Thanks very much, John, for the introduction.
Thank you also for pointing out that I was once
Australian ambassador to Greece.
I'd like to follow that up by saying it was in fine shape when I left.
(Laughter)
But, now, now I'm of course in Hong Kong.
I'm not sure how closely associated most of this audience is with Hong Kong,
so I thought I might start by giving you just a very brief and probably
overly generalised description of Hong Kong and its relationship
with Australia as it currently stands.
Most of you will know that Hong Kong for a long time was a British territory.
That was through until 1997, when sovereignty of Hong Kong switched back to China.
At that time there was introduced a document called the Basic Law, which is
essentially Hong Kong's mini constitution, and it establishes
the framework of..., which is described as a "one country, two systems" framework.
That framework is to apply nominally, at least,
until 2047, which is, of course, fifty years after 1997.
That one country, two systems framework gives
Hong Kong a very high degree of autonomy over a number of policy areas.
It has an independent executive, independent legislative and judicial powers,
and, in particular, a lot of sovereignty over its economic policy.
It does not have autonomy over its own foreign policy or defense policy,
so in terms of international relations, for example,
Hong Kong is not a member of the United Nations, but it is a member
of the key economic and trade forums, such as the World
Trade Organisation and APEC.
Now we're roughly a third of the way through that
fifty year period of the Basic Law, and I think it's pretty
safe to say that Hong Kong is now quite heavily integrated
already into the Chinese economy, and the economic
relationship, I think, between Hong Kong and China is quite symbiotic.
China already is far and away Hong Kong's largest
trading partner. It holds up in many respects Hong Kong's
retail sector when...I'll give you some statistics later on
on the number of mainland visitors there are to
China and their role in the retail sector in Hong Kong.
Hong Kong, of course, is still a major entrepôt and
serves as an entrepôt for a lot of trade going into China.
The manufacturing sector in Hong Kong has largely
now shifted, it's gone offshore out of Hong Kong,
most of it now in the Pearl River Delta, in mainland China.
So, again, there's a very, very strong and, in my sense,
quite symbiotic relationship between the two.
Hong Kong is also the number one source of foreign
direct investment into China and it's the most important
fundraising market for Chinese companies--there's
something like 3,000 Chinese companies now registered
in Hong Kong in one form or another, many of them
listed on the Hong Kong Stock Exchange.
Hong Kong has also been designated in the most recent
Chinese five year plan as the prime offshore trading centre
for the Chinese currency, the renminbi.
So, it's a very important source of investment funds
for Chinese companies going abroad and, as I mentioned before,
the Hong Kong Stock Exchange is the premier market for
Chinese companies listing overseas and seeking access to overseas markets.
One of the reasons for this is that Hong Kong, of course,
developed a role and maintains a role as a major
financial centre; it developed that role over many years now.
It's also among the most open economies in the world--
when the groups that do these sorts of ratings
rank which is the most open economy in the world, the top three
are invariably Hong Kong, Singapore and Australia.
And I think Hong Kong's led that list for probably the best part of fifteen years or so now.
But, more particularly, Hong Kong has a large
sophisticated and very credible capital market;
it's got a highly skilled workforce, particularly in the
financial services area; and, importantly, it's got a very
transparent regulatory regime and, most importantly of all, I think, the rule of law.
It's essentially British law which applies in Hong Kong,
given the heritage of Hong Kong there, which makes
that a very easy thing for international capital markets
to deal with, because many people dealing in that area
are fairly familiar with that style of law, and it's
applied fairly rigourously in Hong Kong.
So, that makes Hong Kong, as John mentioned before,
a very important two-way portal for companies seeking
to do business with China. And it's not only foreign
companies going into China, but it's also these days increasingly
Chinese companies going out of China into the rest of the world.
So, it really is an invaluable part, I think, now of
China's economic infrastructure. Specifically, with
respect to Australia, Hong Kong's an important partner for
Australia in its own right: we've had an official presence in Hong Kong
for more than forty years. It began as a trade office just
around about fifty years ago and it's been a fully
fledged consulate for the last forty odd years.
There are very strong commercial and social and personal
links between Hong Kong and Australia. Two-way bilateral
trade between Hong Kong and Australia is around
seven to eight billion dollars annually. That's not
a large amount, but when you consider that Hong Kong
is only a touch over seven million people, it's still a
significant amount of trade. More importantly, the
investment relationship is much more substantial:
when you add up the stock of Hong Kong investment in Australia
to Australia investing in China, it's the best part of
seventy billion Australian dollars, and I think last year
Hong Kong was something like the sixth or seventh
largest source of investment, foreign investment, into Australia,
so that's quite significant.
In the last Australian census, it reported that there are around about
80,000 people born in Hong Kong who are now resident in Australia.
That reflects a bit of a peak in migration from Hong Kong to Australia
before 1997, before the handover back to China.
I bet a lot of those people have stayed in Australia
or maintained their links with Australia; many still have
property here or children here, or have sent their
children to university in Australia, even if they
returned to Hong Kong after 1997.
