Hong Kong and its New Role as an Open Financial Platform Presented by: Mr Danny Luk Director of Louis Lai & Luk CPA Ltd, Hong Kong Director of Horizons Corporate Advisory Holdings Ltd, Hong Kong 1 HONG KONG 2 Title Text: 3 Hong Kong and its New Role as an Open Financial Platform • The big picture: China’s Structural Market Reform • Timing: international finance to overtake trade as projector of Chinese global influence • Inextricable: Hong Kong’s role as a facilitator of change 4 Hong Kong in Numbers 2011 2012 2013 Population (million) 7.07 7.15 7.19 Gross Domestic Product (US$ billion) 248 261 272 35,100 36,500 37,900 Real GDP Growth (%) +4.8 +1.5 +2.9 Inflation (%) +5.3 +4.1 +4.4 3.4 3.3 3.3 GDP Per Capita (US$) Unemployment Rate (%) 5 Title Text: Hong Kong Investment in China US$ billion 700. 525. 350. 175. 0. 2004 2005 2006 2007 Source: TID and Census & Statistics Department of HKSAR 2008 2009 2010 2011 2012 2013 8 Hong Kong Total Trade Statistics 2013 Others EU China USA Source: EU Commission, US Census Bureau, Census & Statistics Department of HKSAR 9 C H I N A China in Numbers 2011 2012 2013 Population (billion) 1.344 1.351 1.362 Gross Domestic Products (US$ billion) 5,930 7,320 8,230 GDP Per Capita (US$) 2,869 3,120 3,348 Real GDP Growth (%) +9.3 +7.8 +7.7 Inflation (%) +4.0 +2.6 +2.5 11 World Trade 2013 US$ billion 5000. 3750. 2500. 1250. 0. China Source: World Trade Organisation USA Germany Japan France 12 Challenges: the Renminbi • A truly international currency? 80% of payments using the RMB involve China and Hong Kong. • Free trade: The RMB is currently neither freely traded nor fully convertible. • The rule of law? Creditors seek to protect their investments through the legal process. • A state-controlled market. • Regulatory change: Complexity and expense of satisfying China’s economic reform agenda. 13 The Answer? ‘Connectedness’ 14 Measuring ‘Connectedness’ Sources: McKinsey Global Institute 2014, as reported in South China Morning Post 15 Connecting with China • Trade Settlement • Renminbi Business • “Through Train” Hong Kong - Shanghai Stock Purchase Arrangement • Listing of State Owned Enterprise in Hong Kong 16 Trade Settlement in RMB • Hong Kong monthly average trade settlement increased from US$5 billion in 2010 to US$35 billion in 2012. • In 2013 the total RMB trade settlement handles by banks in Hong Kong amounted to UD$663 billion. 17 Appetite for ‘Dim Sum’ Bonds Sources: Thomas Reuters 2014, as reported in South China Morning Post 18 Rising Yuan Deposits in Hong Kong Source: South China Morning Post 19 Connecting with the Global Economy • Double Taxation Agreements • Agreement to Exchange of Tax Information • Foreign Account Tax Compliance Act (FACTA) 21 Double Taxation Agreements Effective Date Dividends Dividend Qualifying Interest (%) Others (%) Company (%) Royalties (%) Technical Fees (%) Austria 2012/13 - 10 - 3 - Belgium 2004/05 0/5 15 10 5 - Brunei 2011/12 - - 5/10 5 15 Canada 2014/15 5 15 10 10 - Czech 2013/14 5 5 - 10 - France 2012/13 10 10 10 10 - Guernsey 2014/15 - - - 4 - Hungary 2012/13 5 10 5 5 - Indonesia 2013/14 5 10 10 5 - Ireland 2012/13 - - 10 3 22 Double Taxation Agreements (Cont’d) Effective Date Dividends Dividend Qualifying Interest (%) Others (%) Company (%) Royalties (%) Technical Fees (%) Italy Pending 10 10 12.5 15 - Japan 2012/13 5 10 10 5 - Jersey 2014/15 - - - 4 - Kuwait 2014/15 0/5 5 5 5 - Liechtenstein 2012/13 - - - 3 - Luxembourg 2008/09 - 10 - 3 - China 2007/08 5 10 7 7 - Malaysia 2013/14 5 10 10 8 5 Malta 2013/14 - - - 3 23 Double Taxation Agreements (Cont’d) Effective Date Dividends Dividend Qualifying Interest (%) Others (%) Company (%) Royalties (%) Technical Fees (%) Mexico 2014/15 - - 4.9/10 10 - Netherland 2012/13 - 10 - 3 - New Zealand 2012/13 0/5 15 10 5 - Portugal 2013/14 5 10 10 5 - Qatar 2014/15 - - - 5 - Spain 2013/14 - 10 5 5 - Switzerland 2013/14 - 10 - 3 - Thailand 2006/07 10 10 10/15 5/10/15 - United Kingdom 2011/12 0/15 0/15 Domestic Rate 3 - Vietnam 2010/11 10 10 10 7/10 24 “You don’t have to open up your market… You let Hong Kong do the work.” Quote from Professor Chan Ka-keung, Secretary for Financial Services and the Treasury of Hong Kong SAR Source: South China Morning Post 25 Thank You Louis Lai & Luk CPA Limited 9/F., Surson Commercial Building, 140-142 Austin Road, Tsimshatsui, Kowloon, Hong Kong Tel: (852) 2314 3668 Email: [email protected]