'Having foothold in HK facilitates dealings with China'
Hong Kong is playing an ever more significant role in Asia as a centre of business and Invest Hong Kong is the department of the special administrative region's government responsible for foreign direct investment. Krungthep Turakij TV reporter Chaowarat Yongjiranon speaks to Charles Ng, the associate director-general of investment promotion at Invest Hong Kong, on the new leadership in mainland China and the importance of the renminbi.How will the new Chinese leadership affect Hong Kong?
I think it is very positive. As we move forward, our economic platform is moving more and more with that of the mainland and for obvious reasons. We are a part of China under the "one country, two systems" [policy] and as China's economic development grows further and further and bigger and bigger, Hong Kong has a very big role to play in contributing to the economic growth of our nation.
How beneficial is it going to be for Hong Kong?
As you know, right now Hong Kong is very keen to join the free-trade agreement between Asean and China, and I know we are all working towards that. We have support from Beijing in joining that and we are looking forward to that. Also, very importantly, China is today the world's largest exporter and second-largest importer, and that trade facilitation increases more and more. Hong Kong has a very big role to play. For example, right now Hong Kong has been used as an experiment to help internationalise the renminbi. So this is a very big phenomenon that is happening in the history of the world. We are witnessing the birth of a new reserve currency, and Hong Kong has a big role to play in that. We continue to be a bridge, sort of platform, for not only overseas companies from all over the world, including Thai companies, that are going into China, but also we are increasingly being used as a platform for mainland companies now to go global.
The Chinese government has put a lot of attention on social issues in the mainland such as social inequality. Will this change the focus from economic policies?
I think the gentlemen who are the president and premier are smart individuals who are very well versed and groomed to take up that leadership position. Of course, like any other country, China has its own fair amount of challenges, but we are very confident that these challenges will be overcome, because I think the world is going through a transition. First of all, there is a huge economic crisis in Europe, and the sluggish economies in North America and Japan, for example. That is creating a very big change in the economy itself because China is traditionally a very big exporter in the world. So when the economy slows down in these countries, it is bound to bring about changes. The challenge for the new administration is how to ensure that there is growth. The 12th five-year plan will be creating more economic development within China. As villages turn into cities, cities turn into mega-cities, that is creating a lot of changes already, so I think the new government is ready to tackle that, because they have already in place all their systems and looking at how to take advantage of the changes. Changes are bound to happen.
When you talk about Hong Kong, one of the biggest issues is the currency in Hong Kong. What are the risks for Hong Kong's currency board, and is there a chance of floating the currency?
I don't see it actually as a risk, actually I think of that as stability. The Hong Kong dollar has been pegged to the US dollar for many years now, and that has served Hong Kong very well. And if you look around the world with all the discussions going on, you have to have certainty, and the fact that the Hong Kong dollar is pegged to the US dollar has certainty. It creates certainty for companies, and what is happening right now is Hong Kong is the freest economy in the world, so people can change their money and exchange [it] any time they want. As more businesses and more investment go into China and so on, people need to have that stability. Hong Kong does offer that in terms of its currency. So being pegged to the US dollar gives that certainty. Also, the fact that there is ongoing development and the revolution of the renminbi to becoming an international currency, so as we speak right now, banks in Hong Kong are looking very much at developing and are currently developing more products in renminbi, whether they are loan products, investment products, or deposit products, to ensure that the capital market for that grows in mainland China. This is, therefore, contributing to the whole economic development for Hong Kong and China.
Let's talk about raising funds there. What are the advantages of raising funds in either yuan or the Hong Kong dollar?
You have different companies from around the world coming to list in Hong Kong and the advantages are that not only are they able to tap funds, because 60 per cent of the industries on the Hong Kong stock exchange are institutional investors from outside, but also they get the benefit because of the "one country, two systems" to tap mainland institutional investors who want to invest in the market in Hong Kong. Under "one country, two systems", we have a qualified domestic institutional investment scheme that enables mainland institutions to invest in Hong Kong, in the equity market and other type of investor vehicles, so it makes it very added-value. This position is very [distinct] actually to Hong Kong, [something] that no other jurisdiction or economy has.
I now have to address the elephant in the room, and that is the South China Sea conflict. How has this conflict, which is still ongoing, impacted the confidence of investors?
From an economic perspective, if you look at the free-trade agreement that has been going on between Asean and China, we have seen tremendous growth in the last few years since it has been signed. It is a proven fact, and that is why countries and economies sign free-trade agreements - to enhance trade - because this is a globalised world, and therefore it does make sense for economies to come down and sit together and settle their disputes to refocus on the trade side or the economic side, because it has direct impact on the people in all these economies.
Talking about investing now in the more positive and optimistic side, what is the potential in Hong Kong for Thai businesses?
Those companies that are trading with China are really seizing an opportunity to have a foot in Hong Kong to use Hong Kong as a platform to distribute and build a relationship. Even though we are close - it is only two hours and 30 minutes away - it is always important to have a foothold in Hong Kong because when the Chinese firms who come to Hong Kong or to the world to buy things, if you have an office in Hong Kong they feel very comfortable to deal with you directly and they know you have a foothold. Equally, I think that when you talk about tourism, when you talk about hospitality, when you talk about food, and other types of products which Thailand is exporting to Hong Kong and China, and equally for Thai companies that want to import products from mainland China and elsewhere, that can be used as a platform. So it is a sort of a two-way traffic, and that is why I think there are strategic opportunities for trade and investment on both sides for a win-win situation.