Hong Kong Circle: Hong Kong Economic and Trade Office in Washington D.C. Newsletter

Over the past 13 years, Hong Kong has weathered many challenges: the Asian financial crisis, avian flu, SARS, H1N1 and the recent global economic crisis. Yet through each, Hong Kong people persevered and the city emerged more resilient.

As we look ahead, Hong Kong aims to maintain the momentum of economic growth, and ensure more uniform growth, by capitalizing on the Mainland of China’s phenomenal economic development and nurturing domestic industries where Hong Kong enjoys competitive advantages.

Recent liberalization measures under the Closer Economic Partnership Arrangement (CEPA), Hong Kong’s quasi free trade agreement with the Mainland of China, further relaxes market access conditions and enhances trade and investment facilitation for Hong Kong companies and individuals in the Mainland of China.

Domestically, the Hong Kong government aims to broaden Hong Kong’s economic structure beyond the four traditional pillar industries of financial services, trading and logistics, tourism, and professional services to include six new industries, namely, testing and certification, medical services, innovation and technology, culture and creative industries, environmental industry and education services.

Another significant milestone since July 1, 1997, is the Legislative Council’s recent approval to amend the methods for selecting the Chief Executive and for forming the Legislative Council in 2012. The Legislative Council’s passage of the political reform package takes forward Hong Kong’s democratic development, in keeping with the ultimate aim of universal suffrage as prescribed in our mini-constitution, the Basic Law.

I am confident that the opportunities arising from our economic initiatives, as well as our political development, will boost Hong Kong’s living standards, enhance governance, and ensure future prosperity.

Lastly, I would like to take the opportunity to welcome our new colleague, Bassanio So, who has taken up the post of Director-General of the Washington office.

Bassanio’s predecessor, Eddie Mak, has returned to Hong Kong to become Deputy Postmaster General. Eddie served as Director-General of the Washington office for four years. For those of you who knew Eddie, you will no doubt recall his gregarious and jovial nature. I want to thank Eddie for his tireless work in strengthening Hong Kong-U.S. ties.

And I look forward to introducing Bassanio to our friends here in Washington, D.C.

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Washington Office Welcomes New Director-General

On August 2, Mr. Bassanio So took up the post of Director-General of the Hong Kong Economic and Trade Office in Washington, D.C.

Mr. So joined the Hong Kong Civil Service as an Administrative Officer in 1991. He was promoted to Senior Administrative Officer in 1997 and to Administrative Office Staff Grade C (directorate level in the Hong Kong Civil Service) in 2001.

Mr. So has worked in a number of overseas offices. From 2003 to 2008, he served as the Director of the Hong Kong Economic and Trade Office in Canada. In the period from 1995 to 1998, he was Assistant Representative in the Hong Kong Economic and Trade Office in Brussels.

Prior to his current posting, Mr. So was a Deputy Government Chief Information Officer of the Hong Kong Special Administrative Region government. He supervised three divisions responsible for e-government service delivery, digital economy facilitation and digital inclusion.

Mr. So graduated from the University of Hong Kong in 1981. He has a Bachelor Degree in Mechanical Engineering and a Master Degree in Business Administration.

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Consent Signed for Draft Basic Law Amendments

On June 29, Chief Executive Donald Tsang signed instruments of consent at Government House giving consent to the draft amendments to Annexes I and II to the Basic Law, Hong Kong’s mini-constitution, concerning the methods of selecting the Chief Executive and forming the Legislative Council.

Commenting on the Legislative Council’s passage of the motions put forth by the Hong Kong government concerning the draft amendments to the methods for the selection of the Chief Executive and for the formation of the Legislative Council in 2012, Mr. Tsang remarked that a milestone had been reached in Hong Kong’s democratic development.

“The formal consent I gave to the draft amendments today reflects the aspirations of Hong Kong people to roll forward our constitutional development towards universal suffrage,” Mr. Tsang said.

“Though the ceremony today is simple, it represents the long-term efforts of many in achieving greater democracy in Hong Kong.”

The Chief Executive’s consent draws Hong Kong closer to the completion of the five-step mechanism to amend both electoral methods in accordance with the Basic Law and the Interpretation by the Standing Committee of the National People’s Congress of April 2004.

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Wine Deal Signed with U.S. States / Wine Trade Boosts Hong Kong's Appeal

Hong Kong has signed a Memorandum of Understanding on Cooperation in wine-related businesses with the states of Oregon and Washington.

Speaking at the signing ceremony in Hong Kong, Permanent Secretary for Commerce & Economic Development (Commerce, Industry & Tourism), Yvonne Choi said the pact was Hong Kong’s first trade agreement with the two states.

Under the deal, the three places will strengthen cooperation in promoting wine-related trading, tourism, investment, education and the fight against counterfeiting.

“We welcome wine companies from Oregon and Washington to take advantage of Hong Kong’s prime location, business-friendly environment and low-tax regime to discover their niche in the booming wine market in Asia and particularly on the Mainland,” Ms. Choi said.

