Speech by Permanent Secretary for Constitutional and Mainland Affairs (English only)

  The Permanent Secretary for Constitutional and Mainland Affairs, Mr Joshua Law, on December 3 made a presentation entitled “The Hong Kong Special Administrative Region (HKSAR) Government’s role in promoting co-operation between Hong Kong and the Greater China Region” at the Regional Symposium on Rapid Social and Economic Change and Policy Responses in Greater China co-organised by the Hong Kong Institute of Education (HKiEd), National Taiwan University and Sun Yat-sen University. Following is the full text of Mr Law’s presentation.

Professor Mok (Ka-ho), distinguished guests, ladies and gentlemen,

 Let me begin by congratulating the HKiEd for your achievements over the years. I had the good fortune of holding an education portfolio some time ago. My strong conviction then was that the quality of education in Hong Kong really depended to a very large extent on the quality of our teachers. I would like to congratulate the HKiEd for your steadfast efforts over the years in equipping our teachers to ensure that our students receive the best quality education to prepare them for the world and for their careers in the days and years to come.

  I would like to thank you all for inviting me to this symposium and I would want to, like your president (Professor Cheung Bing-leung) said just now, welcome our guests from Mainland China, Taiwan and Macao to visit Hong Kong. I hope you have time not only to attend this symposium but also to look around our city which we pride ourselves on being “Asia’s World City”.

 The theme of this symposium is how we should respond to the rapid social and economic changes in the Greater China region. I would like to start by recapping the major changes in the Mainland, Hong Kong, Macao and Taiwan in the last few decades. I will then talk about the roles of the HKSAR Government in promoting co-operation and exchanges in the Greater China region and how we meet these challenges.

 We see remarkable changes in the Mainland over the last 30 years. In 1978, China embarked on a policy of opening up and reform. Since then, China started to reform, develop and prosper at lightning speed. With her entry into the World Trade Organization in 2001, globalisation has gone past the point of no return for Mainland China.

  In the last three decades, we have witnessed the country's rapid economic development, rising national power and huge improvement in people's standard of living. In 2009, China's Gross Domestic Product (GDP) reached US$ 4.9 trillion, up by over 92 times compared with 1978. Over the same period, per capita income increased by 67 times from around US$ 55 in the 1970s to the present level of over US$ 3000. Recent figures indicate that Mainland China will soon overtake Japan as the world's second-largest economy. These remarkable achievements have made China the focus of world attention.

Hong Kong

  Let’s look at Hong Kong.

  Politically, Hong Kong was formerly a British colony. We were reunited with our Motherland and became a Special Administrative Region with a high degree of autonomy in 1997.

  Economically, we have transformed from a local entrepôt engaged largely in manufacturing industries into a world city where services account for more than 90 per cent of our GDP.

  Over the last 30 years, Hong Kong manufacturers played a significant role in the “four modernisations” of China, especially in building a strong manufacturing base in southern China. The signing of the Close Economic Co-operation Agreement between Hong Kong and the Mainland (CEPA) in 2003 signalled a new phase of economic co-operation between us and the Mainland and added impetus to our economy.

  Today, our social, economic and cultural ties with Mainland China are stronger, deeper, and broader than they have ever been. Indeed, we are well poised to make further contribution to the development of Mainland China in the next 30 years, particularly in the development of modern services industry.


 Likewise, we see changes in Macao. In 1999, Macao became a Special Administrative Region of Mainland China and is now a major centre of tourism.


 Let’s turn to Taiwan. Over the years, Hong Kong and Taiwan have maintained very close cultural and economic ties. The total bilateral trade between our two places amounts to around US$30 million. Taiwan is our fourth largest trading partner, after Mainland China, the US and Japan.

  For reasons that we are all familiar with, direct contact across the strait had been held up for decades. However, cross–strait relations entered into a new era in 2005 following the visit to the Mainland by Mr Lien Chan, then chairman of Kuomintang.

  Following the general election in 2008 with Kuomintang regaining power in Taiwan, we have seen significant improvements in cross-strait economic ties and the implementation of the “Three Direct Links”.

