Tuesday, 29 May 2012
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Hong Kong: Visit Of Lord Green: Background Note
British Consulate General Hong Kong
Lord Green will visit Hong Kong on 30 May. This is an opportunity to promote the UK’s agenda for growth, and to emphasise the importance of the UK-Hong Kong relationship, both as the second largest market for UK goods in Asia Pacific, and as a regional hub for British business.
Political and economic context
The recent election for Chief Executive of the SAR Government was notable for its competitive nature: a hard fought campaign marked by intense media and public interest. Since his election, Cy Leung’s statements have been carefully calibrated: promising to address social issues (e.g. the wide and widening wealth gap) while underlining the importance of enhancing Hong Kong’s position as an international financial centre and gateway to China.
Hong Kong’s economy is highly dependent on world trade flows and on economic activity in China. The official forecast for growth in 2012 is 1-3%, a marked slowdown from 5% in 2011. Growth in the first quarter of this year was just 0.4 per cent year-on-year. In April, Hong Kong’s total exports increased by 6 per cent year-on-year, down from 10 per cent growth for 2011 as a whole, with exports to Europe slowing most sharply (with a 22 per cent fall in exports to Germany and 3 per cent fall in exports to the UK). However, Hong Kong’s growth remains supported by strong domestic demand from a tight labour market, high levels of infrastructure development, and strong inbound tourism. Retail sales grew at 17 per cent year-on-year in March – with a significant proportion of this is due to spending on luxury goods by mainland visitors.
The bilateral relationship
Hong Kong is central to our prosperity interests. Exports of goods topped £5bn for the first time in 2011, with over £1bn of services exports on top. Overall exports increased by 20%, for the second year in a row. Hong Kong is home to nearly half of all UK investment in Asia, at approaching £30bn. More than 300 UK companies use Hong Kong as their regional headquarters. The UKTI team is helping into the market a steady stream of SMEs looking at opportunities here, and in mainland China and the region. The UK remains the favourite destination for Hong Kong investment; Cheung Kong/Hutchison Whampoa’s holdings in the UK are close to those of all Japanese companies combined. But there is increasing competition from Europe.
Links between London and Hong Kong as the leading financial centres in their regions are close. The visit by the Chancellor of the Exchequer in January saw a warm welcome for his announcement of Beijing-Hong Kong-London co-operation on internationalisation of the RMB. The first meeting of the Hong Kong - London Forum was held in mid May and offers the prospect of this becoming a significant new area where the two will work together.
The past year has seen a good level of ministerial engagement. We work well with the SAR Government in areas such as law enforcement and education policy. Student numbers are up. The GREAT campaign events this year, including the Great Celebration event on 10 May and an education event in February led by Schools Minister Nick Gibb have been well received by our target business contacts. Parliamentary links are also in good shape as evidenced by visits by the Commons All Party Committee on China and the Commons Energy and Climate Change select Committee earlier this year.
Hong Kong is unique in having five High Value Opportunity projects. Up to 80% of content from these projects is accessible for British companies. But the competition is fierce. The HVO programme is focussing on encouraging more UK companies to the market and supply chain opportunities that exist within these project life cycles. Fosters + Partners and Mott MacDonald are responsible for the conceptual and development plans at West Kowloon. On rail there have been substantial project wins over the past 18 months for Laing O‘Rourke, Kier International and Gammon in JV with various partners.
On arrival Lord Green will meet some of the bankers involved in the Hong Kong-London Forum on RMB internationalisation, to hear first hand their analysis of the opportunities to grow this sector. Lord Green’s keynote speech at a lunch for around 150 guests jointly organised by the Consulate, the British Chamber of Commerce and the Hong Kong Trade Development Council will be an opportunity to promote the UK’s strategy for growth. The UK’s strong relationship with Hong Kong, both as a key market for British companies and as a hub from which to do business in some of the most dynamic economies in the world, is an important part of the growth strategy.
In the afternoon Lord Green will visit Kai Tak, one of the five HVO projects. The UK has made a substantial contribution to the first phase of this project, a terminal for luxury cruise liners. Local representatives of British companies will join to hear about plans for the second and third phases of the project which will include residential and commercial space, and possibly a sports complex. We should take the opportunity to impress on the developers UK expertise in building sports stadia and related infrastructure, as evidence by the facilities for the London Olympic and Paralympic Games. A call on Financial Secretary John Tsang will be a chance to cement this important relationship. Lord Green will also meet a range of investors in the UK, who will be keen to hear about the Government’s economic strategy, and about opportunities for investment in infrastructure in the UK.
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