Asian American Chamber of Commerce (AACC)“Lunch with Leaders” luncheon The City Club of Washington
Remarks by Sylvester Wong
Director, Hong Kong Economic and Trade Office
September 27, 2023
I am honored to have the opportunity to speak to members of this distinguished chamber. This afternoon I will give you an overview of developments in Hong Kong – from the status of our economy to efforts to nurture new areas of sustainable growth.
First, let me introduce the work of our office. The Hong Kong Economic and Trade Office is the official representative of the Hong Kong Special Administrative Region Government. Our mission is to enrich economic, trade, and cultural ties between Hong Kong and the US.
In addition to the office in Washington, we maintain offices in New York and San Francisco. These two offices host a number of activities and programs. They also house Invest Hong Kong teams tasked with attracting businesses and talent. The offices offer free counseling services to American companies wishing to establish an office or expand operations in Hong Kong.
Now, let me quickly bring you up-to-date on the economy. Like many economies, Hong Kong is undertaking course corrections after stifled growth due to the pandemic. In the first quarter of the year, our economy registered growth of 2.9 percent. However, growth slowed to 1.5 percent in the second quarter given global economic headwinds and higher interest rates. As an aside, some of you may know that thanks to our Linked Exchange Rate System, Hong Kong interest rates move in lockstep with those in the US. As a result, they can have an outsized influence on our economy.
Tourism has rebounded. Inbound tourism figures were up to 80 percent of pre-pandemic levels in August. Unemployment is low, at 2.8 percent. The headline inflation rate is forecast at 2.9 percent. Our Financial Secretary forecasts growth for the year of between 4 to 5 percent.
Illustrating our return to the world stage, this year we have – or soon will – host a number of major international financial events. In January, we hosted the Asian Financial Forum, Asia’s premier platform for global leaders in government, finance and business. In March, we hosted Art Basel Hong Kong, the third location for the acclaimed arts fair after Basel and Miami. In the coming months, we will host FinTech Week and the Global Financial Leaders’ Investment Summit.
The US and Hong Kong have long enjoyed extensive economic and trade ties. The US is Hong Kong’s 3rd largest trading partner – after Mainland China and Taiwan – and our 2nd largest export market.
In 2022, bilateral merchandise trade between the US and Hong Kong amounted to US$30 billion. US goods exports to Hong Kong reached nearly US$26 billion in 2022, with Hong Kong being the US’s 5th largest market for wine exports, 7th largest market for beef and beef products and 21st largest market for agricultural and related products. As a result, the US enjoys a sizeable trade surplus with Hong Kong, amounting to US$21 billion in 2022 – a point we like to emphasize in discussions with our American friends.
With nearly 1,300 firms, the US remains one of the largest sources of overseas commercial presences in Hong Kong. Not surprisingly, the American Chamber of Commerce in Hong Kong is the largest international chamber in the city. This is a strong vote of confidence in the city’s economic prospects.
In addition, US nationals represent one of the most significant foreign presences in Hong Kong. An estimated 70,000 US citizens call Hong Kong home.
The US and Hong Kong maintain several bilateral agreements on issues such as taxation and air transportation services. Areas of cooperation include counter-terrorism, anti-money laundering and drug trafficking, and maintaining strict export controls.
Hong Kong learned early on the importance of adhering to free market principles. As an externally oriented economy, our commitment to free and open trade spurred economic development and in turn sustained prosperity. The city continues to be recognized for its economic policies. Last week, The Fraser Institute released its “Economic Freedom of the World 2023 Annual Report,” which ranked the city as the 2nd freest economy in the world.
Hong Kong has the requisite strengths of an international financial center on par with London and New York: market size, liquidity, infrastructure, talent, balanced regulation aligning with the best international standards, and, above all, the common law. This has allowed Hong Kong to bolster its financial services industries. The city is now Asia’s leading asset-and wealth-management center. Our A&M business amounted to over US$3.9 trillion in 2022, with 64 percent of the funding sourced from non-Hong Kong investors.
Our financial services acumen and international exposure have presented the city with a unique and essential role: as a trusted testing ground for the Mainland’s liberalization policies. The suite of mutual market access initiatives serves as a compelling example. The expansion of various cross-boundary “Connect” schemes for stocks, bonds and wealth management build upon our position as the leading center for offshore Renminbi cross-border trade settlement.
Hong Kong has been entrusted with enhancing the international exposure of the Renminbi. The city has the largest offshore RMB liquidity pool, occupies the top position for global RMB payments, and has a mature RMB business ecosystem. Hong Kong holds about one trillion in RMB deposits and handles about 75 percent of the world’s offshore RMB payments.
