Speech by the Director-General
of Trade and Industry
Monday, April 2, 2001
The following is the full text of the speech by the Director-General of Trade and Industry, Mr Joshua Law, at the Opening Ceremonies of the Institute for China and Global Development and the Hong Kong WTO Resource Centre today (April 2):(English only)
Vice-Chancellor, Prof. Davies, distinguished guests, ladies and gentlemen,
I am delighted to be here today on such a significant occasion. And I would like to congratulate the University of Hong Kong for your initiative in establishing the Institute for China and Global Development - an institute that will be a multi-disciplinary focal point for developing training and research programmes.
Franklin Roosevelt once said "wise and prudent men have long known that in a changing world worthy institutions can be conserved only by adjusting them to the changing time". I believe the University of Hong Kong has taken a more progressive step by creating a new institution as it adjusts to changing times. And I am sure the programmes developed here will help us better understand China's interactions with the global economy, as well as the economic, social, political, and legal transitions which are bound to accelerate as a result of the Mainland's membership of the WTO.
Let us take a look at some statistics. China is already the world's 9th largest trading entity in terms of combined goods and services. From 1999 to 2000, its foreign trade increased by over 31% to some US$474 billion. Being a major world trading nation with a population of over 1.2 billion, I believe no one can afford to overlook the impact of Mainland China's integration into the global economy. The establishment of the Institute for China and Global Development is, indeed, a most timely endeavour.
Hong Kong's Close Economic Ties with the Mainland
And Hong Kong is well positioned to take full advantage of the emergence of China as a world economic power. Over the past two decades, we have built up very strong commercial links with the Mainland. Such links were of course reinforced with our reunification in 1997. For some years, the Mainland has been our largest trading partner. In fact, the China market now accounts for almost 39% of the value of our trade, and we are the Mainland's third largest trading partner. Last year alone, our two-way trade increased by 19% to over US$160 billion.
We also continue to be the most important entrepot for indirect trade between the Mainland and the rest of the world. Nearly 55% of our total re-exports last year were Mainland-origin goods destined for overseas markets. Indeed, three-quarters of the 18 million containers handled by our port operators were related to Mainland trade, mostly to and from the Pearl River Delta.
The private sector is also playing a major part in Mainland China's development, particularly in the neighbouring Guangdong Province where Hong Kong companies employ more than 5 million people in some 70,000 wholly or partly owned ventures. This is 20 times the size of our own manufacturing workforce. And the cumulative value of our realised direct investment in China reached US$162 billion at the end of June 2000.
China's Accession to the WTO
China's entry into the WTO will bring us even more opportunities, although greater challenges as well, arising from increased competition from both Mainland-based and international companies. But the conditions for trade and business will undergo fundamental changes. For China's WTO membership will mean a fairer and more certain trading environment, wider market access, more foreign capital inflow, faster restructuring of state-owned enterprises, and accelerated transformation into a market-driven economy. This liberalisation in China's trade and investment regimes will stimulate faster growth in foreign trade and direct investment, bringing enormous efficiency and welfare gains to the Chinese economy in the longer term.
Indeed, China's State Council Research Development Centre estimates that real GDP growth will increase by 13% by 2010 as a result of China's WTO membership. Exports are estimated to rise by 22% and imports by 17%. And major financial institutions predict that the Mainland's annual external trade will double to US$600 billion by 2005, along with a doubling of annual foreign direct investment to US$100 billion over the same period. These are phenomenal figures by any standard.
Significant opportunities will also be available to foreign participation in the Mainland's service industries - in particular, telecommunications, financial services, and distribution. Even with the anticipated increased competition, Hong Kong's advanced business infrastructure, professional expertise, extensive business network, and close cultural and language ties with the Mainland will help us to secure a fair slice of the emerging economic opportunities.
So there will be enormous benefits for us in terms of both goods and services trade. To give you some idea of the benefits, it is estimated that by 2010, Hong Kong's exports involving the Mainland will rise by an additional 15% and our GDP by an extra five-and-a-half per cent.
Indeed, involvement in China's services market could well usher in the next wave of Hong Kong investment into the Mainland. And our professionals can contribute further to strengthening the Mainland's business and legal systems. However, in order to fully reap the benefits, we must also position ourselves, identify our niche, enhance our infrastructure, and sharpen the capability of our workforce.
Government's Initiatives to strengthen Economic Ties with the Mainland
To capitalise on these opportunities, we are already strengthening our links with the Mainland. Towards the end of 1999 we established a Joint Commission on Commerce and Trade (內地與香港特別行政鬼唬貿郡繫榷郎帆) to provide for high level liaison and communication and to exchange views regularly with Mainland authorities on matters of mutual concern. We also hope to participate in the strategic development of Western China, which covers more than half the nation.
The western region, which is rich in resources and has vast development potentials, has not yet enjoyed the same degree of prosperity as eastern China. So its development is an ambitious and long-term undertaking - one that will provide Hong Kong with business opportunities on a continuing basis. Opportunities that will be further explored when Mr Donald Tsang, as the new Chief Secretary, leads a high-level delegation to major cities there next month. Through this mission we hope our business people will gain a better understanding of the investment environment in the region to give them the edge over their competitors.
We will use the visit to reinforce Hong Kong's position as the premier international financial centre and business hub serving the Mainland. And we will also take the opportunity to promote our strategic position as the principal gateway for foreign companies entering the Mainland market and for Mainland companies seeking to expand their business overseas.
Hong Kong's Participation in the WTO
So far I have spoken in some detail of China's accession to the WTO for two reasons - the obvious benefits that will flow to the Mainland, Hong Kong and the rest of the world, and because today's ceremony also marks the inauguration of the Hong Kong WTO Resource Centre, which is established under the umbrella of the Institute for China Global Development. I very much welcome the establishment of this Resource Centre, which will no doubt promote more public interest and enhance public awareness of the work of the WTO in the global trading scene.
Hong Kong has always played an active part in the multilateral trade arena. Our participation dates back to 1986 when Hong Kong became a separate contracting party to the GATT (General Agreement on Tariffs and Trade). We are a founding Member of the WTO upon its establishment in January 1995, and have since been a constructive player in this rule-based multilateral trading system to ensure that it meets the needs of an increasingly integrated world economy. As a staunch supporter of free and open trade, we fully support the launch of a new round of multilateral trade negotiations which we hope will get under way at the 4th WTO Ministerial Conference in Qatar in November. We believe a new round can sustain the momentum of trade liberalisation and help forestall the world economy from sliding into protectionism or inward looking regionalism.
Indeed, I have just returned from a trip last week to Geneva to exchange views with my counterparts on ways to inject momentum into launching of a new round. In the coming months, many meetings of similar nature are likely to be held. I can assure you that Hong Kong will spare no efforts in participating in such meetings and garnering support for a new round. This year is a particularly important one for the WTO. Following the setback two years ago at the Seattle Ministerial Conference, the Organization's credibility is at stake. And the slowdown in the US and Japanese economies could raise the spectre of more domestic protectionist forces at work.
Unfortunately, the road to global free trade is a long and winding one. But we must endeavour to meet the challenges to try and narrow and hopefully resolve the many differences among individual members. So, against this background, it is timely to increase our efforts to promote public awareness of the benefits of the WTO and of a new round of trade negotiations. I understand that the new Institute [for China and Global Development] and the Hong Kong Trade Development Council will be organising a joint public forum on the WTO tomorrow. I applaud such initiatives and hope to see more efforts in this area in the months ahead. Finally, I would like to extend my best wishes for the future success of the Institute and the WTO Resource Centre.