This is actually my first full visit to Hong Kong. I passed through when I was flying back from China in August. I have been here for about twelve hours, and I have already been struck by just how dynamic this place is. The enormous amount of energy, talking to members here today, the sense of entrepreneurship and just how vibrant this particular organisation is. I was told that you organise 180 events in a year, that is really quite impressive. So I’m really pleased to be here.
I would just like to take you back from this dynamic city to another dynamic city: London. And I would like to take you back to 24 June at about 12.30 in the morning. I campaigned on the remain side of the referendum campaign and I had been asked to come and do some media for the remain campaign at Festival Hall. I think the expectation – everyone’s expectation – was the remain camp would win that particular vote. But I have to say, even by the time I arrived at 12.30 in the morning, it was already pretty clear that the results were not going in the right direction. By about 3.30 that was it; we were clear that the remain side had lost and we were going to leave the European Union.
Fast forward six months from June. If you look at the economy, there were various predictions about what might happen. Actually the sky has not fallen in.
The economy has continued to grow, and more strongly than expected. For next year, the forecasts for the UK economy are higher than France and Germany. Our business environment remains highly regarded – we are ranked number seven in the World Bank rankings for ease of doing business. In the World Economic Forum Competitiveness Index we are also at number seven. We have a respected system of contractual law, and of course the lowest corporation tax rate in the G20, reducing to 17 per cent by 2020.
What this demonstrates is that the UK is still very much open for business.
Since my appointment in July, I have been doing a lot of travel around Asia. I have been to China, India, Japan, Indonesia, Australia and New Zealand, New York for the UN General Assembly and Brussels. I’m here now and going on to Manila after this.
My immediate priority has been to reassure people about what Brexit means and the fact that we are still very much open for business. What is particularly striking for me is that the first discussion that always comes up when I am in Asia and the Pacific is Brexit. But actually, very quickly the discussion then moves on to bilateral trade. What is the opportunity for doing a free trade agreement? And I have been very happy with the number of investors in Asia who have said, not only will they continue to invest in the UK, but they will enhance their investments because they can see the opportunities in terms of bilateral trade post-Brexit.
I do not want to leave you with the view that we will not face any challenges. Of course there will be challenges as we prepare to leave the EU. But of course with challenge also comes opportunity.
What I would like to do this morning is to set out our Prime Minister Theresa May’s vision for the UK after we leave the European Union. I also want to talk to you about what that means for Hong Kong, China and Asia more broadly. Most of all, I want to highlight the opportunities this presents for Hong Kong.
‘One Country, Two Systems’
Before I do that, perhaps I should just say a few words about the recent developments in the Hong Kong Legislative Council.
As a co-signatory of the Joint Declaration, the British Government has made clear our view that ‘One Country, Two Systems’ continues to be the best system for Hong Kong’s long term stability and prosperity – as it has proved to be since its inception 19 years ago. We are therefore concerned by recent developments in the Hong Kong Legislative Council.
But as the former Foreign Secretary Philip Hammond said, it remains our view that independence for Hong Kong is not a practical option. But we do believe that further progress on political reform, in line with the Basic Law, would help address recent developments by strengthening governance and helping to protect Hong Kong’s future stability and prosperity.
Open for business
The Prime Minister has set out her vision for the UK: it is for us to be ambitious, outward-looking as a country, open for business at home and a champion for free trade abroad.
We are open for business. We have low taxation rates, low regulation, low levels of industrial disruption; a skilled workforce, world class research and development (R&D) and some of the world’s best universities; the ideal time zone - and of course, not to be ever underestimated, the English language.
Investors continue to see the UK as a really attractive place to invest. You have seen the £24 billion that Soft Bank made in purchasing ARM Holdings, the biggest investment into the UK from Asia ever. The acquisition of Odeon Cinemas for almost a billion pounds by Dalian Wanda. You have seen GSK announcing its investment. Nissan of course has confirmed that the super plant at Sunderland will go ahead securing 7,000 jobs. You have got a billion pounds that have come from Google with 3,000 extra jobs. Facebook has announced that they are going to increase their workforce by 50 per cent by the end of next year. There is a long list. The reason I set it out is to make the point that investors are voting with their feet and they are continuing to invest in the UK because they see it fundamentally as a good place to invest and a good place to do business.
Of course we are not complacent. We know that we need to continue to innovate and to be responsive in terms of what investors want. We are determined to make the UK home of innovation and cutting edge science and technology. You will have seen the Autumn Statement, where the Chancellor Phillip Hammond announced an extra £2 billion a year of Government investment in R&D by the end of this Parliament.
