Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

• Hong Kong, with a small population of 6-7 million, is spreading resources over too many areas. The result is that everything is moving slowly.

• Hong Kong needs to be focused with respect to PRD.

• The PRD strategy should be an integral part of Hong Kong’s macro policy rather than only a separate measure.
• The private sector should develop a coherent voice to advocate HK/PRD economic integration

• Hong Kong and the PRD together have a population of over 50 million, with combined GDP of about US$250 billion. If our economies continue to grow at the same rate as in the past, in 10 years' time the combined GDP will be close to US$500 billion
• From a Chamber’s survey, most Hong Kong companies have close business relationship with the PRD, and a majority of them have some sort of expansion plan for the PRD in the next 12 months to five years, as they believe that PRD client’s needs will grow.
• The overall message from the survey finding is that the great majority of respondents have a picture of a highly-integrated Hong Kong-PRD region in the next 15 years. Of this, the extent of economic integration is much higher than that of social or administrative integration.
• However, Hong Kong has not really integrated itself into the PRD while Shanghai, for example, has always been the principle metropolis for its hinterland

• A slight concern is that only about half of the respondents of a Chamber’s survey believed that Hong Kong would be the service metropolis of the PRD. It seems there is not yet a predominant consensus over Hong Kong’s vision of itself.
• A clear consensus on the range of possibilities in enhancing HK/PRD integration does not exist in Hong Kong. To some extent, such integration is perceived as a negative process by the general public because of the fear of uncertainty. Some may also think that greater integration of Hong Kong with the PRD would result in reduced competitiveness of the Hong Kong economy.
• The existing communication channels within the government are insufficient and inadequate, creating conflicts between government bureaux and policy making bodies. Consequently, community interests are being affected.
• PRD itself is not a single entity. Municipalities are competing with each other.
• Integration will benefit the PRD as a whole. It should be done at the right level and it would take time, requiring shared vision within the PRD, as well as shared leadership with commitment. The strategy is to “compete together”, not against each other.

• The HKSAR together with the PRD governments should advocate more support from the Central Government.
• There is a need to strengthen governmental expertise in monitoring economic and political development in the mainland.
• While leveraging the advantage of “One Country Two Systems” to attract foreign investment, the HKSAR government should adopt a clear policy towards HK/PRD economic integration with a view to forming an “Economic Coalition” with the PRD.
• It is necessary to raise public awareness of the economic integration, cultivate and sustain popular support from the community in order to build a shared common vision.

• Hong Kong-PRD can become a centre of producer services not just for themselves but for the mainland and the world.
• Rapid economic growth in the PRD implies the transfer of resources – manpower, capital and technical know-how, to the rest of China, i.e. a process of polarization. PRD will grow further and become a model for other cities in China.
• With the whole pie (the PRD region) growing, Hong Kong would maintain a good share with our well established legal framework and corruption-free environment. We need to maintain the rule of law, as well as to advance the efficiency of the administration of justice. “One-country two-system” will continue to provide protection to foreign enterprises.
• Restructuring within the service industries is ongoing. Hong Kong companies are now moving low-end producer services to the mainland.

• A strong producer-service base needs to be established but it cannot be built upon current Hong Kong-based investors in the PRD who are basically low-value manufacturers.
• The industrial structure of the PRD should be upgraded and optimised through technological innovation.
• The term “manufactured in Hong Kong” no longer applies, as most of the goods are now manufactured mainly in China. Instead, “manufactured by Hong Kong enterprises” should be the brand name.

• To develop an integrated strategy that enables HK/PRD to leverage each other’s advantages, i.e. PRD’s resources and high-tech manufacturing , and Hong Kong’s advanced infrastructure.

• There is a 8% economic growth projection for the PRD.
• PRD municipalities are aware of the potential challenges to their low-end production and are advancing their technology as well as marketing and packaging services, not only for overseas but also domestic markets.
• PRD is responding to globalisation by shifting emphasis from tangible assets (i.e. infrastructure, factories and facilities) to intangible one (i.e. information, supply chain management). China is gradually aware that it cannot develop manufacturing industry just by itself. The sector will not grow without market intelligence and supporting services.
• PRD is seeking direct investment in technology projects, probably from US and Japan.

• Is Hong Kong lagging behind in the use of technology (e.g. China is already developing and using voice services technology) or are we driving the use of technology in the territory as well as in China?