A number of trade-promotion opportunities will be available in Hong Kong in the coming months, including the Wine & Dine Festival in October and the International Wine & Spirits Fair in November.

“I hope more wine merchants from the Pacific Northwest will join these exciting events,” she said.

Speech by the Permanent Secretary for Commerce and Economic Development (Commerce, Industry and Tourism), Miss Yvonne Choi, at the signing ceremony of the Hong Kong - Oregon and Washington States of the United States Memorandum of Understanding (MOU) on Cooperation in Wine-related Businesses: http://www.info.gov.hk/gia/general/201005/24/P201005240233.htm

Wine Trade Boosts Hong Kong’s Hub Appeal

The fantastic strength of the Asian market for fine and rare wines was left in no doubt at the record-breaking May auction held by Acker Merrall & Condit. The largest wine auction in the region, and the second-biggest worldwide, drew Asia’s most serious collectors to Hong Kong.

The auction of The Imperial Cellar, a legendary single cellar owned by U.S. collector Eric Greenberg, fetched US$19.5 million, with 97.3 percent of the lots sold.

Acker Merrall & Condit President and Auction Director John Kapon said the May sale far exceeded expectations.

“We are beyond thrilled with the results of this record sale, with many lots selling well above their estimated value,” Mr. Kapon said.

“We had over 400 clients registered for the auction room alone, with hundreds of others participating live online and via absentee bid, indicating the fantastic strength of the Asian market for fine and rare wines. Owners of fine cellars around the world now understand that there is a keen demand for rare wines among buyers in Asia, and especially in China.”

He added that the region’s professional wine collectors gathered in the saleroom to participate in spirited bidding. They were rivaled by absentee bidders from around the world who used the phone and the Internet to compete for most of the lots.

“The majority of buyers, however, were from Asia and, particularly, Hong Kong, with strong participation by Chinese mainland buyers.”

Acker Merrall & Condit held its debut sale in Hong Kong in May 2008, followed by two more that first year. Four successful auctions were held in 2009, and six are scheduled for 2010.

Mr. Kapon said the Hong Kong government’s abolition of wine duties “absolutely” influenced the wine merchant’s decision to bring business to Hong Kong. “The taxes were unusually high, and the fact that we don’t have those now puts a lot of energy into the market.”

The growth rate has been exponential since. In 2008, Mr. Kapon said, Hong Kong accounted for 25 percent of the firm’s global auction sales. In 2009, it was 50 percent, and the estimate for this year is 75 percent. “We definitely hadn’t forecast growth on such a scale,” he said.

Acker Merrall & Condit is banking on continued growth, with plans to open its first Hong Kong retail store as early as next year. “This is a two-way street. I hope the traffic continues to move in both directions for many years to come.”

Château Margaux Arrives

According to the International Wine and Spirits Record (IWSR), the Mainland of China imported more than 10 million cases of still wine last year, a 50 percent increase over 2008, with France the largest supplier.

“Wealthy Chinese are investing in expensive wines, with Hong Kong auctions of fine wines now becoming more important than those in London,” IWSR Magazine editor Alex Smith told the Financial Times newspaper.

The trend has caught the eye of prestigious Bordeaux winery Château Margaux, which has sent one of its top people to Hong Kong.

In April, Thibault Pontallier, son of Château Margaux Managing Director Paul Pontallier, moved to Hong Kong, where he will spend at least two years as the brand’s ambassador.

Château Margaux first identified Greater China as an emerging market in 2006, when Mr. Pontallier senior led an eight-day promotional tour of China. Thibault Pontallier said there were compelling reasons for the company’s recent establishment in Hong Kong.

“Five years ago, we were selling only a few cases in Asia. But the growth rate has been very fast. Today, China accounts for about 20 percent of our sales,” he said.

Mr. Pontallier is in Hong Kong to build relations, organize presentations and host wine dinners. He said he was pleasantly surprised at the wine culture in Hong Kong, where so many young people are drinking wine – “almost more than in France” – and said his presence has been well-received. “People love to see someone from Bordeaux coming to visit them in Hong Kong.

“Hong Kong has a central position in the region, and the absence of duties has made it the wine hub of Asia. I meet so many people in the wine business here every day, who agree that that’s why they need to be in Hong Kong.” Mr. Pontallier added that, if he were a wine merchant today, “I’d say you definitely need to have someone in Hong Kong.”

Record Crowds

“Asia is now the most dynamic and happening market in the wine and spirits world,” said Robert Beynat, Chief Executive of Vinexpo Asia-Pacific.

Attendance at Vinexpo Asia Pacific 2010, held at the Hong Kong Convention and Exhibition Centre, was up 40 percent compared to the last show, two years ago.

The three-day event drew 880 exhibitors from 32 countries, and attracted about 12,000 visitors. Exhibitors came from almost every wine-producing region in the world. The increase in visitors, according to Mr. Beynat, reflected burgeoning wine consumption in Asia, which is “increasing four times faster than the world average and is expected to continue in the next five years.”

