Why Hong Kong Matters Now, By Christophe Bahuet, Country Director
Why Hong Kong Matters Now
By Christophe Bahuet, Country Director
Why Hong Kong Matters Now International Forum
3 July 2012
ladies and gentlemen,
- On behalf of the United Nations Development Programme, I would like to express my most sincere thanks to the Executive Committee of the World Trade Centres Association Hong Kong and her chairperson for the invitation extended to speak at this high level event in Hong Kong.
Why is it a fitting time to discuss the importance of Hong Kong?
- 2012 is a significant year for Hong Kong. It marks the 15th anniversary of the establishment of the Hong Kong Special Administrative Region and earlier this week, Mr. CY Leung became the new Chief Executive of Hong Kong SAR. On this occasion, let me offer on behalf of UNDP our warmest congratulations to Mr. Leung on his election and our best wishes for a very successful mandate as Chief Executive.
- Today’s topic is also very timely because of the global economic uncertainty and the persistent turmoil in the Euro zone, which is bound to impact the economic growth of China. With Hong Kong being a global and regional business and financial hub, exploring why Hong Kong matters in this period of incertitude is definitely timely and of high interest.
Economic importance of Hong Kong: A Bridge between China and the world, trade and finance
- Hong Kong matters now because its role as a bridge between China and the rest of the world remains pivotal. Last year, 15.3% of the mainland’s foreign trade was handled through Hong Kong, including re-exports to and from the Chinese mainland. Hong Kong is also the third largest trading partner of mainland China, trailing just behind the US and Japan and accounting for 7.8% of its total trade in 2011. Revealingly, Hong Kong is also the largest source of overseas direct investment in mainland China. By the end of last year, among all the overseas-funded projects approved in Chinese mainland, as much as 43.8% were tied to Hong Kong interests.
- Hong Kong matters now because Hong Kong holds the unique position of offering valuable economic experience to China. It was no coincidence that during the beginning of China’s economic reforms, the country’s initial four special economic zones (Shenzhen, Zhuhai, Shantou in Guangdong and Xiamen in Fujian) were strategically set up in close proximity to Hong Kong, with Shenzhen, being the most successful and remarkable among them. China is now the second biggest economy in the world and a key engine of the global economic growth. Yet, it is faced with many challenges and the experience that Hong Kong is providing to China spans across a number of sectors. This includes the financial sector, given Hong Kong’s established role as a financial hub and its critical mass of relevant resources, in terms of capital, talent and the world-class institutions and regulations in place. Maybe nothing epitomizes Hong Kong’s role of providing economic experience to the rest of China more than the fact that the Special Administrative Region is now the leading offshore center for RMB, developing cross-border settlement in the currency. In fact, both the amount of RMB deposits and the number of institutions authorized to conduct RMB business in Hong Kong have risen sharply over the past year. Looking into the future, it is clear that Hong Kong will continue to provide valuable economic experience. With financial reform to be one of the top priorities in China’s agenda, Hong Kong’s time-tested financial system will certainly serve as an example of how to adjust the financial system so that the rates of return and the direction of investment of domestic savings will become more responsive to market conditions, which will certainly be of great importance to China’s efforts in boosting domestic consumption.
- Hong Kong matters now also because in a gloomy global context, the world perceives it as a land of dynamism and opportunities. Hong Kong is attractive to the citizens and the companies of the world. Between 2008 and 2011, the number of registered French in Hong Kong increased by 60 per cent. Hong Kong is where the French community in Asia is the largest. In 2011, Schneider Electric has moved its whole management team, including its CEO to Hong Kong.
Hong Kong’s role in sustainable development
- Given Hong Kong’s economic success, one might be tempted to conclude that the Special Administrative Region only matters on the economic front. However, as successful as it has been economically, Hong Kong’s importance goes way beyond the economic dimension. And from a UNDP point of view, it is crucial to highlight that Hong Kong matters now for sustainable development.
- During the recently concluded United Nations Conference on Sustainable Development, commonly referred as Rio+20, UNDP underscored that sustainable development has three interdependent and mutually reinforcing pillars: economic, social and environment. Hong Kong has clearly thrived economically, but its experience on the environmental and social is also highly relevant to China and the rest of the world.
Significance of Hong Kong in the area of environment
- Hong Kong has developed itself into one of the greenest cities in Asia. According to a report published by Siemens and the Economist Intelligence Unit last year, Hong Kong is among the 7 major Asian cities with an overall environmental performance above average, which covers areas such as energy and carbon emissions, transport, water, waste management, sanitation, air quality and environmental governance.
- In particular, Hong Kong outperforms all major Asian cities in the area of land use and buildings. The city’s achievement in this area can be attributed in part to its natural geography, but more importantly, it is the government’s proactive policies towards conservation of green space, as well as strong policies on eco-buildings and land-use that makes Hong Kong a leading performer in this category. In that respect, a very encouraging initiative is the city’s participation in the C40 – a network of the world’s megacities that account for 18% of the global GDP and 1 in 12 people worldwide, which take actions to reduce greenhouse gas emissions.
- Being environmental friendly yields socioeconomic dividends as it helps improve the competitiveness of the city. Multinational companies increasingly take these factors into consideration when deciding the locations of their offices. Experts as renowned as Michael Porter from the Harvard Business School have shown that strict environmental regulations can induce efficiency and encourage innovations that help improve commercial competitiveness, which more than offsets the cost of complying with them.
- Hong Kong matters now precisely because this technical expertise and best practices can serve as a very good reference for other cities around the world, especially in rapidly urbanizing mainland China. Rapid urbanization will pose great challenges to the Chinese cities, including securing sufficient public funding for the provision of public services for an expanding population, and dealing with demand and supply pressures on land, energy, water and the environment, all areas in which Hong Kong has clearly very valuable experiences to share.
Significance of Hong Kong in social development
- The third pillar of sustainable development is the social pillar. For the past decades, Hong Kong has a vibrant civil society, with rising level of public participation, which can contribute to policies formulation and implementation and provision of basic services. China’s 12th Five-year Plan includes references to the role that social organizations can play in providing public services and reflecting the needs of the people, for which Hong Kong’s history and experience may be of relevance.
- Hong Kong matters now as China is facing sensitive socio-economic issues, such as food safety where Hong Kong’s experience in both setting up and enforcing regulations and involving the food sector as well as associations and other stakeholders is highly relevant.
Hong Kong and the United Nations
- Hong Kong matters now to the United Nations because of the examples it gives and the contributions it makes to sustainable development. Hong Kong matters now to the United Nations also because it can financially support the work of the United Nations at a time when financial resources are particularly needed. Hong Kong is seen as the most sophisticated Asian city for philanthropy. Last year contributions from Hong Kong made up 64% of charitable donations in China. UNDP benefits from support from Hong Kong Foundations. The Hong Kong Committee for UNICEF founded in 1986 organize fundraising and advocacy activities to provide financial support for UNICEF’s programmes to help children survive and thrive. UNICEF Charity Run, which has been held for six consecutive years, is currently the 2nd largest distance running event in Hong Kong raising more than HK$28 million and attracting over 32,000 runners.
- The UN is actively supporting the cause of volunteerism and here again, Hong Kong matters because volunteering is also a norm for Hong Kong citizens. Hong Kong is well represented in UNDP China with volunteers as well as staff members from Hong Kong providing their expertise in development, economics, IT, etc, and contributing to the work of UNDP.
- For all these reasons, for the economy and for social development, for expertise and the sharing of experience, for China, the world and the United Nations, Hong Kong matters now, and as UNDP we look forward to seeing an increased role played by Hong Kong in all these areas.
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