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2016 June
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The “13th Five-Year Plan” Presents New Opportunities for Hong Kong

“Backed by the Mainland and Facing the World” is the unique advantage enjoyed by economic development in Hong Kong. At the kick-start of the “13th Five-Year Plan”, as Hong Kong enters a “new economic normal”, there is a need for the Hong Kong business world to understand the latest development direction of the country so as to ride on the tide.

 

John Tsang: The inclusion of Hong Kong in the Dedicated Chapter reflects an abundance of opportunities for Hong Kong

John Tsang, Financial Secretary, said that although the Dedicated Chapter of the “13th Five-Year Plan”, which mentioned the roles of Hong Kong and Macau, is brief, the content is rich with a “high gold content” and is very meaningful to the development of Hong Kong.

 

Transparent and comprehensive regulations on the financial sector

Tsang pointed out that Hong Kong has its advantages in the financial, commercial and legal sectors; therefore in the “13th Five-Year Plan”, various opportunities shall unfold in these areas. Firstly, he believed that Hong Kong’s financial market can become the “testing field” and also a “firewall” of the country. He also considered that the development of “One Belt and One Road” and the new economy shall bring important development opportunities to Hong Kong’s financing and fund management services. In addition, the expansion of the interconnection between the financial markets of the Mainland and Hong Kong as proposed in the “13th Five-Year Plan” is expected to be actualized.

 

Advantages in commerce and law

In the aspect of commercial and trading services, the Dedicated Chapter on Hong Kong and Macao also mentioned the further opening up of the Mainland to Hong Kong and Macao. Tsang disclosed that the HKSAR Government shall follow up on studying with the Central Government on the further substantiation of the content of CEPA.

 

Tsang further pointed out that there is an abundance of opportunities in the aspect of legal and dispute resolution services. The Dedicated Chapter on Hong Kong and Macao supports Hong Kong’s establishment of an international law and dispute resolution services center for the Asia-Pacific Region. This has also been one of the policy goals of the HKSAR Government. Hong Kong has a good source of legal professionals well equipped with international experience; therefore, he believed that Hong Kong can become a neutral 3rd place for providing dispute resolution services.

 

Fang Aiqing: Fully support economic and trade cooperation between Mainland and Hong Kong

“Opportunities are to be grasped. Once lost, they may not return.” Fang Aiqing, Vice Minister of the Ministry of Commerce, called upon the HKSAR Government and industries to find “what the country needs and what advantages Hong Kong has” in order to grasp the three major opportunities brought forth by the country’s “13th Five- Year Plan”.

 

Three major opportunities that should not be missed

The first opportunity is to participate in the “One Belt and One Road”. Fang pointed out that Hong Kong is at an advantageous position for setting up a financing platform and a transport hub, which can play a very strong role in the “One Belt and One Road”. The second opportunity is in materializing the liberalization in services and trade. Hong Kong not only understands the mode of operation of the international market, it also understands what Mainland industries need when undergoing transformation and upgrading as well as expanding its overseas markets. The third opportunity is the integration into the establishment of the Mainland’s pilot free trade zones. Fang pointed out that the four free trade zones in the Mainland welcome Hong Kong’s participation in their establishment and development, particularly in Guangdong.

 

The Mainland becomes the strong backing of Hong Kong’s development

Fang further pointed out that the Mainland is a strong backing for the development of Hong Kong. Facing the future, the Mainland shall continue its reform policies, to improve public services and to provide improved system and policy protection for the cooperation between the Hong Kong and Mainland industries. These include the further opening up to Hong Kong and to promote the upgrading of CEPA. In addition, the Mainland shall support the Hong Kong industries to participate in the “One Belt and One Road” and to actively strengthen mutual communication.

 

On the level of developing mutual cooperation, Fang directly pointed out that the industrialists shall form the main body. Over the years, Mainland and Hong Kong industries have joined hands in their development to contribute their efforts and wisdom for the opening up of China to the world and to the prosperity and stability of Hong Kong. He believed that under the cordial efforts of all sectors, the economic and trade cooperation between Hong Kong and the Mainland shall reap fuller harvest.

 

Li Wei: Expanding the areas of cooperation to build a better future

According to forecast, by 2020, the disposable income of 40% of China’s urban families shall exceed US$8,000, which means it will generate massive market needs following the development of China’s “13th Five-Year Plan”. Li Wei, Director of the Development Research Center of the State Council, found that this will create more opportunities for cooperation with foreign parties.