• We should take advantage of our intellectual capital and explore application-oriented high-value industries, such as digital entertainment.

• Apart from a safe living environment, Hong Kong needs to improve education system and quality of life to attract expatriates.
• HK/PRD should join forces to attract FDI in high-tech industries, as well as develop our own high-value industries like digital entertainment.
• By technologising low-tech manufacturing, Hong Kong should become an innovative technology centre in southern China, while the PRD would develop into a regional hub of high-tech manufacturing. Hence the whole region will be developed from a processing base to a “world factory”.

• Hong Kong contributes about 30% of the workforce in the PRD, providing three times more producer services than those offered by local firms. With growing demand of producer services, there will be a shortage of local professionals so the cost of manpower will go up.
• Entry of Hong Kong professional services providers such as lawyers and accountants to the PRD market may result in shifting of tax revenue from HKSAR to China. It may reduce demand for local employment for junior management, supervision and low-skill positions.
• There will be a growing number of Chinese professionals working in Hong Kong. They will help facilitate the growth of stock market, debt market and cross-border banking business.
• When Chinese enterprises grow big, they become more sophisticated. Many of them will begin to appreciate the strengths of Hong Kong and make use of our expertise to build up themselves. The newly wealthy in the provinces would seek out the quality goods and services found in Hong Kong. This also applies to individuals who would like to have Hong Kong residency.

• In 15 years the key advantage of Hong Kong is information services which will not be totally opened up in China. The recent policy relaxation to include IT and telecommunications use in industrial and business buildings in Hong Kong helps facilitate the development of IT sector, and it is possible to re-position Hong Kong as the IT and telecommunications hub of southern China.

• Some of the biggest strengths of Hong Kong are our differences with other Mainland cities, and not our similarities with them. Hong Kong is a business partner of the PRD because it is an international city. Therefore, Hong Kong should be the Hong Kong of the PRD, as well as the Hong Kong of China, and the Hong Kong of the world.
• The success of Hong Kong as a major commercial centre and financial hub depends to a great extent on the adoption by the Administration of a strong urban centre strategy in urban design.
• We need to enhance mobility of professionals within the PRD, attract professionals from the outside, as well as ensure a steady supply of high-quality locally-trained professionals.
• Our population and immigration policy should encourage import of professionals from China, especially lawyers and accountants who know China better. Their entry should be facilitated by offering interim permits, so that they can learn here and bring the knowledge back to China.
• According to the Chamber’s survey, less than half of respondents feel that Hong Kong is perceived by PRD as an information centre. Much more will need to be done if Hong Kong is to promote itself as an information and digital hub.

• The existing industrial structure should be re-organised to form a new composition with highly efficient business conglomerates. The keys are urbanisation, informationisation and globalisation.
• Hong Kong should be marketed as a “brand” for business services and tourism in the mainland.
• Given the rapid changes in economic structure and integration, the new urban development plan, probably in a 30-year planning horizon, should enable appropriate objectives in the land use, transport and environmental planning to be achieved.

Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

• Greater Shanghai’s population is 60 million whilst HK-PRD is 50 million.
• Yangtze region is likely to be the “Singapore of China” driven by the government, whereas the PRD will be the “Hong Kong in Asia” driven by entrepreneurs.
• Even for foreign enterprises using Shanghai as base, they can mobilise Hong Kong’s expertise and PRD’s resources to build up and run their mainland businesses.
• One of the important factors often overlooked is the close economic tie between Hong Kong and Shanghai. The rising prosperity of Shanghai is partly fuelled by investments from Hong Kong. As Shanghai's largest foreign investor, the territory has brought not only capital to the city, but also the management expertise and business experience of its companies, as well as other foreign partners via their investment and co-operation with local firms.

• Greater Shanghai often receives more attention from the Central Government than the PRD.
• International attention is now on Shanghai/Yangtze region rather than the PRD.

• Hong Kong and Shanghai should not compete with each other, but should instead form a partnership. Hong Kong’s competitors are other world cities, whilst Shanghai’s competitors are other mainland cities. Although the two cities have some overlapping areas (competition), there exists much more cooperative opportunities.

