1. Multinationals, China, Hong Kong and Competitiveness
Presentation for The Competitiveness Institute Annual Conference
10 November 2005

2. Latest economic Data In 2004: GDP up 8.1% Exports of goods up 32.4%
Exports of services up 7.3%
Hang Seng Index up 3.8%
World’s 11th largest trading economy
In last 6 months:
GDP up 6.5%
Inbound tourists for first 9 months of 2005: 16.9 mil
GDP, exports of goods, exports of services
HSI
HKEx Factbook 2003 –
See securities market – statistics archive and monthly summary
28 Feb 05 15,821
27 Feb ,244
= inc of 3.8%
Trading economy
TDC
Tourists
HKTB website
Sources: HK Census and Statistics Dept; HKEx; HKTB; HKTDC

3. Latest investment data
Inward
2nd largest recipient of FDI in Asia after Mainland, 7th in world
US$34 billion in 2004
US$20 billion for first half of 2005
Largest investors: Mainland, Netherlands, US, Japan
Outward
Largest source of outward FDI in Asia; 7th in world
Per -
- UNCTAD through
Stat without a source:
Outward
- Largest investor in every single Chinese province
Sources: UNCTAD World Investment Report 2005; HK Census and Statistics Dept.

4. Foreign Direct Investment
Inflow of FDI in Hong Kong
Year
(Q1-Q2)
Amounts (US$billion) * *
*preliminary figures
Source: Census and Statistics Department

5. Inward Direct Investment by Major Investor Economy
Country US$bill
Mainland China
Netherlands
United States
Japan
Singapore
United Kingdom
Total $380.5
2003; HK Census & Statistics Dept

6. FDI Inflows of 10 Neighbouring Economies in Asia (US$ billion)
Ranking
2002
2003
2004 1
Mainland China (52.7)
Mainland China (53.5)
Mainland China (60.6) 2
Hong Kong (9.7)
Hong Kong (13.6)
Hong Kong (34.0) 3
Japan (9.2)
Singapore (9.3)
Singapore (16.1) 4
Singapore (5.8)
Japan (6.3)
Japan (7.8) 5
India (3.4)
India (4.3)
S.Korea (7.7) 6
Malaysia (3.2)
S.Korea (3.8)
India (5.3) 7
S.Korea (2.9)
Malaysia (2.5)
Malaysia (4.6) 8
Philippines (1.8)
Brunei (2.0)
Taiwan (1.9) 9
Taiwan (1.4)
Thailand (1.9)
Vietnam (1.6) 10
Vietnam (1.2)
Vietnam (1.5)
Thailand (1.1)

7. Inward Direct Investment by Major Economic Activity
Investment holdings, real estate, business services
Wholesale, retail and import/export trades
Banks and deposit-taking companies
Other financial institutions
Transport and related services
Communications
Manufacturing
Insurance
Restaurants and hotels

8. 3,800 regional operation centres
More RHQs than any other city in Asia Pacific
Source: Report on 2005 Annual Survey of Regional Offices Representing Overseas
Companies in Hong Kong, Census and Statistics Department, Hong Kong

9. One Country, Two Systems
Hong Kong retains its advantages
Rule of law
Level playing field
Currency convertibility, separate from Renminbi
International business practices
Free flow of information
Negotiates and signs own economic/trade agreements
Hong Kong is a full, separate member of WTO and APEC
At the same time, Hong Kong is an integral part of China

10. Why Hong Kong ?
Why do so many international investors establish operations in Hong Kong rather than any other cities in the Asia-Pacific region?
Essential to Hong Kong’s appeal and success are competitive advantages that help build the foundation of Hong Kong's prosperity and stability.

11. Hong Kong - Key advantages
Rule of law
Unrivalled location
Low and simple taxes
World’s freest economy
Clean government
Free flow of information
World class infrastructure
Skilled workforce
International lifestyle
Gateway to the Mainland

12. International financial centre
Asia’s 2nd largest stock market
Home to 73 of the world’s 100 largest banks
Mainland firms have raised over US$100 billion
World’s 7th largest foreign exchange centre
Asia’s largest fund management and insurance hub, outside Japan
Controls over 28% of the venture capital under management in Asia
Full currency convertibility
Real time USD and Euro settlement system in place
Sources: - - -
- The 2004 Guide to Venture Capital in Asia – Asian Private Equity 300 (hard copy)
Sources: HKTDC; The 2004 Guide to VC in Asia

13. Hong Kong - Key advantages
And…
OUR PEOPLE

14. Hong Kong & the Pearl River Delta – A Winning Combination
Hong Kong provides the capital, management, technology, market knowledge and access to international markets
Mainland PRD cities provide world-class,
low-cost manufacturing, and access to a new, demanding consumer base

15. Closer Economic Partnership Arrangement (CEPA) What is it?
China’s - and Hong Kong’s - first free trade agreement
Covering trade in goods, services and investment facilitation
Reaffirms Hong Kong role as gateway to Mainland
Provides easier access to Mainland for HK-made products and HK-based service companies
Available to people and businesses of all nationalities
WTO compliant
Being introduced in phases:
CEPA I, fully effective from 1 January 2004
CEPA II, fully effective from 1 January 2005
CEPA III, fully effective from 1 January 2006
Wef tariffs on other goods can be lifted
Rules of origin still to be fully determined – negotiations to continue and decision in place before

16. CEPA Benefits
Trade with the Mainland through HK and enjoy CEPA benefits like:
Cost savings now
Short term gain through earlier market access than WTO (WTO early)
Greater market access than WTO will ever allow in some sectors (WTO plus)
All Hong Kong-origin products may be exported tariff-free to the Mainland

17. Our main competition HK as a regional centre HK as part of China
Singapore main competitor
HK as part of China
Shanghai, Beijing
HK as part of S. China/GPRD/Pan-PRD
Guangzhou, other PRD cities

18. Parting shot…
Hong Kong is a world leading business centre poised at the edge of the world’s biggest market. Hong Kong’s potential is huge and its opportunities unique.