The Chamber’s Senior Economist Rocky Tung is attending the Belt & Road Summit today and has listed out some bullet points of key messages of the morning session. Kicking off the summit, Zhang Dejiang, advised Hong Kong to be more active in the nation’s overall development. To achieve this, he suggests that the Central Government will support Hong Kong in four specific areas.
1. As a broad-based services platform for
- Design, accounting, consulting and other professional services - Legal, dispute resolution centre for Asian and international peers - High value-added, multifunctional maritime centre - Fostering innovation, cultural, and connectivity of people - Enhancing the competitiveness of Hong Kong
2. RMB internationalization, flow of funds
- Chinese enterprises to utilize Hong Kong’s platform to provide low cost financing options; - Expanding RMB business offerings; - Developing financial, asset management services; - Making greater use of insurance, re-insurance to hedge risks.
3. People and cultural connectivity
- Connecting and sharing knowledge of countries along the B&R; - Developing platforms to allow friendly exchanges to nourish cooperation; - Associations, think tanks, and organizations can play an important role in this by organizing training programmes and missions.
4. Enhance cooperation with the Mainland
- Exploring different areas and sectors to develop new business opportunities; - Encouraging more professionals with international experience to take part in the Mainland’s development; - Expanding connections to areas along the two routes and improving standards of services and facilities.
Discussion Panel
From the first panel discussion, Gregory So, Secretary for Commerce and Economic Development, suggested that governments and policymakers should make transactions easier by addressing the following issues:
1. Reduce transaction costs
With the involvement of 60 some countries, differences in regulation and standards leads to higher transaction costs. One way to reduce transaction cost would be to synchronize standards. Policymakers should also pay attention to the avoidance of double taxation.
2. Improving transactional certainty
Investors tend to not know much about some emerging economies and companies in these countries. Therefore, governments should provide information about different economies. Governments can also enhance transactional certainty by working to sign investment promotion agreements, such as free trade agreements.
3. Reducing transactional barriers
Governments should look to remove physical barriers (e.g. infrastructure, connectivity), legal barriers, and boost openness to investment for strategic sectors to facilitate investment.
Officials from UAE, Malaysia and Indonesia suggested different initiatives to boost investments. For example, reducing red tape. Indonesia introduced a one-stop, 3-hour service for investors with a minimum investment of US$8m and/or employing 1,000 local workers.
Other ideas included engaging in FTAs. For example, Malaysia has engaged in 7 bilateral and 7 other multilateral FTAs to liberalize and boost trade with other economies.
Panelists from the second discussion suggested that:
- Efficiency (e.g. time and cost) of transportation remains important, despite the cheaper cost of oil.
- Infrastructure should be created as an asset class, which will involve both public and private sectors as well as multilateral banks.
- Hong Kong can benefit from RMB internationalization by boosting investment and trade finance using RMB, as well as continuing to expand our competitiveness as the largest offshore RMB clearing centre.
- Bond markets will accelerate due to the internationalization of the RMB.
- Investments made in RMB will boost demand of FX trading of the currency.
- Through the existing SH-HK stock connect and the upcoming Shenzhen-HK stock connect, as well as the potential of "bond connect," investors are encouraged to invest through HK into the Mainland.
- The RMB will likely play a greater role in the areas of commodities trading, financing/syndication, e-commerce.
- Hong Kong can use its expertise in risk evaluation, and take the lead and get a template for standard evaluation procedures and documents.
- Through the availability of banks and experts in the city, Hong Kong can help enhance risk mitigation for businesses in the form of FX hedging, among the others.
- AIIB will cooperate with the other multilateral development banks to invest in infrastructure projects, while the private sector will also need to fill in the US$8 trillion gap between infrastructure needs and capital made available by development banks.
- With the involvement of 60 some countries, differences in regulation and standards leads to higher transaction costs. One way to reduce transaction cost would be to synchronize standards. Policymakers should also pay attention to the avoidance of double taxation.
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