     Some commentators are concerned about the impact of the “Three Direct Links” on Hong Kong. Our strong belief is that we need not to be too concerned because further integration in economic activities in the region will generate greater opportunities for trade, commerce and other areas. As the “pie” becomes bigger, all places in the region will benefit. Indeed, if we look at the figures for the first three quarters of this year from January to September, the total trade value between Taiwan and Hong Kong was about US$28 billion, representing an increase – not a decrease which is after the implementation of the “Three Direct Links” – of about 37 per cent over the same period last year.

     This year, we also saw another significant development, i.e. the signing of ECFA – the Economic Co-operation Framework Agreement. It signifies that cross-strait economic and trade relations have entered into a new stage of development. Not only will these positive initiatives enhance the interaction between the two places, but they will also benefit the economic development of the region, including Hong Kong.

     So we see that the world today is undergoing extensive and profound changes. As the world looks to the East, the Greater China region will no doubt play an even greater role in the decades to come. To qualify for a front-row seat in this process, ahead of other cities in our region, the HKSAR Government has been making proactive efforts in fostering exchange and co-operation between Hong Kong and the region, particularly with Mainland China and Taiwan, with a view to further enhancing our competitiveness.

The roles of HKSARG

     Now let’s take a look at our roles as the Government. There are four aspects that I can think of. The first one is to foster strategic partnership; second, to enhance complementary development; third, to be a door opener; fourth, to lead in the process. I will illustrate each of these roles in the next few slides.

Forstering strategic partnership – HK-Regional co-operation

     Firstly, fostering strategic partnership. Since 1997, we have established a number of co-operation frameworks with Mainland and our regional partners, just to cite a few: the Pan-Pearl River Delta Regional Co-operation and Development Forum which covers nine provinces plus Hong Kong and Macao. Pan-PRD covers a huge market for goods and services, serving a total population of 400 million. Second, we have set up the Hong Kong/Shanghai and the Hong Kong/Beijing Economic and Trade Co-operation Conferences. The Hong Kong/Beijing Co-operation Conference was just held last week and we have signed a number of MOUs on co-operation. Third, we also have the Liaison Officer mechanism set up with Macao. I myself serve as the Liaison Officer for the HKSAR Government, liaising with my counterpart in the Chief Executive’s Office in Macao.

     Among the various regional co-operation initiatives, the one bringing the greatest immediate benefits to Hong Kong businesses is Hong Kong/Guangdong co-operation, given the close proximity to Hong Kong. Today, I will not go into the details of every one of these co-operation frameworks, but will highlight and illustrate to you using the Hong Kong/Guangdong co-operation as an example.

Forstering strategic partnership – HK-Guangdong co-operation

     In 1998, the Governments of the HKSAR and the Guangdong Province jointly set up the Hong Kong/Guangdong Co-operation Joint Conference, which is co-chaired by the Chief Executive of Hong Kong and the Governor of Guangdong. The aim of the Joint Conference is to study, co-ordinate and take forward issues of mutual interests so as to facilitate co-operation and exchanges of both sides. In January 2009, the National Development and Reform Commission announced the “Outline of the Plan for the Reform and Development of the Pearl River Delta”, which elevated co-operation between Hong Kong and Guangdong to a national strategic level. In order to translate the macro policies in the Outline into concrete measures conducive to the development of both places, Hong Kong and Guangdong, under the support of the Central Government, signed the Framework Agreement on Hong Kong/Guangdong Co-operation in April this year.

HK-GD Framework Agreement

 Let me set out some of the key elements in the Framework Agreement.

     The Framework Agreement sets out clearly the positioning of Hong Kong/Guangdong co-operation, including six areas of co-operation, viz. a world-class new economic region; a financial co-operation region; a manufacturing and modern service base; a modern economic circulation sphere; a quality living area; and a world-class metropolitan cluster.

     To achieve these objectives, Hong Kong and Guangdong have put forward a number of specific policies and measures, as well as setting out the major initiatives for 2010. For example, in respect of the facilitation of the flow of people and goods, information and capital, both places will pursue the implementation of the Hong Kong-Zhuhai-Macao Bridge project in a timely manner – the project is expected to complete in 2015/16. This project is strategically important to the future development in Hong Kong and Macao, as well as the western Pearl River Delta Region. It will reduce transportation cost and save time for travelers and movement of goods in the Region.

     We will also continue with the planning of the Hong Kong-Shenzhen Western Express Line to link up our airport at Chep Lap Kok with Shenzhen airport and to facilitate the development of areas along the route, including Qianhai.