And of course, we want to go further on tax too. The UK corporation tax is already the lowest in the G7 and joint lowest in the G20. We will be reviewing the tax regime to seek ways to make it as pro-innovation as possible.
And as we draw up our plans for our future relationship with the EU, we are engaging UK businesses and Asian investors to hear their views on what that relationship should look like.
The Prime Minister’s vision for the UK is very much outward-looking. Far from turning our back on the world, as some have suggested, we will continue to play a leading role in foreign policy issues, international security, development and trade.
Champion for free trade
We will be an independent nation working alongside the traditional trading blocs and trading freely with others. I should just say a word about globalisation. Of course it has had its benefits. But we have got to recognise that some things will have to change if we are to respond to the voices of those who feel globalisation has left them behind. It truly does herald a new era in global trade.
And we see an important role for Hong Kong in this new era of free trade. We will be building on strong foundations.
UK-Hong Kong trade and investment
Hong Kong is our second largest export market in Asia. Last year, UK exports to the territory were worth almost £8 billion. More than 630 UK companies have offices here – you are proof of that – and thousands more come here regularly to do business.
You are working on massive infrastructure projects like the airport expansion; improvements to the rail network; and you are supporting the development of West Kowloon Cultural District.
But of course we can do even more together. The UK Government wants to support British companies like yours to grow your business here. We want to see more UK-Hong Kong collaboration on education; more cutting-edge UK technology being used in Hong Kong hospitals; and more British food and drink enjoyed in Hong Kong’s excellent restaurants.
And we want to see more trade and investment going in the other direction too. Investment from Hong Kong is already a crucial part of the UK economy: from container ports to fin-tech; from high street brands to semi-conductors. It is transforming Manchester through large-scale regeneration projects and MTR are helping us to improve our commuter routes across the country.
We want to see even more of Hong Kong’s vibrant tech start-ups setting up in London. We want to bring Hong Kong expertise and investment into our new high speed rail project, HS2, and into the Birmingham regeneration projects associated with it.
UK in China and beyond
So what about our approach to China? We are a building a comprehensive global partnership between our two countries.
This is a partnership which aims to establish co-operation with China on the world’s most pressing challenges: climate change, violent extremism, anti microbial resistance, nuclear proliferation. And of course, business. We want this to be an open partnership, one which enables us to speak frankly when we do not have a shared view - including on human rights.
Our commercial work is a key component of this partnership. We are committed to working closely with China on their outbound programme. The Prime Minister has given the green light to Hinkley Point C and we have committed to an Alliance to support UK and Chinese companies in infrastructure projects.
A key aspect of that is Belt and Road. I know many of you in Hong Kong are already involved in this important initiative. We want to encourage more UK companies to get on board and we will be working with China to identify suitable projects.
We also want to encourage more UK companies to break into the Chinese market. China has risen from our tenth largest export market in 2010 to our fourth largest in 2015, up 57 per cent.
As a gateway to Mainland China, Hong Kong is uniquely placed to help. And it is not just about breaking into the Chinese market. It is also about helping us to establish more UK-China projects in the UK, in Asia and around the world. UK companies based here in Hong Kong can lead the way by bringing these new partnerships together.
As we leave the EU and look ahead to making our own trade deals, Asia is a hugely exciting prospect. As well as the increasing trade with China, total UK exports to the six largest ASEAN countries were higher in 2015 than our exports to Japan, India and South Korea. And the cumulative stock of Foreign Direct Investment from Singapore, Malaysia and Thailand in the UK is over three times that in the US and Germany combined.
More than 1,000 Japanese companies base themselves in the UK and as the new deal with Nissan shows, we are committed to maintaining those links with established trading partners.
We will also be reaching out to new ones and we are strengthening our engagement with the region to enable us to do so.
In conclusion, I want to make clear that we see huge potential for even stronger economic links between the UK and Hong Kong. More than that, there are significant opportunities for Hong Kong as we seek to encourage UK companies to do more business in China and the other dynamic economies of Asia.
Many commentators call the 21st century the Asian Century. You will all know from your history that in 1700, Asia’s share of global GDP was nearly 60%. Today it’s just under 30% and rising. And most forecasters predict that this will grow to over 50% by 2050. Asia was, is and will remain one of the most economically important regions of the world, and Hong Kong is a key participant in Asia’s dynamic development.
The Hong Kong SAR Government is absolutely right when it says: ‘Think Asia, Think Hong Kong’. I just want to add: ‘Think Brexit, Think Opportunity.’