By KPMG

The Hong Kong advantage

Hong Kong has a significant role to play in the development and success of the BRI. The city is regarded as one of the world’s freest economies, with a vibrant capital market, an extensive network of financial institutions, a robust legal system and an experienced pool of human capital. As an international finance centre and shipping hub, Hong Kong is well-positioned as a super-connector to the fast-growing BRI economies, and is set to play a prominent role in facilitating trade and investment, and encouraging cooperation in value-added sectors along the Belt and Road.

A policy agreement signed in December 2017 between Hong Kong and the National Development Reform Commission (NDRC) (referred to herein as the HK-NDRC Arrangement) is also set to expand Hong Kong’s role in the BRI.

Hong Kong’s key competitive advantages

1. Established international financial centre

The provision of financing and capital markets solutions represents a key driver of initial success for the BRI. At the outset, access to finance is a necessary element for the successful development of new infrastructure. If successful, this investment can stimulate further positive knock-on effects to sectors such as real estate, healthcare and industrial markets, leading to job creation, greater economic outcomes for BRI economies and a larger volume of global consumers.

One of the largest financial services centres worldwide, Hong Kong is well-placed to position itself as the long term partner of mainland Chinese and international groups seeking financial, banking, insurance and risk management solutions for BRI investment.

2. Connectivity with ASEAN

The ASEAN region comprises 10 Southeast Asian countries with a total population of more than 635 million,2 all of which are Belt and Road economies. With a young workforce, a strong growth track record, and a middle class population that is projected to reach 400 million by 2020,3 ASEAN represents an attractive investment jurisdiction for groups seeking to invest and conduct business along the Belt and Road.

For Hong Kong, its geographic proximity and cultural connections with the ASEAN countries make it an attractive investment platform for entry into these markets. In addition, many Hong Kong companies possess a deep, lengthy and well-respected track record of investment and business operations in ASEAN.

In November 2017, Hong Kong and ASEAN signed a Free Trade Agreement and a related Investment Agreement. The agreements will enhance legal certainty, investment protection and market access for the trade of goods and services, which will create new business opportunities and boost trade and investment between Hong Kong and ASEAN.

3. Integration with the Greater Bay Area

Hong Kong’s positioning within the Greater Bay Area (GBA) strengthens its status as a platform for BRI investment. Key elements include:

• SOE concentration: Chinese state-owned enterprises (SOEs) are expected to play a highly active role in the BRI, with many using the GBA as their national and international headquarters.

• Transport and logistics: The GBA is home to a world-class transport and logistics network that is continually expanding and will provide significant support to BRI investors with their trade requirements.

• Innovation and technology: There are plans to expand the GBA’s positioning as a regional technology hub. An example of this is the agreement between Hong Kong and Shenzhen to develop the Lok Ma Chau Loop into one of the world’s largest innovation and technology parks on the border of the two cities. For countries and companies participating in the BRI, leveraging innovation and technology in the GBA will support the acceleration of their economic growth and development.

4. Professional services community

Hong Kong has more than 250,000 professionals working in the financial services sector. In addition, its professional services workforce numbers more than 217,000 in areas such as legal, accounting and auditing, architecture and engineering, information technology, advertising and specialised design.

Hong Kong’s professional services community has in-depth experience working with international investors, lenders and public sector entities on their inbound and outbound work, underscoring the city’s leading role in facilitating trade and investment both locally and along the Belt and Road.

5. Cultural diversity and human capital

The Hong Kong workforce represents a deep and diverse talent pool of resources with skills, multilingual capabilities and international experience suitable for companies seeking to be active in the BRI.

Female labour force participation in Hong Kong also continues to increase significantly, while there is a growing working population from diverse backgrounds and nationalities spanning Europe, North America and other parts of Asia Pacific.

The Government of the Hong Kong Special Administrative Region (Hong Kong Government), through enhancement measures to its immigration policy, continues to look at ways to recruit top talent from outside Hong Kong. It also continues to offer financial incentives to individuals who pursue continuing education and training courses in order to broaden the knowledge and capabilities of the city’s workforce and wider community.

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