Hong Kong Trade Development Council: http://www.hktdc.com/

Article credit: Hong Kong Trade Development Council

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Hong Kong Pavilion Draws Crowds at World Expo 2010 Shanghai China

A light installation made up of hundreds of traditional lamp shades greets visitors at the entrance of the Hong Kong Pavilion.

Infinite Constellation, created by a student-teacher group from the Hong Kong Design Institute, is just one of several exhibits showcasing Hong Kong’s creativity.

With its sleek, contemporary design, the Hong Kong Pavilion focuses on connection and creativity.

The three-storey structure, located in Expo Zone A, in Pudong, showcases Hong Kong as a city that works on all levels. Exhibits feature Hong Kong’s efficiency in the areas of transport, infrastructure, technology and services. Cultural diversity and creativity, as well as sustainable living, are also key themes.

Chief Executive Officiates at Opening of Hong Kong Exhibitions at Shanghai Expo

Chief Executive Donald Tsang officiated at the opening of the Hong Kong Pavilion and Hong Kong’s Urban Best Practices Area (UBPA) Exhibition at the World Expo 2010 Shanghai China (Shanghai Expo).

“The concept, design, preparation and implementation of this project have involved a wide range of people and groups, from designers and architects, to government bureaus and departments, construction and management companies, and sponsors.

"Everyone involved has put their hearts, minds and precious time into this project,” Mr. Tsang said. “For their dedication and contribution, I offer my heartfelt thanks.”

The Chief Executive said that during the Shanghai Expo, people from all over the world would be able to visit Hong Kong’s exhibitions at the Expo Park or visit Hong Kong’s virtual pavilion and virtual UBPA exhibition online.

Financial Secretary Officiates at “Style Hong Kong” Fashion Show

Financial Secretary John C. Tsang attended the “Style Hong Kong” fashion show organized by the Hong Kong Trade Development Council at the Shanghai Expo.

The show was held at the Grand Show Hall of the Shanghai Fashion Centre, and was also part of the Shanghai International Fashion Culture Festival and Shanghai Fashion Week, an event celebrating the opening of Shanghai Expo.

During the show, Mr. Tsang met participating Hong Kong fashion designers, Lu Lu Cheung, Hidy Ng and Henry Lau. The designers presented their latest fall/winter collections to a packed hall of 600 people.

During his opening speech, Mr. Tsang said the Hong Kong government was fully committed to the development of creative industries. “Creative industries are a strong driving force in the overall economic development of Hong Kong’s economy, with the value added to the Gross Domestic Product reaching over $60 billion [US$7.7 billion] each year, accounting for some 5 percent of Hong Kong’s GDP,” Mr. Tsang said.

"At present, there are nearly 32,000 enterprises engaged in the creative industries with more than 176,000 employees.”

Mr. Tsang noted that the Institut Européen d'Administration des Affaires (INSEAD) rated Hong Kong as the most creative economy in Asia.

“Fashion design is an important element of Hong Kong’s creative industries. Situated at the crossroads where East meets West, Hong Kong is able to array the latest fashion information from around the world.”

Financial Secretary Officiates at Hong Kong Design Centre Exhibition

Financial Secretary John C. Tsang officiated at the opening of "Hong Kong: Creative Ecologies – Business, Living, Creativity" Design Exhibition organized by the Hong Kong Design Centre (HKDC) for the Shanghai Expo.

The exhibition includes workshops, conferences and educational forums that profile Hong Kong’s creative industries and design power.

Mr. Tsang said at the opening that the exhibition showcases to visitors the ecologies and dynamism of Hong Kong’s creative industries.

“In the past, Hong Kong was a base for entrepot trade and manufacturing goods, but it is not by chance that Hong Kong transformed into the creative capital and center of services industry that it is today,” Mr. Tsang said.

"Being the melting-pot of Eastern and Western cultures, Hong Kong has all the attributes of an open, accommodating and diverse city. In addition, Hong Kong is a leading hub in the region in terms of mobility of manpower, merchandise, knowledge and information.

"The exhibition will also introduce renowned Hong Kong designers, design enterprises and brands, and unveil Hong Kong’s creative minds through successful cases.”

Mr. Tsang noted that the Hong Kong government had subsidized Hong Kong organizations in the creative industries to hold the "Shanghai Expo x Creative Ecologies Study Tour."

Through the program, close to 100 Hong Kong youths will visit Shanghai. They will conduct exchanges with Shanghai bodies and institutes in the creative industries to facilitate better knowledge about creative ecologies in Shanghai and Hong Kong, and to explore cooperation between the two places.

They will also act as volunteer workers at Hong Kong’s Urban Best Practices Area exhibition in the Shanghai Expo offering briefings on Hong Kong to visitors.