Under the principle of “one country, two systems,” Hong Kong may enter into free trade agreements, on its own, with economies around the world. This has allowed us to strengthen our connectivity to the Mainland and international markets. We have signed eight free trade agreements with 20 economies, including with the Mainland and the Association of Southeast Asian Nations. Just earlier this year we began negotiations with Peru on a free trade agreement.
As a trading bloc, ASEAN is our 2nd largest trading partner. While our FTA with ASEAN entered into force just over two years ago, our trade in goods with the bloc has reached a record US$165 billion. The comprehensive agreement encompasses enhanced market access, investment protections and dispute resolution mechanisms, among of things.
ASEAN’s member states are founding members of the Regional Comprehensive Economic Partnership. RCEP members in 2022 accounted for 71 percent of Hong Kong’s total merchandise trade and 46 percent of our trade in services in 2021. It comes as no surprise that we are actively seeking accession to RCEP to bolster our goods and services trade.
While we look to enhance our connectivity with the world, some of the most significant opportunities are emerging right in our backyard. Hong Kong is an integral part of the burgeoning Guangdong-Hong Kong-Macao Greater Bay Area, a cluster-city development comprising Hong Kong, Macao and nine neighboring cities in the Pearl River Delta. The Greater Bay Area has a combined population of over 86 million people and a GDP of over US$1.9 trillion. It aims to leverage the competitive and complementary advantages of the three areas to promote regional economic development.
The earlier mentioned offshore RMB business ecosystem positions Hong Kong to serve the development needs of the Greater Bay Area. Enterprises in the area are able to handle their cross-border settlement, financing and asset management in Hong Kong for their business expansions.
Hong Kong is looking beyond its traditional pillar industries to diversify the economy – and innovation and technology is front-and-center. Just today, the World Intellectual Property Organization recognized the significance of our I&T potential in its “Global Innovation Index.” The index ranks the Shenzhen-Hong Kong-Guangzhou science and technology cluster 2nd globally, while Hong Kong ranks 5th in Asia and 17th globally.
Our government recently laid out a blueprint to plot the city’s I&T course, rolling out bold measures to attract enterprises in areas such biotechnology, fintech and green living.
Hong Kong has nurtured a vibrant biotech ecosystem, thanks in large part to our talented workforce. Five of our universities are ranked among the world’s top 100 universities. Coupled with strong research capabilities, the city is now Asia’s largest and the world’s second-largest fundraising hub for biotechnology companies.
Hong Kong has a highly digitized economy. With world-class financial infrastructures and a robust and balanced regulatory environment, the city is at the forefront of financial technology development. Of course funding support is crucial. Thankfully, Hong Kong has deep wells of potential financing. Our stock market is the world’s 7th largest and Asia’s 4th largest by market capitalization at US$4.3 trillion. Hong Kong is already home to over 800 fintech companies and start-ups. Virtual banks, insurers and asset trading platforms already offer a spectrum of innovative financial services and products.
Hong Kong is on its way to becoming a green tech and green finance hub. Green and sustainable debts issued last year totaled US$80 billion. The bonds issued accounted for more than one-third of the Asian market. Together with our sister cities in the Greater Bay Area, we envision building a financing chain, which will drive global green transition.
Hong Kong has to be more than just a commercial center. It has to be an enjoyable and livable city. Over the years, we have been working to cultivate a vibrant and diverse arts and cultural landscape. The culmination of our visionary work is the West Kowloon Cultural District. The district, situated along scenic Victoria Harbor, is an integrated arts and cultural hub, providing a suite of museums and performing arts facilities to connect artists and audiences.
M+ is the district’s new museum of contemporary visual culture, which boldly showcases visual art, design and architecture. The Hong Kong Palace Museum exhibits artefacts on loan from The Palace Museum, covering 5,000 years of Chinese art and culture.
In addition, the district is home to world-class performing venues, such as the Xiqu Center, which is dedicated to the promotion and preservation of Chinese opera; the Lyric Theatre for dance and theater; and Freespace, a venue for contemporary and experimental performing arts. Next month, Freespace will present the Freespace Jazz Fest. Now in its 5th edition, the festival will feature over 500 local and international musicians and offer a series of free programs and audience experiences.
I could go on about the myriad opportunities Hong Kong offers – for investor and visitor alike. I do hope I have given you a snapshot of some of the more exciting developments in our city. I hope that I may rely on you to spread the word that Hong Kong is once again open for business and fun.