• There is an inherent ambivalence in Hong Kong’s attitude towards PRD. On the one hand, Hong Kong is promoting itself as a solution provider dealing with difficulties of doing business in PRD, i.e. highlighting PRD’s disadvantages and promoting Hong Kong’s strength. On the other hand, Hong Kong wants to cooperate with the hinterland to take on the world, i.e. highlighting our dependence on PRD.
• The hinterlands of the world cities are willing to be the adopted/satellite economies of the leading cities such as New York, London and Shanghai, but PRD cities are unlikely to voluntarily be satellite cities of Hong Kong. Instead they have a motivation to surpass Hong Kong.
• The PRD itself is not a consolidated entity. Different municipalities are competing with each other.

• Hong Kong’s relationship with PRD should be one of common interest in taking on the world. We should reinforce the commonality of our competitive advantages in the region (i.e. flexibility).
• To promote Hong Kong and the PRD as a single entity, a mentality change is required, from one of “market access into PRD” to “cooperation with the PRD”. We should help strengthen the hinterland to advance their services standard.
• It is essential to gain consensus from Guangdong government as well as the Central Government on Hong Kong’s relationship with PRD cities.
• Greater cooperation in the PRD is needed to reduce the complexity of multi-jurisdiction among municipalities.
• Hong Kong should explore full integration with Shenzhen in the long term, e.g. by 2047.

• To establish a sustainable common vision of HK/PRD integration with common goals.
• To convince the HKSAR government and share the vision to the PRD municipalities.
• To develop an action plan to promote the common vision to the municipalities, such as a series of seminars in the PRD.

• TDC is promoting the concept of PRD Inc by inviting PRD for joint promotion. But, promotional activities are mostly presented by Hong Kong investors in the PRD rather than as collective selling with PRD people.

• Different cities in the PRD will try and stage more exhibitions of their own to rival Hong Kong’s.
• Collective promotion is better than sole promotion. It requires integrated infrastructure and information system.

• The Chamber should involve the HKTDC and InvestHK in a major promotional programme for the PRD, engaging the policy makers in policy formulation and the enterprises in joint promotion with a view to promote the PRD region internationally as a one entity.
• To invite PRD local people to jointly organise promotional event for the whole region, and to engage PRD people by inviting them to participate in the international events organised by Hong Kong.
• To promote Hong Kong as a destination for global buyers by upgrading regional trade fairs to international level.

• Some findings from the Chamber’s survey indicate that the type of support that Hong Kong companies wanted – bridging, connection and collective promotion, market information and policy change by the mainland government – are all related to the market situation in the Mainland. Support from the HKSAR government is not important in their business development. What are important are the government’s priorities to work closely with PRD government, improve connectivity and lobby for central government’s attention.

• There are 50,000 factories in PRD invested by Hong Kong enterprises, but they have done little to influence the government. They have become part of the local system rather than being able to influence the government.
• At present, the development plan of the Central Government is favoured toward the west and inland provinces. It is also part of the central policy to develop Shanghai.
• Comparing to other inland cities, Shanghai and PRD governments may be less active in cooperating with Hong Kong due to their own agendas.

• Hong Kong is considered as a separate entity in the PRD and not included in the social and economic plans of the Central Government.
• It is important to get the recognition of PRD governments that Hong Kong is a financial centre. Therefore the major challenge is to agree on our relationship with Guangzhou and Shenzhen. An understanding from Central Government may be needed.
• PRC lacks a representative body, a counterpart of Hong Kong to drive the growth of the services sector in the whole region.
• Cooperation is difficult in the absence of an effective coordination party of all PRD cities in Guangdong. On the other hand, formal mechanisms like a “PRD’s Mayors’ Council” may not be appropriate for Hong Kong because of the constraints of “One-Country-Two-Systems”.

• HK/PRD need to present a more unified vision to the Central government and to encourage it to pay more attention to the PRD.

• A proper engagement strategy should be developed for the HKSAR government to deal with municipalities in the PRD and to establish a effective mechanism to achieve common objectives.
• Should a Mayors Council be established to coordinate major infrastructure projects and other strategic policies?00

• PRD needs massive investment to improve infrastructure, but the source of capital is uncertain.
• There is no significant private sector group within PRD to facilitate inter-city relationship.

• Capacity building in the PRD is to our advantage. So there is a need to pool our resources to invest in the PRD, including using public funds. This, however, may encounter some opposition by the general public and Legco.
• Hong Kong should help Guangdong and PRD cities develop their own private sector voices, so that they can become a lobbying voice and a focal point for cooperation with Hong Kong.