Leveraging on Shanghai Expo to showcase Hong Kong design

The "Hong Kong: Creative Ecologies – Business, Living, Creativity" Design Exhibition being staged by the Hong Kong Design Centre in Shanghai shows visitors the vibrancy of Hong Kong designers and enhances communication between creative industry talent in Shanghai and Hong Kong, said Secretary for Commerce and Economic Development, Rita Lau, during a visit to the Shanghai Expo.

The exhibition is a major project funded under the US$38.5 million "CreateSmart Initiative" set up by Create Hong Kong. It is also one of the signature programs organized by Hong Kong during the period of the Shanghai Expo.

“Hong Kong designers have a competitive edge in terms of design quality, market sense and global outlook,” Mrs. Lau said.

“Hong Kong’s annual ‘Business of Design Week’ has become one of most important events on the international design calendar. The ‘Hong Kong: Creative Ecologies’ exhibition provides a platform to showcase the international influence of our creative industry and talent.”

"Hong Kong: Creative Ecologies – Business, Living, Creativity" is a six-month multi-faceted program featuring a series of events including three thematic shows and educational forums to profile the excellence and advantage of Hong Kong creative industries. It aims to promote the energy, style, innovation and branding power of Hong Kong designers to Mainland audiences and Expo visitors from around the world.

Green Transport in Hong Kong” Exhibition and Seminar at the Shanghai Expo

Secretary for Transport and Housing, Eva Cheng, spoke at the “Green Transport in Hong Kong, Asia’s World City” exhibition and seminar as part of Hong Kong’s participation in the Shanghai Expo.\

Ms. Cheng shared Hong Kong’s experience and strategic directions in developing a green transport system.

“Forbes magazine ranked Hong Kong’s commute the best among 84 cities worldwide in 2008 because our transport system is reliable, efficient and very reasonably priced,” Ms. Cheng said.

“Our transport sector emits much less greenhouse gas on a per capita basis than its counterparts in most developed economies. Hong Kong relies heavily on public transport, with railways serving as the backbone.”

Ms. Cheng highlighted that around 90 percent of Hong Kong’s residents use public transport every day, significantly reducing congestion on Hong Kong’s roads. She noted that the car ownership rate in Hong Kong was very low, with only 56 private cars per 1,000 people. This helped reduce the environmental impact of meeting the transport needs of the community, she added.

Ms Cheng outlined the following four key strategies for the sustainable development of Hong Kong’s transport system:

* Integration of transport and city planning;

* Encouraging the use of railways and walking to reduce the demand for land transport;

* Improving the management of transportation and the efficiency of land transport; and

* Adopting green technologies to reduce pollution.

Ms. Cheng was joined by the Secretary General of the Shanghai Urban and Rural Construction and Transport Commission, Xu Jianqun; and the Director of Centre of Urban Studies and Urban Planning, The University of Hong Kong (HKU), Professor Anthony Yeh, in officiating the opening ceremony.

Other speakers from Hong Kong included the Deputy Director of Planning, Jimmy Leung, who spoke about urban planning; and the Chief Executive Officer of MTR Corporation Limited, C K Chow, who addressed the issue of financing green transport.

Professor David Banister from Oxford University in Britain also shared the international experience of green transport at the seminar.

In a separate panel discussion, the Deputy Director of Shanghai City Comprehensive Transportation Planning Institute, Chen Bizhuang; Professor Pan Haixiao and Professor Peng Zhongren from Tongji University; and Professor Anthony Yeh from HKU discussed the development of green transport in Shanghai.

The event was jointly organized by the Hong Kong government, the Centre of Urban Studies and Urban Planning and the Institute of Transport Studies of HKU, the Chartered Institute of Logistics and Transport in Hong Kong, and the Hong Kong Institute of Planners.

The seminar was held at Shanghai International Convention Centre, Pudong. More than 250 scholars and stakeholders from the transport and planning professions attended the event.

Hong Kong is staging more than 55 events and activities during the Shanghai Expo period, which includes performing arts programs, exhibitions, seminars, and promotional activities for the tourism, design and branding and film sectors.

The Shanghai Expo will run until October 31, 2010. More than 240 countries, cities and international organizations are taking part in the Expo, which is expected to attract 70 million visitors.

For more details on Hong Kong’s participation in the Shanghai Expo, please visit www.hkexpo2010.gov.hk.

About the Hong Kong Trade Development Council

Established in 1966, the Hong Kong Trade Development Council (HKTDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 on the Mainland of China, the HKTDC promotes Hong Kong as a platform for doing business with China and Asia.

The HKTDC also organizes trade fairs and business missions to connect companies with opportunities in Hong Kong and the Mainland, while providing information via trade publications, research reports and online. For more, visit www.hktdc.com.

