the business world, it only makes sense to keep up with those changes. That is very much what CreateHK is all about, too.
Creative GDP
“In Hong Kong now, we have 32,000 establishments involved in creative industries,” said Mr. Siu, Acting Head of CreateHK. “They engage over 170,000 people and contribute, annually, over HK$60 billion [US$7.7 billion], roughly four percent of GDP. The creative industries are now a very important part of our economy – and they are becoming more and more so.
“The government has recognized the growing importance of the creative industries to Hong Kong and identified it as one of the six economic areas that we should explore and develop.”
CreateHK, which was set up in June last year, has pooled the government’s resources together for the benefit of the creative industries.
The government has set aside some US$38 million specifically to support the city’s creative industries, which has been added to already successful initiatives such as the Film Development Fund and the DesignSmart Initiative.
“The two industries [film and design] have been supported through those two programs. And now, as creative industries develop in Hong Kong, we have expanded the funding to help promote and develop other sectors as well,” said Mr. Siu.
The film industry in recent times has shown just what can be achieved, thanks in no small part to government support.
Cinematic Success
At the recent Berlin International Film Festival, the Alex Law-directed Echoes of the Rainbow picked up the Crystal Bear award. The film was put together with the help of a grant from the Film Development Fund.
“We have seen through the Film Development Fund, for example, that we have new directors and new film producers emerging, and this is helping more diverse films to be made in Hong Kong,” Mr. Siu said.
“In a similar way, the annual Business of Design Week has raised the profile of the Hong Kong design sector internationally and, of course, through the emerging Chinese Mainland market. Again, that has been the same with our support of the film industry.”
Creative Matching
Hong Kong hosted its sixth Entertainment Expo in March and April, an event which focused not only on film but on other creative industries, including music and entertainment.
For Jack So, Chairman of the Hong Kong Trade Development Council, the event highlighted the role Hong Kong’s creative industries play in the region and, indeed, in the world.
Mr. So says Entertainment Expo had proven to be a tremendous success in providing a platform for movies, as well as TV productions, music and digital entertainment. He remarked that it served as a business matching platform for, among other things, investors looking for projects or producers looking for financers.
And while the Hong Kong film industry certainly plays a major role when it comes to creative industries in the city, there are many other factors at play.
Savannah Hong Kong
John Paul Rowan, Vice-President of the Savannah College of Art and Design Hong Kong, which opens in September, sees unlimited potential for the development of all creative industries in the city.
“I think Hong Kong is right at what is a great bubbling point for creative industries,” he said. “Now is a wonderful time for the creative industries to move forward and take the lead in Hong Kong from more traditional industries here, such as banking and law and the financial industry and, of course, the manufacturing industry that was here before.
“But the creative industry has really come to the fore, and people are realizing that it is really the way forward for Hong Kong.”
From Mr. Rowan’s point of view, that all comes from education and from a change in the way people in Hong Kong see creative industries.
“You really need to create a knowledge base for the industry, and that is what you can see happening in Hong Kong at the moment,” Mr. Rowan said. “People are realizing that you can have a career in the arts, a career in the creative industries, where before, they might not have thought that was the case.”
As more people turn to the creative industries, he said, they will expand and adapt to new trends in the marketplace. He noted the rapid development of the gaming industry in Hong Kong.
In addition, he sees the film industry going through a period of resurgence with the development of areas like visuals and special effects. But Mr. Rowan said that the area where Hong Kong could set itself apart in all creative industries is in the high-value added talent across all creative industries.
Article credit: Hong Kong Trade Development Council
Looking to diversify the Hong Kong economy, the Hong Kong government has targeted education services.
With education, the main objective is not to create business opportunities and jobs. Rather, as Chief Executive Donald Tsang explained in his October 2009 Policy Address, it is “to enhance Hong Kong’s status as a regional education hub, boosting Hong Kong’s competitiveness and complementing the future development of the Mainland.”
The government’s policy is two pronged: to internationalize Hong Kong’s student population and diversify into more self-financing tertiary institutions.
Attracting Asia’s Brightest
On the internationalization front, Amy Wong, Principal Assistant Secretary for Education, said the government’s focus was to attract more quality non-local students to come to Hong Kong to study, mainly in the higher education sector.
In the past two years, the government has increased the non-local student quota from 10 percent to 20 percent - the current figure is about 12 percent; set up a US$128 million billion scholarship fund for both local and non-local students; and relaxed employment and immigration restrictions for non-local students.
Ms. Wong said the increased non-local student quota doesn’t affect the number of places for local students. She added that having more non-local students on Hong Kong campuses exposed local students to different cultures and a different caliber of people.
Grace Chow, Director of Admissions and Financial Aid at the Chinese University of Hong Kong (CUHK), agreed, saying “For anybody who will eventually be in a responsible leadership position, this exposure to international culture and ambience is indispensable.”
There are currently about 3,800 full-time, non-local students enrolled at CUHK, including exchange students. “A lot of our graduate students are from outside Hong Kong, and we have exchange programs with over 200 universities in 28 countries and region, Ms. Chow said. “The university takes in about 1,000 non-local students for one academic year or shorter exchange each year.”
“If you look at it from a broader perspective, some 90 percent of our teaching staff has a degree from outside of Hong Kong, and we have a lot of research cooperation with prestigious universities outside of Hong Kong. So when we are talking about internationalization, we are really talking about a lot of things other than just admissions.”
Ms. Chow, who has served as Deputy Commissioner of the Office of Administrative Complaints (now Office of the Ombudsman), points to the many advantages Hong Kong has in striving to become a regional education hub. “We are a metropolis with a strong international flavor, and a very successful business and financial center.”