• There should be a representative voice of the private sector to speak for Hong Kong’s interests in the PRD. Hong Kong enterprises should develop closer relationship with PRD companies to form a similar collective voice to speak for HK/PRD as a whole. A mechanism for PRD private sector should be organised to gather input on common issues and to create influence.
• HKSAR government should consider the possibility in using part of its reserves to form joint ventures for some important infrastructure projects to facilitate the sustainable growth of the PRD and vice versa.

Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

• Our current system encourages the middle class to go out for education and career development before coming back, rather than building a middle class locally.

• Co-ordination and control of IT professionals in education, quality assurance and control is insufficient.

• The HKSAR Government should support the universities to provide better facilities for the teaching of design and branding so that we can be in the forefront of the world. This is necessary if we are going to upgrade the production facilities in the PRD.
• Professional institutions should introduce or enhance new or existing accreditation mechanism in a properly coordinated manner.
• The HKSAR Government should facilitate the employment market for technology graduates.

• Hong Kong Open University is offering MBA course in 21 Chinese cities, running it as a business. Students are required to come to Hong Kong for a few weeks to graduate.
• University degree gained in Macau is acknowledged in China now. Macau University also offers distance learning to mainland students.
• Top brand-name schools in China are recognised not because of facilities but their quality graduates.

• There is a need to strengthen the connection between Hong Kong’s and China’s system, so students from all over China can come to Hong Kong, e.g. through mutual recognition of qualifications.
• In the next 15 years there will be freer flow of talents, so there is a need for a common language and examination.

• The HKSAR Government should recognise the qualification from the mainland universities. The mutual recognition of professional and academic qualification between Hong Kong and the PRD needs to be speeded up. More generally, standards between Hong Kong and the PRD should be harmonised through a benchmarking process.

• Under the 10^th Five-Year Plan, Shenzhen and Guangzhou will have University Villages with participation of foreign education institutions.

• There is a need to enhance the public education system in the PRD.
• Hong Kong does not have presence in the University Villages in the Mainland.

• Hong Kong should take part in the University Villages in the PRD.

• There are 60 international schools in Hong Kong, whereas the US and Singapore have respectively 20 and six only.

• To accommodate children of expatriates, we need to be a centre of international schools.
• Hong Kong lacks vocational training on business services.
• Hong Kong should promote the reputation of our high education standard to the world.
• Hong Kong lacks the presence of renowned mainland universities.

• To be a world city, Hong Kong should open up its education system, develop education services exports, and internationalise public examinations. It should also develop vocational excellence to make the territory a regional leading training centre of hotel and business schools, etc
• We need to enhance the role of international schools.

• We need to motivate major Mainland universities to build their “Hong Kong Campus”.

• The subsidised education system and conservative immigration policy have created barriers for quality students from the mainland to study in Hong Kong.
• There are Chinese students studying in Hong Kong on sponsorship, but the scale is small. And they have to return to China after graduation due to the immigration and labour policies.

• One attractive feature of Hong Kong is the SAR passport. Mainland talents can be built through our education system and “awarded” with SAR passport through a policy device. Their knowledge of Hong Kong and their local connection will be very valuable to Hong Kong.

• There should be a long-term strategy with measures such as scholarship schemes to attract mainland talents.
• One solution is to allow Chinese students to study in Hong Kong on different tuition rates.
• Student exchanged programme should be further enhanced.

• Hong Kong does not have many policy schemes to attract quality people from China. The current immigration policy is an employment policy in favour of the advantaged class, rather than a policy to build talents to contribute to Hong Kong.

• Shenzhen is absorbing quality people to develop high-tech and high value economy, e.g. offering 2-year permits for MBA graduates. Their policy vision is: although there is no renowned university in Shenzhen, all mainland’s renowned universities are in Shenzhen.

• We need talents from the mainland to be connected with mainland’s business network, because they know the socio-economic environment of the mainland better than our own students. We need them as bridges to mainland business.

• Hong Kong needs to use the immigration policy to attract quality mainlanders to enhance the talent pool in Hong Kong.
• We need to attract wealthy people from the PRD to invest and live in Hong Kong.
• We need to organise executive training programme for businessmen in the PRD.