Hong Kong Design Centre: http://www.hkdesigncentre.org/en/index.asp

Create Hong Kong: http://www.createhk.gov.hk/

Hong Kong Design Institute: http://www.hkdi.edu.hk/web/index.jsp

Article credit: Hong Kong Trade Development Council

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Further Economic and Trade Cooperation and Exchanges under CEPA

The Hong Kong Special Administrative Region government 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 and other guests, Hong Kong Financial Secretary, John C. Tsang, and the Mainland of China’s 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 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:

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

On technical testing, analysis and product testing, testing organizations in Hong Kong can co-operate 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 centre, 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 Hong Kong government has updated the assessment of the impact, to the Hong Kong economy, of liberalization of trade in services under CEPA and the implementation of “Individual Visit Scheme” (IVS). 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 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 website: www.tid.gov.hk/english/cepa/index.html

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Pushing the Free Trade Agenda

More than 400 business leaders from around the world took part in this year’s ICC World Business Summit.

Organized by the International Chamber of Commerce (ICC) and the Hong Kong Trade Development Council, the June 30 event at the Hong Kong Convention and Exhibition Centre attracted some of the leading lights in international business and economics.

Speakers included Martin Wolf, Associate Editor and Chief Economics Commentator of the Financial Times; David Sokol, Chairman of MidAmerican Energy Holdings Company, a subsidiary of Warren Buffet’s investment conglomerate Berkshire Hathaway; as well as Chen Yuan, Chairman of the China Development Bank.

“Following the financial crisis and economic downturn of 2008-2009, ICC felt it was important to talk about how the future global economy has been shaped by these events and what we can do to help ensure its stability and growth,” said outgoing ICC Chairman Dr. Victor Fung.

“Certainly, the specter of global unemployment, the delicate balancing act between trade, development and sustainability, and the dangers of trade protectionism are key areas that must be dealt with as we develop growth strategies.”

The summit’s theme “New Global Economic Realities: Asia Pacific Perspectives,” – and the choice of Hong Kong as the venue for the latest summit – highlighted Asia’s increasingly prominent role in the global agenda. Indeed, the region that has seen the strongest recovery is now driving global growth amid continuing uncertainty in mature economies.

Where Free Trade Thrives

It is also in this region where “free trade agreements are most alive,” even as free trade appears to be under threat elsewhere in the world.

Summit speakers agreed that continuing fallout from the global economic crisis is threatening to derail the fragile recovery and is giving rise to renewed protectionism.

Experts pointed out that the world is seeing more cases of “micro protectionism” spreading “like poison ivy” in the past year since the financial crisis.

Speakers said that given the current trend, free trade proponents would consider it a victory if the world can get through the decade without any rollback in the current level of free trade.

An ICC-commissioned study released by the Washington-based Peterson Institute for International Economics found that Russia, the United States, India, Argentina, Brazil and the Chinese mainland, in that order, were the countries that imposed or are considering the greatest number of protectionist measures since 2008.

The study found that in fact, all G20 countries had introduced 172 protectionist measures in the past two years, with hundreds more planned. “If only half the protectionist measures ‘in the pipeline’ in 2009 were implemented in 2010 and 2011, the world economy could face a serious protectionist problem,” warned Gary Hufbauer, Senior Fellow at the Institute.

The Institute gave a set of recommendations, including appointing a group of global trade experts or “trade wisemen” who would monitor and name countries that push new protectionist measures.

Another key recommendation involved setting up regular G20 trade ministerial meetings, to ensure trade issues remain top of leaders’ agendas. It also called for the successful conclusion of the Doha Round and the promotion of multilateral trade.

The Job Equation

Summit speakers and delegates agreed that besides trade, creating employment and sustainable development were key drivers of economic recovery and future growth.

With a full-fledged recovery still a long way off, especially in developed economies, unemployment is the most worrisome issue going forward. Prolonged joblessness, experts said, will increase political pressure to seek protectionist measures. A falling euro, which will make European exports cheaper will only add pressure in places such as the United States.

As one of the few economies that experienced growth amid the economic chaos, experts said China has a crucial role in helping sustain the fragile recovery by maintaining its economic growth and continuing to boost domestic demand. They added that it must also step up its international leadership role.

Climate Change

The role of governments’ commitment towards sustainable development was another focus area at the summit. “Sustainability is something that is already impacting daily business decision-making, and we can expect this trend to grow in the future,” Dr. Fung said. “One aspect where there seemed to be consensus at the summit is that we can expect consumers to continue placing more and more value on green technology, which of course means that companies will have to act accordingly.”

Speakers said that sustainability presents enormous opportunities to go to the next level of development, but that business needs direction from governments on the way forward by coming up with a framework, timelines and standards.

Business’ Role

The private sector is capable of addressing such issues, as well as global unemployment and migration by introducing “entrepreneurial solutions” that provide opportunities for unskilled labor, according to Joseph Bower, Baker Foundation Professor of Business Administration at Harvard University.

“We must avoid failed states,” adding that the right business strategies can “bring the unskilled and unserved into the market system.”

Summit leaders concluded that business leadership is key in this time of uncertainty. “More than ever, business needs to accept its role and be part of the solution. The challenge now is structuring the world economic system to secure another period of strong stable growth.”

