Regional partnership to fuel HK trade, financial services
As a champion bred by globalization, Hong Kong will play a greater role as a global trade and financial center following the signing of the Regional Comprehensive Economic Partnership, business and government leaders said.
Heavyweights think business opportunities exist for Hong Kong given its active involvement in the Guangdong-Hong Kong-Macao Greater Bay Area and close ties with Asian countries.
Dennis Ng Wang-pun, president of the Chinese Manufacturers’ Association of Hong Kong, thinks that although China has signed many regional free-trade agreements in the past, the scale of the RCEP is unprecedented, as it involves 15 major countries in Asia-Pacific, covering 30 percent of the global GDP.
The mega trade pact will greatly benefit the business and economic exchanges within the region, and offset some negative effects of the Sino-US trade disputes. “I personally see it as a tremendous agreement,” Ng said.
Many Hong Kong manufacturers build factories in the Bay Area, but they are used to exporting products to the United States and European Union countries, he said. These markets are very important to Hong Kong companies. But Hong Kong may also face more sanctions from the West amid Sino-US disputes, said Ng, the managing director of Polaris Jewellery Manufacturer Ltd in Hong Kong.
However, with the implementation of the RCEP, Hong Kong companies will consider altering their strategies by producing more products targeting Japan and South Korea, as Hong Kong manufacturers are also familiar with Asian markets, Ng said.
In the future, more Hong Kong companies will be able to explore the massive Asian market through the RCEP, with the Bay Area as a tipping point, he said. “The whole world is looking at the development of the Bay Area, and looking at the Chinese mainland,” he said.
All members of the Chinese Manufacturers’ Association are closely monitoring the deal’s implementation, and will act according to more specific policies, Ng said.
Carlos Casanova, senior economist for Asia at Union Bancaire Privee based in Hong Kong, said the signing of the RCEP enriches the whole dynamic of regional investment. It makes the role that companies and financial institutions of Hong Kong can play quite interesting, he added.
Noting that Hong Kong, a global financial center, has been caught in the middle of the dispute between the US and China, Casanova thinks the RCEP benefits Hong Kong by stimulating regional integration.
“Hong Kong should position itself as a champion of globalization because that is what has underpinned other regions’ growth in the past 20 years or more since its return to China,” he said.
“T he main takeaway is that Hong Kong should embrace the initiative. Hong Kong thrives in an external environment where there is deregulation and dynamism in Asia, and low barriers to entry. So this is one step in the right direction,” he said.
As China focuses on high-tech and highvalue-added manufacturing under the 14 th Five-Year Plan (2021-25), the RCEP will enable easier access for Chinese manufacturers that want to shift some lower-value-added manufacturing to Southeast Asia, where costs related to labor, operations, and the environment are much lower, Casanova said.
Hong Kong can play a key role in financing during the supply-chain shift, Casanova said. It’s expensive to move manufacturing operations to a different country. Chinese companies will be more comfortable financing through Hong Kong because that is where traditionally their offshore subsidiaries are located, he said.
But Hong Kong will inevitably have to compete with Singapore in terms of who gets a larger slice of the Southeast Asia pie, he added.
Casanova said that in the long run, if the Bay Area is successful and it becomes a large urban cluster in southern China, it should also be able to fuel imports from Southeast Asia under the RCEP.
“In the very long term, if you have a very dynamic and affluent center in South China, other Southeast Asian nations will be interested in tapping that as a source of demand for some of their exports,” he said.
After the signing of the RCEP, heated discussions have surfaced on when Hong Kong will join the partnership.
At a recent news conference, the Chinese Ministry of Commerce said it actively supports Hong Kong’s participation in international and regional economic cooperation. The ministry will support Hong Kong’s joining the RCEP as soon as possible in accordance with the provisions of the agreement and the actual needs of the city’s development, it said.
Hong Kong Financial Secretary Paul Chan Mo-po wrote on Sunday in his blog that the city hopes to be among the first economies to join the pact after it takes effect.
During a recent Asia-Pacific Economic Cooperation Ministerial Meeting, Hong Kong Secretary for Commerce and Economic Development Edward Yau Tang-wah said the signing and launching of the RCEP is an important milestone for economic integration in the region.
Hong Kong is keenly interested in joining the RCEP and stands ready to start discussions on accession with the partnership’s member economies when the time is ripe for the RCEP to take on new partners, Yau said.