• Even with the extensive interaction between Hong Kong and the PRD, human factor is still the least mobile in the integration.
• 15 years from now, Hong Kong will need professionals, not just entrepreneurs, to enhance its headquarter role. On the other hand millions of Hong Kong people will relocate to the PRD.

• Low value factories will be moved to the inland provinces. It is expected that the wage level of low-skill workers will not rise significantly, given the labour supply from inland provinces.

• Hong Kong people will expect Hong Kong-type services/system to be established in the Mainland if they are to relocate there. The barriers for Hong Kong services to be established in the Mainland should be lowered.

• Based on Hong Kong’s successful experiences, we should provide training and management development programme to PRD enterprises.
• To facilitate businessmen in the PRD to obtain business visas to Hong Kong, trading offices should be set up in major cities in the PRD to promote Hong Kong industries as well as speed up the processing of business visas. Hong Kong should also seek similar treatment to SAR businessmen travelling to the PRD.

• The current administration of the One-Way-Permit (OWP) system has resulted in the entry of less educated/low-skilled population supported by generous welfare. It puts pressure on public finance, which is becoming unsustainable. However, for ethical reason e.g. family reunion, the scheme cannot be stopped.

• We need to encourage mobility people whose skills are not matching the needs here, or who are retiring or have retired. The OWP system should not be made automatic. Hong Kong should have more control over the influx of population.
• Grassroot, low-skill population and elderly to be reluctant to reduce their social benefits or relocate to PRD. Grassroot objection may be less if the welfare is wholly transferred and the option to return to Hong Kong is retained.

• The social welfare should be reduced gradually in phases, so that new immigrants receive less welfare except basic education and healthcare.
• To enhance mobility of people, portability in welfare, education and housing entitlements should be introduced. Cross-border taxation should also be studied.

Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

• There is massive flow of RMB cash in/out Hong Kong.
• About 10% of Hong Kong currency is now circulated in the PRD.

• Hong Kong bankers want to operate RMB deposit.
• When they can do so, how to deploy and deal with the RMB deposit (how to lend out?)

• Liberalisation of banking services, allowing greater market access for Hong Kong banks through CEPA

• Hong Kong bankers are moving their back offices/processing houses to PRD.
• The relocation is caused by cost saving and advance of automation, and the trend will continue.
• Insurance companies could move to the PRD as well, if the issue of security is resolved.
• There will be less difference between Hong Kong or PRD companies, though they still observe the two sides of SAR border as different systems.

• Need to ease PRD entry, making it easier for Hong Kong companies to set up their offices in PRD.
• How to ensure that PRD companies use Hong Kong as headquarter?

• PRD companies should be made a specific target in InvestHK’s promotional programmes.
• Hong Kong should promote its reputation as the expert in the internationalisation of Mainland/PRD enterprises.

• The situation in Shenzhen stock market is similar to Hong Kong in its 70s, when only local transactions are found.
• By 2020, million of Chinese private enterprises will be listed in Shenzhen Stock Exchange. Many of them will become blue clips with conservative business practices. They will be requiring professional services to advance their operations.

• There will be more listings of Chinese enterprises in Hong Kong Stock Exchange to source for international capital.

• There is a need for institutional change in Shenzhen to encourage international corporations to enter the market.
• More demand for professional services calls for freer movement of professionals.

• To attract foreign participation would require objective rules and transparency.
• There should be a programme specifically to promote Hong Kong’s capital market (especially the GEM) to Mainland enterprises.

Banks

• Hong Kong bankers are now making money from retail/consumer and investment banking activities. Corporate banking is not profitable.
• To be profitable, bankers have to be in the place where the customers/growth are.
• With the economic growth in PRD, there will be intensive growth of demand for mortgage, leasing and personal/household banking services.
• Mobility of money/capital will be substantial within China operated by Chinese local banks.

• Hong Kong banks need to increase their presence in PRD substantially, and to attract PRD businesses to Hong Kong.
• PRD clients will go elsewhere if we fail to attract them.
• Chinese bankers need to find outlets by cooperating with foreign banks.

Professional services

• Hong Kong professionals have much to offer to the Mainland in its economic development. Having a common language and knowledge of doing business in the Mainland, they have a definite competitive edge over their overseas counterparts in tapping the mainland market.

