Hong Kong, officially known as the Hong Kong Special Administrative Region of the People’s Republic of China, is a former British territory that reverted to Chinese sovereignty on 1 July 1997. Under the principle of ‘one country, two systems’ adopted at the time, the city enjoys a high degree of autonomy in all areas except defence and foreign affairs, for which China is responsible. The city occupies an area smaller than the Australian Capital Territory and has a population of about one‑third of Australia’s. In GDP (PPP terms) it stands as the 36th-largest economy in the world.
Hong Kong’s economic growth and prosperity have been underpinned by an open trade and investment regime complemented by a highly educated and flexible workforce and a transparent legal and regulatory environment. The city has evolved into an efficient global and regional transport and trade hub. Its location gives Australian companies an important two-way portal for commercial engagement with China and neighbouring countries in Southeast Asia.
The free movement of capital in and out of Hong Kong has accelerated the city’s development as an international commercial and financial centre. A strong institutional framework including the rule of law has attracted a number of important corporate headquarters to Hong Kong. Around 550 Australian companies, including the four major banks, have a major presence in Hong Kong.
Hong Kong’s services sector has grown remarkably since the 1980s and now dominates its economy. The sector’s GDP share increased from 87 per cent in 2000 to 93 per cent in 2010. Australian service providers are actively engaged in banking, transport and logistics, employment consultancies, engineering, construction, aviation, architecture, accountancy, legal services, insurance, tourism and retailing.
The financial services sector is expected to grow further, boosted by China’s efforts to broaden the international use of the renminbi (China’s currency). China has designated Hong Kong as its offshore renminbi centre. Because Hong Kong acts as a gateway for China to the rest of the world for renminbi trade and capital flows, it is important for Australian companies to understand the opportunities developing in the Hong Kong market. In addition, China is implementing part of its strategy for developing and liberalising its services sector under the auspices of the Closer Economic Partnership Arrangement, a free trade agreement signed with Hong Kong in 2003.
Government, business and people-to-people links
Government-to-government relations are in excellent shape. The bilateral relationship is supported by the Australian Consulate-General and various Australian state government representative offices in Hong Kong. Australia and Hong Kong cooperate on a broad range of issues, including trade and investment, law enforcement, judicial exchanges, combating people smuggling and irregular migration, and promoting education and tourism. Australia and Hong Kong share a commitment to eliminating barriers to trade and investment, and work together closely in the World Trade Organization and the Asia–Pacific Economic Cooperation (APEC) forum to promote open and free trade.
Australia has important and enduring interests in Hong Kong. Between 2006 and 2011, Australia’s two-way trade in goods and services with Hong Kong remained fairly consistent, reaching $7.9 billion in 2011. Hong Kong is also an important source of foreign investment for Australia. In 2011, it ranked as Australia’s seventh-largest source of foreign investment.
The many foreign tourists who visit Hong Kong each year (around 42 million in 2011) are an important component of the local market for Australian products, including, food, wine, fashion, jewellery, art, natural and organic health care and cosmetics.
Hong Kong is Australia’s largest business base in East Asia. The Australian Chamber of Commerce in Hong Kong and Macau, with 1,200 members, is the second-largest foreign business chamber in the city, and the largest Australian chamber of commerce outside Australia. The chamber, together with organisations such as the Australian Association of Hong Kong, the Australian Chinese Association, CPA Australia, Engineers Australia, the Australian International School, the Federation of Australian Alumni Associations and a large number of alumni groups, help in promoting business networks and showcasing Australia.
Strong people-to-people links, underpinned by an active dual-national community, tourists and students, continue to support and strengthen Australia’s economic and cultural links with Hong Kong. More than 80,000 Australians are living and working in Hong Kong, and about 18,000 Australians are visiting at any time. There were more than 74,000 Hong Kong-born people in Australia in 2011. Australia also has a formal working holiday maker program with Hong Kong.
Australia is one of the major English-speaking study destinations for students from Hong Kong. In 2011, around 3,900 were enrolled in Australian educational institutions. Many tertiary courses are also offered by Australian institutions operating in Hong Kong. Several Australian and Hong Kong tertiary institutions have agreements for student exchanges and research collaboration. The two-way flow of scholars is supported by the Endeavour Awards program under the Australia Awards. The Australian International School was established in 1985 to cater for the growing number of Australians living in Hong Kong and for those seeking an Australian education for their children.