     We will also press ahead with the construction of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link which is expected to complete in 2015. On completion, the Express Rail Link will reduce the rail travel time between Hong Kong and Guangdong from the present 100 minutes to less than an hour, in fact to about 50 minutes. This Express Rail Link is very important as it connects Hong Kong with the whole express rail network in Mainland China. And we expect to have the capacity to run direct express train services between Hong Kong and some 16 major cities in the Mainland.

  The HKSAR Government and Guangdong Provincial Government are working closely to actively implement the various policies and measures in the Framework Agreement, and there has been good progress on the projects in 2010. We are working together to map out the Work Plan for next year.

Enhancing complementary development – 12-5

  The second role that we believe we have is the enhancement of the complementary development. I will illustrate using the example of the 12th Five-year plan.

  The 12th Five-year plan is a very important document which provides the blueprint for the nation’s social and economic developments in 2011 to 2015 and will shed light on Hong Kong’s future development.

  Some people will wonder why Hong Kong takes part in the Five-year plan. I have to clarify that Hong Kong is still a capitalist society. We are not drawing up our own Five-year plan. What we are doing is to complement and contribute to the formulation of the nation’s Five-year plan. We all know that Hong Kong is a very small place with barely over 1,000 square kilometers in area. Our prosperity cannot be sustained in isolation with the mammoth economy behind us. What we want to do is to ensure that the future development of our city will not conflict with the overall scheme of things north of our administration boundary.

  Our overall aim is to ensure that Hong Kong can play a greater role with our unique advantages and functions during the 12th Five-year plan period.  We really have to ensure that Hong Kong’s development will not be compromised by other developments around us. If we do not pay attention to the Five-year plan, China will, like it or not, definitely go ahead with their Five-year plan.  And if the outcome is such that what they plan is not in sync with ours, then we will be in trouble.
  Our aim during this (Five-year plan) period is to strive, to further enhance Hong Kong’s status as the international centre for finance, trade and shipping; to actively strengthen our services industry, such as the financial services, logistics, tourism and information services; to develop the six industries where Hong Kong enjoys clear advantages as the new growth areas for radiating into the Mainland. These six industries are education services, medical services, testing and certification services; environmental industries; innovation and technology; and cultural and creative industries. We will also actively promote our professional services, so that they could gradually develop the Mainland market and help raising the general standard of service industries in Mainland China.

  Working together with Guangdong Province, we will try to ensure that the most important elements or functions and positioning of Hong Kong/Guangdong co-operation are featured in the 12th Five-year Plan to be promulgated next year.

Door-opening – CEPA, Qianhai

  The third role that I mentioned to you is that of the door opener. This is the role of a facilitator. We see the Government in opening the door. With both the CEPA and also the new development plan in Qianhai, which I shall also mention briefly, we try to secure for the community new and more liberalised policies - so we are opening the door. But it is up to the private sector, the businessmen, to take the advantage of such opportunities.

  The CEPA is the first free trade agreement concluded by the Mainland and Hong Kong. It made way for the liberalisation of trade in goods and trade in services, as well as trade and other investment facilitation measures.

  The Mainland and Hong Kong signed the main text of CEPA in June 2003 and it came into force in January 2004. Subsequently, we signed another seven supplements to the CEPA. CEPA VII was signed in May this year, providing 35 market liberalisation and trade and investment facilitation measures in 19 sectors. This can further enhance Hong Kong businesses’ access to the continuously growing services market in the Mainland.

  So far the implementation of the CEPA has brought considerable benefits to Hong Kong enterprises and the economy as a whole. During 2004-09, cumulative business receipts obtained by companies in Hong Kong as a result of the CEPA from Mainland-related businesses reached HK$61 million.

  The other feature in this development is the implementation of the “Individual Visit Scheme”. It was introduced under the CEPA and has been extended to 49 Mainland cities. By October this year, over 57 million Mainland visitors have come to Hong Kong under the scheme. During 2004-2009, individual visit visitors brought about additional spending totaling over HK$84 million.
  As at the end of 2009, a total of over 54,000 jobs were created in Hong Kong, while 40,000 jobs were created in the Mainland due to the liberalisation of trade in services as well as the “Individual Visit Scheme” under the CEPA.