Hong Kong Trade Development Council: http://www.hktdc.com/

Article credit: Hong Kong Trade Development Council

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Hong Kong Benefits from Flow of Foreign Direct Investment into Asia

On June 22, Chief Executive Donald Tsang hosted a reception to thank the foreign investors whose presence in Hong Kong is a testimony to its position as Asia’s international business and finance center.

The reception, attended by about 300 executives, is an annual event to welcome overseas, Mainland of China and Taiwanese companies that have set up or expanded in Hong Kong during the past year.

Addressing the audience, Tsang said Hong Kong’s economy expanded at its fastest pace in four years in the first quarter of 2010 with GDP growing 8.2 percent year-on-year; the fourth consecutive quarterly rise. He noted that the news was reflected at Invest Hong Kong where the department continued to exceed its previous years’ targets for completed investment projects.

“Hong Kong stands to benefit from the flow of investment which shifted towards Asia. This shift has been magnified by the credit crunch and the global financial crisis,” Mr. Tsang said.

“We are committed to capitalizing on this and enhancing our overall competitiveness through a raft of initiatives. These include the growing network of double taxation agreements, the Renminbi Trade Settlement scheme, and the development of six new growth industries where Hong Kong has clear advantages.”

The Director-General of Investment Promotion at Invest Hong Kong, Simon Galpin said: “While celebrating our 10th anniversary this year, it is very encouraging to see that we have already assisted 178 foreign companies to set up or expand their operations in the city in the first half of 2010.”

Mr. Galpin thanked the past year’s investors for creating 1,980 new job opportunities within the first year of their operation or expansion in Hong Kong.

Since the establishment of Invest Hong Kong in July 2000, over 2,000 investment projects have been completed, creating more than 25,000 new jobs in the first year of operation or expansion and in excess of US$6.7 billion of investment.

Mr. Galpin added, “In terms of geographical distribution, in the first half of 2010 the number of completed investment projects from Asia Pacific accounted for 39 percent, those from Europe for 31 percent and North America 24 percent. To support future potential growth from BRIC markets, we have hired additional consultants in India and Russia.”

Among the executives who attended the reception was the Vice President of Savannah College of Art and Design (SCAD), John Rowan.

The Savannah College of Art and Design, an art, design and digital media university founded in 1978, will open its first Asian campus in Hong Kong this autumn at the former North Kowloon Magistracy Building in Sham Shui Po.

SCAD secured the historic site with its conservation record and academic excellence. This brings its number of global campuses to four, having already established facilities in Savannah, Atlanta, and Lacoste, France.

Courses offered in Hong Kong cover advertising, animation, graphic design, illustration, interactive design and game development, motion media design, photography, and visual effects, etc.

Invest Hong Kong: http://www.investhk.gov.hk/

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Hong Kong International Airport Named Most Efficient Asia-Pacific Airport

Hong Kong International Airport has been named the most efficient airport in Asia-Pacific for the fourth time in a row.

The airport received its fourth “Asia-Pacific Airport Efficiency Excellence Award” from the Air Transport Research Society at the 2010 ATRS World Conference in Porto, Portugal.

The results were obtained after a year’s research by 13 top aviation experts from Europe, Asia-Pacific, North America and Australia, and published in the ATRS Global Airport Benchmarking Report.

Airports are benchmarked according to their performance, productivity, efficiency, unit cost competitiveness and other factors. The report also provides 30 performance measures identifying the effects of the operating environment of the airport, business diversification efforts, outsourcing and service quality.

Airport Authority Chief Executive Officer, Stanley Hui, welcomed the award, saying: “We will continue to do our best to provide efficient, reliable, safe and cost-effective services to our passengers and other airport users.”

Hong Kong International Airport: http://www.hongkongairport.com/eng/index.html

Air Transport Research Society: http://www.atrsworld.org/airportawards.html

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Assuring Future Growth in Insurance Market

The global insurance market is tipped to reach US$4.6 trillion in two years, according to global research provider Datamonitor. It’s a trend reflected in Hong Kong’s buoyant recruitment market.

All the big insurance firms are shoring up their presence in the city and, according to global insurance recruiter Kinsey Allen, the strong domestic demand is driving a job boom. The firm expects the industry to employ another 1,000 insurance specialists in Hong Kong by year’s end.

Research commissioned by Kinsey Allen suggests that, although Europe is the world’s biggest insurance market, Asia is the fastest-growing market segment, with net written premiums growing 15 percent, year-on-year. In contrast, the research found that Europe’s insurance market is shrinking at an annual rate of one per cent. Kinsey Allen says that by 2014 Hong Kong will be writing one percent of the world’s net premiums – enough to make it one of the top global insurance hubs.

Shifting Eastward

Ken Brotherston, CEO of Kinsey Allen International, says the writing “is on the wall.” He says that while “London is still a hugely important city for insurance, it is clear that, in terms of growth, Hong Kong represents the future. Even the most traditional of British insurers know this.”