But there are around about, we estimate, 100,000 alumni
of Australian education institutions in Hong Kong.
That includes people who've studied on shore here in Australia,
but also they've sort of done courses with Australian
institutions off in Hong Kong.
Now, I'm going to dwell for a moment on the number of Australians
we estimate to be in Hong Kong. I do this for a reason
that'll become obvious as I speak.
I should say it's difficult to estimate this because it's not actually compulsory
for Australians to register with an embassy or a high commission
or a consulate when they're overseas.
So it's not always the case that we have a very accurate
idea of how many Australians there are there.
The one thing that we do know very accurately, however,
is the number of passports we issue every year and
in Hong Kong last year it was 9,500.
The rule of thumb that we use is that if you multiply
that number by ten, you get a pretty good estimate
of how many Australian citizens are resident in the
territory in which you're involved.
So that gives us a figure of, you know, somewhere around
at least 80,000, probably 90,000 closer to 100,000
Australians up there--it's a very large number.
The other thing we know quite accurately is the number
of Australians that vote through the Australian consulate
in a federal election. And I can tell you my favourite statistic
about Hong Kong is, in the entire Australian electoral
system, the two individual places that get the most
number of votes in the federal election are the
Australian High Commission in London and the Australian Consulate in Hong Kong.
More Australians vote in Hong Kong than at any individual
polling booth anywhere in mainland Australia-- Melbourne, Sydney, you name it--
which means we're going to have a long queue there on September 14th.
But it really is a sign of just how substantial the Australian community in
Hong Kong is. Within that community, there's a lot of
different professional associations. The Australian Chamber of Commerce
in Hong Kong claims--and I believe them to be the largest Australian
chamber offshore, even bigger than London or New York or Turkey or Singapore or anywhere else--
I know the chapter of the CPA Australia, Certified Practising Accountants Australia, Hong Kong is
their largest offshore chapter, as is the Hong Kong chapter of Engineers Australia.
And a number of Australian alumni groups have their largest chapters in
Hong Kong, as well, so I think that's an important reflection
of just how substantial the Australian presence is in Hong Kong,
particularly in the commercial area, and you will have noticed
when I have read off those statistics, it's especially in the professional service.
So, in terms of merchandise trade, as I mentioned before, Australia has a significant surplus
with Hong Kong, around about 2 billion dollars.
But the thing that's important, I think, about our trade profile there
is that our major exports tend to be high value products, high quality products.
They're things like premium seafood, premium beef, premium wine.
The value of the Australian wine exports to Australia--uh, to Hong Kong--the average value per litre is
five times higher than our global average, which is an indicator
that Hong Kong buyers are buying up the top end of the Australian wine range
rather than towards the bottom end.
We also sell lots of cosmetic products into Hong Kong and products such as pills and gems.
Education is an important Australian export to Hong Kong, though it's suffered,
I have to say, a little bit over the last couple of years, in particular
with the value of the Australian dollar, but still quite significant.
Hong Kong generally has a small surplus in the services trade
between Hong Kong and Australia, and that largely reflects
the balance on transport services trade, which,
as you might expect, is heavily in Hong Kong's favour,
given its entrepôt role.
The investment relationship, as I mentioned before,
Hong Kong is the seventh largest foreign investor into
Australia last year. It's got a stock of investment in
Australia with now around about 40 billion dollars.
The Australian stock of investment in Hong Kong
is about 25 billion, so total figure gets up close to
about 70 billion dollars, as I mentioned earlier.
Hong Kong is the tenth largest destination for Australian
investment going offshore. So, very, very important.
There's a number of interesting examples of the investment of those of you from Melbourne,
who, I guess, most of you, many of you.
I always hesitate to say this because you never know what reaction you're going to hear.
But part of your metro system is managed or was managed out of Hong Kong.
They tell me it works better now than it did before, but I won't pass judgment on that.
And a lot of your electricity generation and distribution
is actually done by Hong Kong companies.
Hong Kong companies are very heavily involved in utilities and infrastructure throughout Australia
that there's bit of a focus in south Australia, in Victoria, in particular.
They're also heavily involved in biotechnology, telecommunications.
Examples of some of the Hong Kong invested companies here are
EnergyAustralia, Citi Power, Powercor, investor of metro trains--
Melbourne, as I mentioned--and AIA is also a Hong Kong investment company.
In terms of the Australian investment in Hong Kong,
it includes all four of the major Australian banks plus
the Macquarie Group, QBE, a number of legal and
accounting firms, Telstra, Leighton's, and investment
in areas like logistics, fashion, health and medical
products, education, and training, etc.
Again, I've sort of dwelt on that a little bit because I want to try and paint a picture
of the relationship, the commercial relationship,
between Hong Kong and Australia,
as one of being one that's quite substantial and mature,
but notably it's not one that's typical of many of Australia's major trading partners
in that it's not based in any significant way on trading of commodities,
the sorts of commodities like carbon or iron that
dominate our trade relationships with a lot of other countries.
That's not really a feature of the relationship with Hong Kong.