Case studies on two-way trade and investment
In March 2012, Goodman opened a HK$5 billion landmark warehouse and distribution centre in Hong Kong’s strategically important Tsing Yi port district. The company owns, develops and manages industrial space. The warehouse is close to Hong Kong’s container ports, the international airport and major highways to mainland China. It has a lettable floor area of more than 224,000 square metres, making it Hong Kong’s fourth-largest warehouse and the biggest new warehouse project in Hong Kong in nearly a decade.
An Australian company, Austal, is the world’s largest builder of fast ferries and the main supplier of passenger ferries between Hong Kong and Macau, a route used by more than 14 million passengers a year. Austal has built 65 vessels for Asian clients, including more than 50 for operation in China.
Solar Sailor, a leading Australian innovator in maritime solar technology, delivered four hybrid-powered passenger ferries to the Hong Kong Jockey Club. Twenty-four metres long and carrying up to 100 people, the Solar Sailor vessels are part of a cleaner, greener fleet that transports passengers to the club’s Kau Sai Chau public golf complex.
Cheung Kong Group is one of the biggest overseas investors in Australia, with investments amounting to over $10 billion. Its interests in Australia include power distribution, natural gas distribution, water supply, telecommunications, ports, pharmaceuticals, nutraceuticals, vineyards and other agriculture-related businesses. The group is also the matching fund sponsor of the Endeavour Australia Cheung Kong Awards—a $22.5 million 15-year Australian Government scholarship program that supports undergraduate and postgraduate education exchange between Australia and Asia.
CLP Holdings Limited gained a foothold in the Australian market in 2001. Operating through a wholly owned subsidiary, TRUenergy, CLP has become a substantial investor, generator and retailer in the Australian energy sector, providing gas and electricity to residential and business users throughout the country.
Horse racing has been an important economic link between Australia and Hong Kong for more than four decades. Australia provides an estimated 40 per cent of Hong Kong’s thoroughbreds. We participate in most facets of the industry by providing accountants, stewards, farriers, jockeys, veterinarians and commentators. Other equipment, such as starting gates and photo-finish cameras, and turf are also sourced from Australia.
The rule of law and civil and political freedoms under the ‘one country, two systems’ formula are major factors in Hong Kong’s continued success. Hong Kong’s constitutional development process is guided by the democratic principles embodied in its Basic Law. Progress towards the Basic Law’s goal of universal suffrage, in accordance with the legitimate aspirations of the citizens of Hong Kong, will contribute to social harmony.
Successive Hong Kong governments have embraced a strong commitment to open trade and investment. The city is expected to maintain its status as one of the freest economies in the world, with a highly sophisticated financial market. Current and future market participants should expect a stable, transparent and efficient regulatory environment.
Hong Kong’s economy is increasingly integrated into China’s. Both the Closer Economic Partnership Arrangement and China’s 12th Five-Year Plan emphasise China’s support for consolidating Hong Kong’s position as an international financial, trade and shipping centre and developing it into an offshore renminbi business centre as well as an international asset management and regional logistics centre. Hong Kong should therefore play an important part in the strategies of Australian companies engaging with China and the region. Many exporters use the city as a test market for China and other regional markets. Hong Kong will also continue to offer opportunities for direct two-way trade and investment with Australia.
Hong Kong is positioning itself to become an international arts hub. The construction of an integrated cultural and arts precinct known as the West Kowloon Cultural District is underway. The project involves the construction of hotel, residential, retail, dining and entertainment facilities. Overall, the project offers a potential platform for Australian companies to deepen their commercial engagement with Hong Kong; some are already bidding for business in the project. As it develops as an arts hub, there will be ongoing opportunities for arts practitioners in Hong Kong.
Major infrastructure and services-related projects in the pipeline are expected to attract investment in various sectors. One project, a third runway for Hong Kong International Airport, if approved, will offer Australian design, construction, engineering, architectural and logistics companies avenues to showcase Australia’s competitive advantages and technology. A feasibility study is expected to be completed in 2013 and construction is expected to be completed in 2022.
With minimal agriculture, Hong Kong will continue to depend on imported food. Australia is regarded as one of the top supplying countries for safe, high-quality food products. While that reputation has served us well, we should not be complacent. Hong Kong is an acutely discerning and competitive market, so we should preserve and promote our well-earned reputation.
Hong Kong has developed into a regional wine trading and distribution centre since the abolition of customs duty in 2008. A memorandum of understanding signed by the Australian and Hong Kong governments in April 2009 should continue to enhance the trade in Australian wine.
Hong Kong’s society is ageing rapidly. By 2025 it is estimated around 25 per cent of the population will be over 65. There could be opportunities for Australian businesses providing aged care and medical services.
Environmentally sustainable development could become another area for partnership with Hong Kong, given the city’s increasing focus on green building materials, energy efficiency and environmental products and services.