A full house for the release of the Chamber's report, "China's Entry into the WTO and the Impact on Hong Kong Business."

The study analysed nine sectors in Hong Kong that are most likely to be impacted by the opening of the mainland market. It also said that the gloomy picture some business people are painting can be averted if Hong Kong uses the phase-in time wisely to prepare itself.

Mr Tung: "Many of the China WTO commitments have a phased time schedule. Let us use this time wisely."

"Some business people and academics have been vocal in predicting a less-than-rosy scenario for Hong Kong," Chamber Chairman C C Tung said in his opening remarks at the conference. "The Chamber feels such pessimism is uncalled for, and that Hong Kong continues to possess unique advantages as a bridge between China and international businesses."

These advantages also include Hong Kong's sophisticated service sector, high end retailing, wholesale, distribution and logistic skills, franchising, merchandising and sourcing techniques. In addition, the proximity to the motherland, the close bond between Hong Kong and mainland people, and knowledge of the mainland business and social culture are advantages that others do not have.

But to take advantage of these opportunities, Hong Kong businesses must be competitive in both cost and value, and must look at new niches, Mr Tung said.

"In the next three to five years, if Hong Kong capitalises on its advantages and makes the necessary adjustments, the [working committees] participants believe the future is bright," he said.

Chamber Director Eden Woon said at the conference the report shows that opportunities for many sectors will expand, especially for trade in goods and services.

"The total volume of Hong Kong's entrepot trade and offshore trade will increase and demand for import and export trade related services, such as sourcing, merchandising, and distribution, will also rise in tandem with this growth," he said.

Dr Woon: "Despite all the opportunities, a more open China market will not automatically benefit Hong Kong."

He also predicts the liberalisation of market access will benefit services sectors, including legal, accounting, banking, insurance, trading, retail and distribution, and telecommunications, which are now heavily regulated in the mainland.

However, the Chamber cautioned that despite all the opportunities, a more open China market will not automatically benefit Hong Kong. Notwithstanding the relaxation in market access in China, many sectors are still subject to a high level of entry requirements and operational restrictions, he said.

Also, Hong Kong companies should not expect to seek favouritism from China. "In fact, the current arrangement of treating Hong Kong as foreign is to our advantage, and in any case, one country two systems should be withheld," he said.

Representing the Trading Working Group Committee, Managing Director of Jebsen & Company Ltd. H M Jebsen said the trading sector will benefit immediately upon China's WTO accession.

However, "There are mixed feelings from enthusiasm, because the cake is getting bigger, to actual fear, because there is competition outside of Hong Kong and that is in the mainland," he said.

Mr Jebsen: "All told a mixed bag, but the opportunities outweigh the dangers of losing out if we do a lot of things right."

Mr Jebsen said Hong Kong's traditional gateway role is a very dangerous formula to rely on, even through two-thirds of all investments in China are channelled through Hong Kong. Instead, business should seek ways to add value to their products and services because, "The left-hand, right-hand trading companies, which merely serve as mailmen, will not have a future," he predicts.

Outward processing trade is Hong Kong's big trump card, and he expects that will remain the bread and butter of Hong Kong traders in the future.

The idea of forming strategic alliances with mainland companies and multinationals has been floated, but Mr Jebsen said businesses cannot rely on them as a key to immediate success, because they have to be formed as we go along.

"All told a mixed bag, but the opportunities outweigh the dangers of losing out if we do a lot of things right. Fear is not a good motivation," he said.

Accession to the WTO will rattle China's banking sector, but the shake up will benefit not only its banks but also China's businesses, citizens and the country as a whole, projects K C Kwok, Chief Economist, Standard Chartered Bank, speaking on behalf of the Banking Working Group Committee.

"In respect of banking, the very basic and rather sad fact is that China's banking system has not been reformed as fast as it should have been," he said. "The opening of the banking industry under the WTO represents the stimulation of banking reform and this is going to be a major positive factor for China."

Despite their inadequacies, he cautions that China's domestic banks are catching up with foreign banks very quickly.

Potential for growth of foreign banks in China is huge, he said. Between 1991 and 1997, foreign bank's assets in China grew by an average of 44 per cent per year. But even with all those rates of growth foreign banks' market share in China today is still tiny.

Mr Kwok: "The reform of the banking system is opening major opportunities for China, not just for the banks but for everybody."

"If foreign banks' assets today continued to grow by roughly 40 per cent a year, 10 years from today foreign banks would still account for less than 10 per cent of China's total market," Mr Kwok said.

Whether this will materialise, however, is debatable. "The biggest hope in China is always too much hope, too little to deliver. There may be a lot of hype, but at the end of the day there is no money on the table. There may also be too much competition; China arguably has too many banks already," he said.

For Hong Kong to be able to take advantage of the opportunities that China's WTO entry will present, all working groups concur that the territory needs a new mind set in its education policy. Just 15 years ago, manufacturing accounted for 80 per cent of Hong Kong's industries. Today, the service industry accounts for the same figure.

"We need to wake up to the fact that we need many bright people to be competitive," said Mr Jebsen.

Lily Chiang, Executive Director, Chen Hsong Holdings Ltd., and Chairman of the Information Technology Working Group Committee, said Hong Kong must develop a unified industrial policy cross linked with the education system.

"For example, we are encouraging China's Ph.D.s to come to Hong Kong, which in the information technology sector Ph.D.s may not be the most suited to technologies," she said. "And the other side is we are cutting budgets every year for post graduate students. The Government must come up with a policy to ensure that over the long run Hong Kong can produce its own talented personnel."