 

Transformation of industries and urbanization of rural areas

Li pointed out that the upgrading and transformation of industrial structure shall create new space for cooperation with foreign parties. Whether it is the transformation and upgrading of traditional industries or the development of new industries, or the achievement of new breakthroughs in key technological areas, China needs broader international cooperation. On the other hand, Li also pointed out that the progress of new urbanization shall release potential for international cooperation. China not only needs to borrow the experience of other nations and regions, it also welcomes with open-mindedness the participation by foreign enterprises in China’s urban operation and management.

 

Regional coordination brings new landscape

At the same time, the promotion of regional coordination and development shall bring forth new opportunities for cooperation. Li indicates that the speeding up of urban development promotes regional economic coordination and development which require massive capital investment. The strong development of cities will also create a massive need for industrial investment, thus bringing wide opportunities for sinoforeign cooperation.

 

Lastly, Li found that the construction of a comprehensive new pattern shall open up new areas for cooperation. During the implementation period of “13th Five-Year Plan”, China shall further substantiate the content of openness to the world and further deepen global cooperation. Following the deepening of China’s openness to the world, there shall be more opportunities for the world to enjoy the “bonuses” from China’s development.

 

Hong Kong may be marginalized during China’s future development. He believed that Hong Kong people will surely create a better and brighter future for Hong Kong should they fully understand the prevailing trends and grasp opportunities in a timely manner.

 

Wang Wenbin: COEs to deepen internationalization of operations

In recent years, central government owned enterprises(COEs) have significantly improved their overall strength through active restructuring and intensified innovation. Wang Wenbin, Vice Chairman of the State-owned Assets Supervision and Administration Commission (SASAC), noted that as of the end of 2015, COEs had total assets of RMB47 trillion and more than 8,500 units in Hong Kong, Macao, Taiwan and the rest of the world. They are located in 150 countries and regions, of which 47 COEs are listed on the Fortune Global 500.

 

Participating actively in “One Belt and One Road” construction

Wang said that currently over 80 COEs have already set up branches in the “One Belt and One Road” countries to undertake numerous related production capacity and transportation construction projects. As this year is the first year of the “13th Five- Year Plan” period, Wang stressed that the SASAC will comprehensively drive the COEs to go deeper into internationalizing their operations in order to foster a number of key state-owned enterprises that are highly innovative and internationally competitive.

 

Making the best use of Hong Kong’s strength as a “bridgehead”

Wang hopes to fully capitalize on Hong Kong’s role as a “bridgehead” to drive the COEs, especially those operating in Hong Kong, to help Hong Kong’s economy achieve new development while actively participating in the “One Belt and One Road” construction. He explained that 1. through Hong Kong, the COEs can serve as a fundraising platform for internationalization of operations, providing financing channels such as loans, bonds and equities for participation in the “One Belt and One Road” construction; 2. the COEs can leverage Hong Kong’s strengths in logistics for extensive cooperation with Hong Kong enterprises in areas such as overseas operations; and 3. as Hong Kong brings together financial, legal, accounting, engineering, environmental protection and design professionals, the COEs can make the best use of its talents and services.

 

Wang stressed that because Hong Kong is an important fulcrum for the “21st Century Maritime Silk Road”, the SASAC will continue to support the COEs to invest and develop in Hong Kong in order to fully capitalize on Hong Kong’s role as a “bridgehead” to further promote the “One Belt and One Road” construction.

 

K C Chan: Dedicated Chapter on Hong Kong and Macao sets direction for the next five years

K C Chan, Secretary for Financial Services and the Treasury Bureau, noted that the Dedicated Chapter on Hong Kong and Macao in the Outline of the “13th Five-Year Plan” has outlined the direction of development for Hong Kong’s financial sector in the next five years.

 

Hong Kong continues to be a test bed for RMB liberalization

Chan said that the “13th Five-Year Plan” has confirmed Hong Kong’s development as a global hub for offshore RMB operations. The Mainland has always regarded Hong Kong as a pilot for cross-border RMB operations. He looks forward to Hong Kong continuing to be a test bed for RMB capital account liberalization on the strength of its wealth of experience and sound, mature financial platform.

 

With regard to asset management, Chan said that the HKSAR Government had submitted a bill to the Legislative Council in January on providing a legal framework for the introduction of open-ended fund companies, which is likely to attract more funds to register in Hong Kong.

 

Deepening Mainland-Hong Kong financial cooperation

Chan said that the HKSAR Government will focus on accelerating interoperability between the markets of both places going forward. Compared to the “12th Five-Year Plan” which set forth to support developing Hong Kong’s financial system into the leader of the Pearl River Delta cities, the “13th Five-Year Plan” is more progressive, as it deepens financial cooperation and expands it nationwide.