Prudential’s recent takeover bid for AIG's Asian unit was indicative of a global shift eastward, he says. “The final destination of much of that business is Hong Kong.”

More than half – 52 percent – of the world’s authorized insurers are already in Hong Kong. There are 89 authorized insurers incorporated in the city, compared to just 13 in the United States, according to the Office of the Commissioner of Insurance in Hong Kong. Only 19 are incorporated in the United Kingdom, the Isle of Man and Guernsey combined.

Catherine Tan, Kinsey Allen’s Head of Insurance and Pension, Asia Pacific, says strong domestic demand is driving growth.

“Five years ago, the penetration rates in Hong Kong were very low – premiums represented about 9.5 percent of GDP. That’s risen to 11.2 percent. There’s still massive potential for insurance growth, though as Hong Kong is still a long way off Taiwan or Western countries like the UK or the Netherlands. That increase in domestic demand is driving demand for insurance talent, alongside the wider macroeconomic factors.”

Drawn to Hong Kong

Demand is also being driven by international factors. Ms. Tan says that Hong Kong continues to be the top choice for managing the regional businesses of overseas and Chinese mainland companies. A more liberal insurance market since the 1997 Asian financial crisis has drawn many foreign insurers and reinsurers to Hong Kong to expand their market share in the region, Ms. Tan says, noting that China’s accession to the World Trade Organization has also accelerated the process.

“A number of foreign insurers and reinsurers have announced plans to expand their regional operations in Hong Kong to cater to the development of the regional insurance market, as well as the Mandatory Provident Fund market in Hong Kong.”

Alan Mackay, Group Deputy CEO at Darwin Rhodes, a leading insurance recruitment firm, believes the estimated shortfall of 1,000 suitable insurance experts in Hong Kong is conservative.

“It’s been an interesting market over the past nine months. Firms are hiring aggressively. We are back to the point of salary increases and candidates getting three or four offers.”

Region of Growth

Quality control has tightened since the economic downturn, Mr. Mackay says, and this has been good for the industry. “We now have people, including the top people, who are genuinely keen to work in Asia.”

He added that the recent spate of dual listings, and the likes of HSBC moving its chief executive to Hong Kong, have also had an impact on the industry. “It shows that this is the place to be. We’re now seeing companies have their proper headquarters function in Hong Kong, even if the parent company is legally based somewhere else.”

Powerful Combination

Kinsey Allen’s Mr. Brotherston says it’s no surprise that Hong Kong should be the global insurance businesses’ big winner in Asia.

“Since the creation of the Wall Street Journal’s Index of Economic Freedom in 1995, Hong Kong has been the world’s top performing economy. Out of the 183 countries assessed in The World Bank’s Ease of Doing Business Index, Hong Kong was ranked as the third-best country globally. On top of that, the taxes are lower and easier to pay. That’s a pretty powerful combination, and no other insurance center – including the U.S. – can match it.”

Hong Kong Trade Development Council: http://www.hktdc.com/

Article credit: Hong Kong Trade Development Council

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Fourth Meeting of Shenzhen/Hong Kong Cooperation in Innovation and Technology Steering Group

On June 25, the fourth meeting of the Steering Group on Shenzhen/Hong Kong Cooperation in Innovation and Technology was held in Hong Kong.

The two sides reviewed in the meeting the progress of work since the third meeting, and examined the first-year operation of the three-year action plan under the Shenzhen/Hong Kong Innovation Circle.

The action plan is grouped under three categories: innovation foundation (provision of laboratories or facilities); service platform (sharing of technological resources and provision of technological services platform); and major research and development (R&D) projects (co-operation in particular technological areas, such as solar batteries).

The action plan comprises 24 cooperation projects, involving government departments, universities, R&D institutions and community organizations in the two places.

Hong Kong Secretary for Commerce and Economic Development, Rita Lau, remarked that cooperation projects between Shenzhen and Hong Kong had achieved satisfactory results over the past year.

“As the first project under the Shenzhen/Hong Kong Innovation Circle, DuPont’s photovoltaic solar energy project has facilitated the development of solar energy and related industries in Shenzhen and Hong Kong,” Mrs. Lau said.

“It has become the core of the Hong Kong Science Park’s new cluster on green technology, which includes renewable energy and environmental technology. The cluster effect has attracted other companies engaged in solar energy, photovoltaic technology and related industries to set up their businesses in the park.”

Mrs. Lau said that the development of the three-year action plan received extensive support from the R&D sectors of both places, and there was satisfactory progress in the launch and operation of the projects, creating an Innovation Circle modeling effect.

Noting that the Framework Agreement on Hong Kong/Guangdong Cooperation aimed to support the commercialization of Hong Kong’s R&D projects in Guangdong, Mrs. Lau said the collaboration would attract more overseas enterprises to set up R&D and production facilities in Hong Kong and Shenzhen, reaffirming the important role of the Shenzhen/Hong Kong Innovation Circle.

