Think Asia, Think Hong Kong

Think Asia, Think Hong Kong

Remarks

Heidi Crebo-Rediker
Chief Economist

Washington, DC

June 11, 2013

Thank you for inviting me to speak at this special event.

I also wish to acknowledge a few special members of this distinguished audience, including the Honorable Mr. Leung, Chief Executive of the Hong Kong Special Administrative Region, Mr. Norman Chan, Chief Executive of the Hong Kong Monetary Authority, former Treasury Secretary Rubin, Under-Secretary Sanchez, Ambassador Sun, and our Consul General to Hong Kong Stephen Young, and many others here tonight.

I would also like to especially thank our gracious host, Mr. Jack So, Chairman of the Hong Kong Trade and Development Council.

When people think of Hong Kong, they may think of the bustling Ladies Market, Hong Kong Disneyland, Bruce Lee and Jackie Chan, a cutting edge center of finance and markets or even maybe how it has more Rolls-Royces per capita than anywhere else in the world. But Hong Kong also presents an important, dynamic, and ever expanding market for American businesses.

The world’s strategic and economic center of gravity is shifting east, and we in the United States are focusing ever more on the Asia-Pacific region. President Obama put it best when he said, “Asia will largely define whether the century ahead will be marked by conflict or cooperation…” And what better way to achieve cooperation than through prosperous economic partnerships in “Asia’s World City,” Hong Kong.

It’s no surprise that in 2011 then-Secretary of State Hillary Clinton chose Hong Kong as the venue to discuss the “Principles for Prosperity in the Asia-Pacific.” The principles she cited were openness, freedom, transparency, and fairness. Last month, Secretary of State John Kerry laid down his own vision for building peace and prosperity in Asia through “strong, fair, smart, and just growth.” Those of you who have spent time in Hong Kong know that the city and the people embody these exact principles. There is a reason that every year since 1995, Hong Kong has won the title of “World’s Freest Economy.”

So where does Hong Kong fit into the global economy? As the State Department’s Chief Economist, I can’t help sharing some pretty compelling statistics with you. Although Hong Kong has a population of just over seven million, it has one of the highest levels of GDP per capita in the world. Perhaps more remarkably – as we sit here in New York City, home of Wall Street and the New York Stock Exchange – the World Economic Forum named Hong Kong “Top Financial Center in the World” last year, Hong Kong’s stock market was the sixth largest in the world last year and was the most active in the world for IPO funds raised globally in 2011.

And the United States regained its number one spot in IMD’s “World Competitiveness Survey” for 2013, edging out Hong Kong, last year’s number one winner. But, of course, we here in the U.S. don’t mind a bit of healthy competition from our friends.

Hong Kong is also the world’s ninth-largest trading economy and maintains one of the world’s highest trade-to-GDP ratios. By our calculation, roughly 85 percent of the value of Hong Kong’s trade is neither produced nor consumed in the territory. Rather, it is part of the global flow of trade between China and the rest of the world. Why does so much global trade flow through Hong Kong? The answer is simple: because it is easy. Hong Kong provides an extremely convenient platform for trade to and from China and across the rest of the region. It is home to one of the world’s leading international financial centers, weaving sophisticated networks of institutions and markets to the rest of the global financial system. Hong Kong’s well-deserved international reputation for openness, transparency, free markets, and rule of law stands out – just like its soaring skyline.

Hong Kong has maintained this reputation under the “One Country, Two Systems,” policy which has allowed Hong Kong to sustain a high degree of autonomy as a Special Administrative Region of the People’s Republic of China. With this unique position, Hong Kong has demonstrated to the world that, not only is it a bridge between East and West, it is a place where ideas are born, businesses thrive, and economic opportunities can unlock vast human potential.

The United States in particular has benefited as a trading partner with Hong Kong.

As many of you are aware, in 2010 President Obama announced the National Export Initiative, with the goal of doubling U.S. exports and supporting an additional two million American jobs by the end of 2014.

In the past three years, U.S. exports to Hong Kong have increased by an average of nearly 20 percent every single year, on schedule to reaching our target.

Despite its small population, Hong Kong is the tenth-largest market for U.S. export of goods, and the sixth-largest market for U.S. agricultural products. One example: U.S. beef and beef products to Hong Kong reached a record $342 million in 2012.

U.S. firms are abundant in Hong Kong. More than 1,300 U.S. companies are represented in Hong Kong, with more than half choosing to base their Asian regional offices there. Hong Kong is critical to building economic integration between the U.S. and China, as 80 percent of these Hong Kong-based regional offices manage business operations on the Mainland.

But the economic partnership between Hong Kong and the United States goes well beyond the numbers. Hong Kong’s role in U.S. trade includes a qualitatively unique level of collaboration seeking “win-win” objectives. Not long after President Obama announced his National Export Initiative, the Hong Kong government and the U.S. government launched the Pacific Bridge Initiative. In partnership with the Hong Kong Trade Development Council, we agreed to collaborate on trade shows, trade missions, conferences, business matchmaking, and media outreach. The initiative has increased the number of new U.S. small and medium-sized enterprises going to Hong Kong.

It is rare indeed in this world to find two governments working so closely together to promote each other’s trade objectives. But that is the global outlook that truly sets Hong Kong apart.

The American relationship with Hong Kong is very much a two-way street. The future of the Asia-Pacific is very much linked to America’s own future.

Looking ahead, we must continue to strive for greater economic integration, particularly on the trade front. The United States, Hong Kong, and 20 other trading partners representing two-thirds of the world’s trade in services are negotiating a groundbreaking International Services Agreement at the WTO.

And within the Asia-Pacific, the United States and regional partners are striving to expeditiously complete the Trans-Pacific Partnership, a 21st-century agreement which will create a new high standard for multilateral free trade. With current TPP partners agreeing in April to welcome Japan into the negotiations, the group would swell to represent 40 percent of the world’s GDP and almost one-third of world trade. We hope that TPP will serve as a platform for even greater regional economic integration. And to be clear, TPP members look forward to potentially expanding this platform to other Asia-Pacific economies ready to adopt its ambitious commitments.

Within the regional trade context, we also acknowledge Hong Kong’s efforts to forge a free-trade agreement with the ASEAN countries, five of which rank among Hong Kong’s top ten trading partners. Such an agreement would be good for Hong Kong, good for Asia, and good for free trade.

Turning to Foreign Direct Investment, we are striving to take full advantage of China’s historic shift to becoming a net supplier of FDI. Recently, for the first time, China’s outbound FDI surpassed its inbound FDI. This Chinese investment has benefitted the U.S. where, since 2006, FDI from China to the United States has grown at an average rate of 71 percent every year. We at the State Department are working hard to make sure this trend continues. We hope that public and private sector professionals alike are also keenly aware of the opportunity Hong Kong presents to help facilitate and accelerate this trend.

It is clear that there is an increasingly central role for Asia in the future of the global economy.

For the U.S. to fully encourage and capitalize on this increasingly important economic region we need American companies and our government to pursue positive and prosperous partnerships in the region.

It is places like Hong Kong that make me and my colleagues enormously optimistic about that future. Hong Kong is a place where you can do business. It is a place where trade and finance can and do flourish. It is a place with leaders in business, finance, and government who understand how to make things happen and get things done. In short, Hong Kong is a place that “gets it.”

Thank you.

ENDS

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