 

The Mutual Recognition of Funds Arrangement between the Mainland and Hong Kong came into effect last year. Chan stressed that the Arrangement will help internationalize RMB, broaden Hong Kong’s offshore RMB product range, and deepen the interoperability between the financial markets of the two places. He also mentioned that the HKSAR Government has discussed implementing the “Shenzhen-Hong Kong Stock Connect” and improving the “Shanghai-Hong Kong Stock Connect” with the Central Government.

 

Infrastructure financing facilitation office could begin operation this summer

Chan said that the HKSAR Government will continue to discuss with the Central Government and AIIB an appropriate arrangement for Hong Kong to join the bank as a non-sovereign region. Meanwhile, the infrastructure financing facilitation office (IFFO), which the HKMA is preparing, would begin operation this summer and could develop Hong Kong into a main fundraising and financial management platform for constructing the “One Belt and One Road”.

 

Vincent Lo: Hong Kong to capture “13th Five-Year Plan” opportunities to take off again

The “13th Five-Year Plan” inclusion of Hong Kong into the country’s development process means that the country’s continuing reform and development will present new opportunities for Hong Kong’s sustainable development. Vincent Lo, Chairman of the Hong Kong Trade Development Council, pointed out that Hong Kong should capture the golden opportunities arising from the “13th Five- Year Plan” to turn its strengths into power for it to take off again.

 

Strengths in finance, innovation, technology and arbitration

Under the “13th Five-Year Plan”, trading activities between the Mainland and the rest of the world are expected to increase. Lo pointed out that as Hong Kong is an international financial centre and a global investment hub, it can become a “Super Connector” between the Mainland and international capital markets.

 

With regard to innovation and technology, Hong Kong can provide one-stop services from end to end of the innovation and technology industry chain. Lo explained that Hong Kong is able to satisfy the needs for fundraising for research in the early stage; commercialization of research achievements and product design in the middle stage; and product testing and marketing by serving as a stepping stone in the final stage. Subsequently, enterprises can make use of Hong Kong’s global sourcing platform and sales network to go global.

In the process of Mainland enterprises “going global” and foreign enterprises “coming into the country”, they are subjected to different trade rules of each country. Lo believes that in addition to having a sound legal system and adopting a common law system that the international business community is familiar with, Hong Kong has extensive experience in international arbitration. Therefore, Hong Kong is well-positioned to provide crossborder mediation and arbitration services.

 

Catering actively to “One Belt and One Road” market needs

Lo reiterated that the “13th Five-Year Plan” period, as a key period for driving the “One Belt and One Road” initiative, will create golden opportunities. Lo hopes that Hong Kong can play the role of an international hub, providing a platform for integration, intermediation and market orientation, while promoting Hong Kong’s own economic development.

 

Li Jianhong: Capitalizing on triple dividends from “13th Five-Year Plan”

The “13th Five-Year Plan” is very critical to the country, Hong Kong and Chinesefunded enterprises operating in Hong Kong. Li Jianhong, Chairman of China Merchants Group, stressed that to the country, the “13th Five-Year Plan” period is a crucial period for building a moderately prosperous society; to Hong Kong, it is a critical period for consolidating its position for opening up externally and for achieving new development; and to Chinese-funded enterprises operating in Hong Kong such as China Merchants Group, it is a key period for developing into a world-class enterprise, as it provides many opportunities for enterprise development.

 

Dividend from deepening of reform

The “13th Five-Year Plan” stressed the need to deepen reform, which, Li believe, shows that the country will vigorously drive the reform of state-owned enterprises, intensify efforts to reorganize and integrate COEs and concentrate resources on enterprises that have competitive advantages, while increasing the level of opening up externally to further advance the “One Belt and One Road” strategy.

 

Dividend from restructuring

Promoting the upgrade of traditional industries and providing support for strategic emerging industries are also the priorities of the “13th Five-Year Plan”, with particular emphasis on promoting supplyside structural reforms and implementation of “Internet+”. In Li’s view, it shows that structural adjustment is the theme of economic development during the “13th Five-Year Plan” period, under which the country will focus on fostering and growing emerging industries, transforming and upgrading traditional industries, and developing a modern Internet industry system.

 

Dividend from economic landscape reconstruction

The “13th Five-Year Plan” has put forward five new development concepts: innovation, coordination, green development, opening up and co-sharing. Li believes that these five concepts are bound to reshape China’s new economic landscape at the overall level. Reconstruction of the country’s economic landscape will also push enterprises to achieve new breakthroughs in terms of volume, structure, model and efficiency.