“The Guangdong provincial government has expressed their wish for the Central Government to include the framework agreement in the National 12th Five-Year Plan. We hope that the Shenzhen/Hong Kong Innovation Circle will play a more significant part in the technological development area of the 12th Five-Year Plan.

“We shall continue to join with Shenzhen to promote the cooperation model of ‘Hong Kong research and development - Mainland production’ under the Shenzhen/Hong Kong Innovation Circle, with an aim to attract more overseas enterprises to conduct R&D work in Hong Kong, as well as to promote collaboration projects on innovation and technology between the two places,” Mrs. Lau added.

Shenzhen and Hong Kong signed the co operation agreement on the Shenzhen/Hong Kong Innovation Circle in May 2007.

The steering group is an important platform for promoting communication, exchange and collaboration in innovation and technology between the two sides.

Since the signing of the cooperation agreement, the two sides have launched a Shenzhen-Hong Kong technology cooperation funding scheme, which provides joint funding for collaborative R&D projects. The funding scheme is now inviting applications for 2010.

The technology areas involved are in line with the development strategy of the Shenzhen/Hong Kong Innovation Circle, including Internet technologies, integrated circuits and novel electronic devices, new materials, biomedicine, advanced manufacturing and exploitation of biotechnology to enhance food safety.

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Legislative Council Passes Deposit Protection Scheme (Amendment) Bill 2010

The Secretary for Financial Services and the Treasury, Professor K C Chan, welcomed the passage of the Deposit Protection Scheme (Amendment) Bill 2010 by the Legislative Council.

With the passage of the bill, depositors in Hong Kong can benefit from an enhanced Deposit Protection Scheme (DPS) upon the expiry of the full deposit guarantee by the end of this year.

Speaking at the resumption of the second reading debate of the bill, Professor Chan said that the bill sought to provide for the implementation of the enhancement proposals concluded from a review of the DPS by the Hong Kong Deposit Protection Board (the Board) with a view to enhancing the DPS as part of the financial infrastructure of Hong Kong, thereby allowing depositors to enjoy better deposit protection.

The Board completed a review of the DPS in 2009 in the light of developments in international and local financial markets, and experience gained from operating the DPS.

The review concluded that the existing DPS in Hong Kong was already in substantial compliance with international best practices. Nevertheless, the review identified some enhancements to the scheme for addressing the latest market developments, in particular, for meeting heightened public expectations for better deposit protection.

Professor Chan said, “The enhancements identified in the review include raising the DPS protection limit from HK$100,000 [US$12,820] to HK$500,000 [US$64,102], and expanding the scheme’s coverage to include secured deposits.

“Raising the DPS protection limit to HK$500,000 [US$64,102] will bring the level of deposit protection in Hong Kong closer to those in other major markets in absolute terms, and fully cover about 90 percent of depositors, which is on a par with the higher end of international standards in terms of percentage of depositors fully covered.”

“On the other hand, protecting secured deposits will help remove the uncertainties surrounding the protection status of a deposit being taken as a security by banks, or subject to any forms of encumbrance, for supporting the other banking and financial services provided by banks, most commonly under an integrated account. This enhancement proposal will improve the clarity of the coverage of the DPS, thereby fostering stronger confidence of the public in the scheme,” Professor Chan added.

Professor Chan said that the government also proposed the introduction of cost mitigating measures to avoid additional cost being transferred to depositors.

The measures mainly include cutting the annual contribution rates of banks to the DPS Fund by 65 percent so as to keep the annual contribution payable by the industry at its current level.

The Board will launch a publicity campaign to highlight the features of the enhanced DPS so as to help the public to know more about the scheme.

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Facilitating Use of Electric Vehicles

The Hong Kong government has partnered with HK Electric to launch two charging stations for electric vehicles (EVs) at the government car parks at Star Ferry and Tin Hau on Hong Kong Island.

“The launch of these EV charging stations represents the concerted effort of the government and HK Electric to expand the EV charging network,” said a government spokesman. “We will further explore with power companies whether more charging stations can be set up and launched in government car parks for public use.”

The charging stations at Star Ferry and Tin Hau car parks are located at convenient locations. They offer standard charging service for EVs and payment will be made through Octopus. During the trial period, EV users can enjoy free charging services provided by HK Electric at the charging stations. The company has already established seven EV charging facilities on Hong Kong Island.

At present, the government and the two power companies have installed EV charging facilities at 39 locations across the territory. Another 23 locations will be added to the list by mid-2010. The number of charging facilities installed thus far is only the beginning of a continual growth trend as the number of EVs and the demand for charging services will increase over time. The Government will continue to encourage the power companies, property developers, property management companies and car park operators to set up charging facilities at their car parks to meet the growing demand for EV charging service.

EV users can easily plug in at the charging stations which are in convenient locations. They can enjoy free charging services during the trial period.

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