The Education Bureau’s Ms. Wong also noted that Hong Kong institutions enjoyed high positions in prestigious international university rankings.
The Cream
Hong Kong is a natural destination for many Chinese Mainland students, given that the city is trilingual and biliterate. Hong Kong’s universities can now directly recruit students from 25 cities and provinces from around the country, and Education Bureau and Mainland officials are discussing the possibility of Mainland senior secondary students studying in Hong Kong. “We believe that if we can attract them earlier on, our universities will be in a better position to attract them,” Ms. Wong said.
Ms. Chow noted that CUHK accepts only 250 to 260 Mainland students from some 10 million potential candidates each year.
Hong Kong university moves into the Pearl River Delta are already in the works. For example, the University of Hong Kong plans to build an extension in Shenzhen, and last month CUHK signed a memorandum of understanding with the Shenzhen Municipal Government to establish a campus there.
Money for Schools
In terms of diversification, the government sees self-financing institutions as future big players in Hong Kong.
“Up until now, our higher education sector has had a quite publicly funded focus,” noted Ms. Wong. “We realize that we can’t continue on this route because education takes up over 23 percent of the government budget and, out of that, a quarter is on higher education. So in order to get more places, we would like to encourage the development of the self-financing sector.”
The government has launched two initiatives since 2000 to further this goal: the Land Grant Scheme, which provides land at a nominal premium for new campuses; and the Start-up Loan Scheme, which provides loans for campus construction or renovation, interest-free for the first 10 years. The government recently committed an additional US$256 million to the loan scheme.
And, in his 2010-11 budget, Financial Secretary John Tsang announced the allocation of US$128 million for a fifth round of the Matching Grant Scheme to help tertiary institutions tap more funding sources.
“For the first time, this will cover all 12 degree-awarding institutions so as to support the diversified development of higher education,” she said.
Article credit: Hong Kong Trade Development Council
Hong Kong Economic and Trade Office Welcomes New Colleague
Queenie Wong joined the Hong Kong Economic and Trade Office in Washington, D.C. as an Assistant Director-General in March 2010.
Queenie joined the Civil Service of the Hong Kong Special Administrative Region in 2004 as an Administrative Officer. She started with working in the Constitutional Affairs Bureau and then moved to the Administration Wing of the Chief Secretary for Administration’s Office.
Before coming to Washington, Queenie served as the Assistant Secretary in the Transport and Housing Bureau, where she was responsible for negotiating air services agreements between Hong Kong and economies in the Asia-Pacific region.
Queenie loves traveling and will try to explore the United States during her stay.
The 15h Annual Hong Kong Film Festival
Made in Hong Kong
The 15th Annual Hong Kong Film Festival
June 18 – August 15, 2010
Meyer Auditorium, Freer Gallery of Art
Independence Avenue at 12th Street, SW
Washington, D.C. 20560
Metro: Smithsonian
Seating in the 300-seat Meyer Auditorium is available on a first-come, first-served basis. Auditorium doors open approximately 30 minutes before each show. For more information, call 202.633.1000 or visit www.asia.si.edu/events/films.asp
JUNE
Red Cliff: Part 1
Friday, June 18, 7 pm
Sunday, June 20, 2 pm
This spectacular dramatization of the famous Han Dynasty-era Battle of Red Cliff was released in a truncated version in the United States. The Freer Gallery now presents the original, two-part version, which received critical and popular acclaim in Asia.
Director: John Woo (2008)
Red Cliff: Part 2
Friday, June 25, 7 pm
Sunday, June 27, 2 pm
The second part of Woo’s monumental cinematic treatment of the Battle of Red Cliff delves deeper into the military strategy and backstabbing espionage behind the bloodshed.
Director: John Woo (2009)
JULY
Vengeance
Friday, July 9, 7 pm
Sunday, July 11, 2 pm
French singer Johnny Hallyday stars as a Parisian chef who travels to Hong Kong to avenge the death of his daughter’s family in this high- voltage noir thriller.
Director: Johnnie To (2009)
Ip Man
Friday, July 16, 7 pm
Sunday, July 18, 2 pm
Best known as Bruce Lee’s teacher, Ip Man is renowned as one of the world’s greatest kung fu masters. Part historical epic, part kung fu extravaganza, this film focuses on his life during the Sino-Japanese War.
Director: Wilson Yip (2008)
Rule Number One
Friday, July 23, 7 pm
Sunday, July 25, 2 pm
A young cop and his enigmatic supervisor investigate reports of paranormal activity in this clever police thriller/ghost story mash-up, named “one of the best films of any description from Hong Kong in 2008” by James Mudge of Beyond Hollywood.
Director: Kelvin Tong (2008)
The Contract
Friday, July 30, 7 pm
Sunday, August 1, 2 pm
One of a string of hilarious slapstick comedies by the Hui Brothers in the 1970s and 80s, this satire tells of a beleaguered television executive who goes to great lengths to get out of his contract, with help from his eccentric brother and a subpar magician.
Director: Michael Hui (1978)
AUGUST
The Pye Dog
Friday, August 6, 7 pm
Sunday, August 8, 2 pm
This visually arresting drama follows three strangers – a boy who refuses to speak, a gangster posing as a school janitor, and a mysterious substitute teacher – whose fates are intertwined.
Director: Derek Kwok (2007)
Magic Boy
Friday, August 13, 7 pm
Sunday, August 15, 2 pm
A teenage magician falls for a store clerk in this delightful comedy. Starring apprentice magician Anjo Leung – performing tricks with no special effects – the film combines sleights-of-hand with a charming look at life and love in Mongkok.
Director: Adam Wong (2007)
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