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Monday, June 11, 2018
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Highlights From the Caixin Summit Hong Kong

Hong Kong has experienced economic success by harnessing it status as an international financial center and proximity to the Chinese mainland. But it has become increasingly reliant on industries like finance and real estate, and must diversify its path going forward, experts said Friday at the Caixin Summit Hong Kong .

The government officials and financial professionals that spoke at the summit generally agreed that Hong Kong's opportunities lie in industrial upgrading and technological innovation, as well as taking advantage of opportunities brought by projects like the Greater Bay Area and Belt and Road Initiative.

 

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Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor delivers the opening speech to the summit.

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Springboard for Chinese companies

Hong Kong's gross domestic product (GDP) was equal to 20% of the Chinese mainland's in 1990, but now the proportion is less than 3%. Some say Hong Kong will be marginalized during China's continued reform and opening-up.

"Such an opinion completely lacks economic logic," said Norman Chan Tak-Lam, chief executive of the Hong Kong Monetary Authority. Chan reminded attendees that Hong Kong's per capita GDP is $46,000, while the figure on the Chinese mainland is only $8,000. "Hong Kong does not need to worry. As long as we understand the overall development situation of the country, and maintain the status of Hong Kong, we can continue to play a major role and achieve a win-win situation," he said.

Hong Kong has also long been a springboard for Chinese enterprises going global. The more the mainland opens up, the more important Hong Kong's role will become, said Hong Kong Financial Secretary Paul Chan Mo-po. The city can serve as an international business headquarters and monetary center for mainland enterprises going abroad, he said.

Hong Kong's advantages include its clean and transparent governance, efficient markets and policies, compliance with international regulatory standards, and geographical proximity to the Chinese mainland, said Laura Cha Shih May-lung, chairman of Hong Kong Exchanges and Clearing Ltd.

With adequate financial resources, it's time for Hong Kong to invest in sectors of the future, including tech innovation, said Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor.

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Lam told listeners that Hong Kong must innovate and invest in sectors of the future.

Obstacles for the Greater Bay Area

The Guangdong-Hong Kong-Macau Greater Bay Area aims to bring together Hong Kong's strength in finance, Macau's in entertainment, and the Pearl River Delta's in high-tech and manufacturing, to build an even more powerful economic zone, comparable to similar areas centered around San Francisco, New York and Tokyo.

The area can increase its prowess as a global value-chain hub with the manufacturing strength of Dongguan and Foshan, cities next to Guangzhou, and the electronics powerhouse of Shenzhen, said Guo Wanda, vice chairman of the Chinese Association of Hong Kong & Macau Studies. With nearly 80 universities located in the area, it can also become a tech innovation hub, he said.

But notable obstacles lie ahead, including coordination among the three different political and economic systems of the mainland and the special administrative regions of Hong Kong and Macau, which use European-style systems reflective of their colonial past. Experts called for more coordination and communication among these different administrations.

Risks of Belt and Road projects

Hong Kong can serve as a financing center for Belt and Road-related infrastructure projects, said Hong Kong Financial Secretary Chan. The Hong Kong Monetary Authority has established the Infrastructure Financing Facilitation Office to promote investment in and financing of infrastructure projects, and the office has been discussing cooperation with some Chinese state-owned enterprises, he said.

Chinese investment and financing along the Belt and Road have created opportunities for the internationalization of the yuan. However, among various types of direct investment, infrastructure investment may be the toughest as many projects inevitably involve land acquisition, demolition, compensation, environmental protection and labor issues, Chan with the Hong Kong Monetary Authority said. In addition, these projects often have long construction and return periods, and may face political interference, he said.

For such projects, he suggested that Chinese companies consider bringing in international investors, not only to raise money through loans and debt financing, but also to have more investors to share risks and returns.

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