Also, the relationship with Hong Kong is built much more on services
and investment partnership rather than...and, in the area of merchandise trade,
it's largely in high-end products, high value added products.
In many ways, then, the relationship we have in Hong Kong is a bit of
an exemplar of what I think Australia should be trying to achieve, as we move into the Asian Century.
It's a relationship that's sustainable well beyond the end of the mining boom.
The future of the relationship looks reasonably bright to me.
As I said, Australia's developed a reputation for providing high quality, safe food
and beverages products in Hong Kong, and there's a
large market for that. Also, a large market for that in
Macau, where the economy's much more driven by the gaming sector, but that includes
a large chunk of tourismy people that want to be entertained
when they're in Macau participating in the gaming activities up there.
The Hong Kong market's sophisticated. Hong Kong people, as I say,
many of them have a direct connection themselves with Australia.
If they don't have a direct connection, then they will have travelled here
from time to time and have a reasonably good understanding
of Australia. And, again, I think that's reflected, for example,
in the profile of our wine exports to Hong Kong, which
are at the higher end, because Hong Kong purchasers
understand that Australia can produce those sorts of wine.
We're, in fact, the second largest provider of wine into Hong Kong,
second only to the French.
So, there's also developing a bit of a market for high-end
consumer goods being purchased in Hong Kong by mainland shoppers.
There's something like 50 million, I think it is, visitors from outside of Hong Kong
into Hong Kong every year, and fully two-thirds to around about seventy percent of those
who have come from the mainland. So they see the Hong Kong experience as being providing
something of a sort of shop-window, if you like, to Western products.
Very often, the mainland visitors to Hong Kong are travelling overseas
for the first time. So it provides them with an
opportunity to have a look at what sophisticated, Western, saavy, Western,
educated people are buying, so they'll very often see Australian products in the shops in
Hong Kong. A good example I can give you is Paspaley Pearls, a very high-end
Australian product now well-established in Hong Kong,
but many of the purchases that are being made in Hong Kong are indeed being made
by mainland Chinese.
So, for those of you that are in business and looking at the Chinese market,
I think it's often worth thinking about having Hong Kong as your first step into the market
because it's a relatively small market. You might get overwhelmed by the demand
you might create, but it also gives you a bit of an entrée into the pot of gold at the end
of the rainbow, which is the mainland Chinese market.
There's also a bit of a multiplier effect, I think, from trading with Hong Kong as well,
as I mentioned, because it generates an awareness of the quality of
Australian products, which then filters through into other mainland areas.
There are ongoing opportunities in Hong Kong for Australian providers of professional services.
This is associated in particular with Hong Kong's ongoing infrastructure development.
Again, if many of you have been to Hong Kong, you'll be aware of the
development of the West Kowloon Cultural Centre,
which is going to be a massive construction project over the next decade or so.
The redevelopment of the old Kai Tak Airport, which any of you that have flown into won't have forgotten.
But it, of course, is being redeveloped into a passenger shipping terminal and a tourism and sports area.
So, plenty of opportunities there for engineers, architects, people involved in green building.
That's now an increasingly important priority for the Hong Kong government, is to do something about
the environment in Hong Kong, and in particular, air quality.
Plenty of opportunities, as well, in terms of what we describe as the software associated
with these developments in the cultural area, for example.
People experienced in project management, facilities management, training of those
that will end up being the administrators in what's now quite a quickly growing
arts and culture scene in Hong Kong.
There are probably also opportunities coming up in areas like age-care and senior living.
Hong Kong's population, like many others these days, is aging, but it's a relatively prosperous population of
people looking for a higher quality of life as they get into their more senior years.
All of this, of course, is supported by Hong Kong having a dependable
legal and financial system, and, as I mentioned before,
very open markets. Hong Kong also has a bilateral free trade
agreement with China. It's called the Plus Economic Partnership Agreement,
and that gives Hong Kong-based companies privileged access into
the mainland Chinese market. The local content requirements in that
arrangement are relatively generous, so it's quite conceivable for
Australian companies to think about registering some sort of presence
in Hong Kong, which might give them, depending on the sector and
precisely how they do it, it may give them privileged access into the mainland
Chinese market, as well.
So, from where I stand, I think Hong Kong will continue to serve as a principal investment hub into
China and a principal point of access for Chinese business looking to invest overseas
or looking to access international capital markets.
There's a sizable base, as I mentioned before, of Chinese businesses already
located in Hong Kong, about 3,000 we estimate.
And the Hong Kong financial sector is highly competitive and very well-capitalised; also provides
for a high degree of currency flexibility, which is sort of services you don't always get in
the mainland cities these days, in Shanghai, Guangzhou, Shenzhen, or Beijing.
So I think a bright future there for those of you interested particularly in investment
relationships with China, and I'd encourage you to look very seriously at it.
Now, I think I've been talking for about twenty minutes, so I swore that I would not
go on for any longer than that.
So I'll keep quiet and very happily take some questions if people have some.
Thank you.
(Applause)