    Now let’s turn to Qianhai. Qianhai is an area of about 15 square kilometers to the north of our boundary. It is the latest HK/Shenzhen co-operation area, and it is featured in the Co-operation Framework Agreement between Hong Kong and Guangdong signed. The State Council has given approval in-principle to the Overall Development Plan on the Qianhai’s development in August this year.

  Under the scheme, the Shenzhen Municipal Government is responsible for the development and management of Qianhai, while the HKSAR Government provides comments on the study and formulation of issues like development planning and the related policies. The Qianhai Development Plan designates Qianhai as a Hong Kong / Guangdong modern service industry innovation and co-operation exemplary zone. Its aim is to play a piloting role in promoting co-operation in service industries between Hong Kong and the Mainland. So we try to open this new door and more details will come. Next Monday, the Chief Secretary will be leading a delegation to Shenzhen and we will be visiting Qianhai to have a closer look at the potentials there.
Leading – Taiwan

  Lastly, the role of a leader. I would like to mention our bilateral relations with Taiwan. 
  In the last two years, we have done a number of things. First, we had set up the office of the Hong Kong Trade Development Council in Taipei in October 2008. We had also implemented various entry facilitation measures to encourage the flow of people between Hong Kong and Taiwan. We had organised the “Hong Kong- Taiwan Inter-City Forum” with the Taichung City in April 2009 to foster exchanges between cities and counties of Taiwan and Hong Kong. In March this year, two Secretaries (The Secretary for Constitutional and Mainland Affairs and the Secretary for Commerce and Economic Development) from Hong Kong visited Taichung to promote tourism between Hong Kong and Taichung.

 To perform our leading role in Hong Kong/Taiwan bilateral relationship, we had set up new platforms. This April, we set up the Hong Kong-Taiwan Economic and Cultural Co-operation and Promotion Council (ECCPC) while Taiwan side established the Taiwan-Hong Kong Economic and Cultural Co-operation Council (THEC).

  The establishment of the ECCPC and the THEC is a milestone in the relations between Hong Kong and Taiwan. The two places can use this platform to discuss matters relating to public policies. So the ECCPC and the THEC are “the mini-version” of the two cross-strait councils. This is to facilitate contact at the official level.

  At the enterprise level, we have also set up the Hong Kong-Taiwan Business Co-operation Committee and Hong Kong-Taiwan Cultural Co-operation Committee, which comprise members from the local business and cultural sectors. They will work with their counterparts under the THEC to foster economic, cultural and other ties between the two places.

  This August, the Financial Secretary led a delegation of all ECCPC members to Taiwan. Apart from attending the first joint meeting of the two councils, meetings were arranged with personnel from the political, economic and trade, and cultural sectors in Taiwan. Consensus was reached on a number of priority areas. I think it is a very important starting point to institutionalise the communication, liaison and co-operation between Hong Kong and Taiwan.

 In the coming year, the HKSAR Government will continue to promote multi-faceted, multi-level exchanges with Taiwan. These include the active consideration in updating the air services arrangement between Hong Kong and Taiwan; we would also make efforts to support the regulatory bodies of both places to strengthen the liaison mechanism on co-operating in regulating the banking industry – in fact the financial services sector is one area which has a great potential for co-operation between the two places; and thirdly, the use of the new ECCPC-THEC platform to explore greater opportunities for economic and trade co-operation including double taxation avoidance issues. 

 We will also pursue the setting up of a mult-functional office in Taipei and also a Hong Kong office by the Hong Kong Tourism Board in Taipei. These will give us more visible presence in Taiwan. With the Government leading in the front, we pave the way for closer economical and cultural co-operation and exchanges between Hong Kong and Taiwan at all levels, both official and non-official.

Concluding remarks

  The Greater China region will be the fastest growing region in the world in the years to come. This will bring us both challenges and opportunities. To meet these challenges and opportunities successfully, we need the collective efforts of different sectors of the community and the public. All parties concerned need to be proactive in this process.

 In this regard, I am delighted that the HKiEd is signing a Memorandum of Understanding with academic institutions from the Mainland and Taiwan today. I am sure this MoU will make significant contribution in promoting academic exchange and co-operation between Hong Kong, the Mainland and Taiwan.

 Last but not least, I wish you all a successful and rewarding symposium and for those guests from outside Hong Kong, a very pleasant stay in Hong Kong.

 Thank you very much.

Ends/December 3, 2010 (Friday)