• Despite the competitive advantages and the geographical proximity of Hong Kong to the PRD, our professionals have yet to make any headway in extending their business to the Mainland.
• Professional services sectors lack a coordinated body to promote Hong Kong’s services to the PRD.
• Many of the professional services in China are still under restrictions.

• Professional services sectors should form a collective body for PRD market entry.
• Instead of delegating the task to individual professional bodies, trade and services organisations as well as statutory bodies, the Government should take a more proactive role in a properly coordinated manner and help local professionals to enter the mainland market.
• The HKSAR Government should set up offices in selective PRD cities with a special responsibility to promote Hong Kong professional services. These offices would have to be market-oriented with a strong team of mainland staff who are familiar with the mainland market.
• The HKSAR Government should lobby the Central Government for early access to the PRD professional services market through CEPA.

Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

HK

• Hong Kong has over 13 million visitors a year now, but only 5-6 million of these visitors stay in our hotels. World Tourism Organisation predicted that Hong Kong would have 56 to 57 million visitors a year by year 2020.
• Hong Kong used to have character, but we are losing our own character.
• Overseas tourists in the past came to Hong Kong to taste the oriental culture and witness the 1997 transition. But now Hong Kong is becoming a “tired destination”, where the majority of tourist attractions are more than 10-15 years old.
• Things move too slowly in Hong Kong. A project in Hong Kong takes much longer to materialise than in Macau due to the bureaucracy.

• We need to define our distinctive character, and develop a powerful, focused image.
• The government should facilitate the development of infrastructure, not just let them develop on their own.
• We need more investment in tourism infrastructure and attractions.

• We need to build the harbour waterfront, sports stadium, heritage hotel, etc.

• Hong Kong should organize sales festivals to attract international tourists, as Dubai and Bangkok do.
• In addition to Disney Theme Park and West Kowloon, we need more “champions” – landmarks to attract visitors.
• We need to motivate the participation of local residents to promote tourist attractions or landmarks in the 18 districts.

PRD & Macau

• There will be massive investments in PRD, with new hotels owned by Hong Kong companies.
• There are lots of potentials in western PRD, as well as innovations in tourism products.
• Services are developing fast in PRD and there are already lots of new 5-star hotels in the region.
• Tourism industry is declining in Guangzhou, a city destination which is a transportation hub mainly for businessmen but not for tourists, as there are not enough fun, attractions, restaurants and theatres.

• Guangzhou is planning to expand the underground train route to Nansha.
• With government’s support in 10 promotional projects, Macau is transforming itself into an international city not just for entertainment but also for culture, sports and other activities.

• Cities should not be single destinations but a hub with surrounding attractions. PRD cities need to have a mentality to develop together.
• The coastal tourism resources is under-developed.
• A bridge link with Macau may enhance Hong Kong’s attractiveness but may also cause Hong Kong to lose one-night’s stay from tourists.

• Rail and air services coordination with the PRD and Macau should be strengthened.

Infrastructure

• Hong Kong has a very advanced airport, which other PRD cities cannot catch up within 15 years.
• At the moment, Hong Kong is not yet a hub for the region. Transport facilities are still not convenient or user-friendly to people visiting Macau and PRD from here.
• The 24-hour border issue is not just an economic issue, but an issue of interactive relationship between Hong Kong and the PRD.

• Hong Kong needs to improve connectivity or risk becoming just a transit centre. Transport network is critical. The 5-year old consultancy report on the Lingdingyang bridge is obsolete.
• We should have not one bridge, but five bridges. A prosperous hub is a place where there are many bridges.

• We need also the Hong Kong/Guangzhou super train, and coordination with Guangzhou, Zhuhai and Macau airports.

• The HKSAR government should develop a Los Angeles mentality in infrastructure development for tourism, and consider initiating infrastructure projects linking the scenic spots, theme parks or famous resorts in the PRD to boost the flow of tourists and traffic in the Delta.
• The planning and construction of the Lingdingyang Bridge should be speeded up.

HK & PRD

• Visitors between HK/Macau and PRD will be two-way: PRD visitors to HK/Macau, and tourists going to PRD via HK/Macau.
• With the economic power in Hong Kong and PRD, we are attracting investors not tourists.

• Tourists’ habits have been changing from traditional tour to sophisticated pattern. Shopping is one of the key attractions to mainlanders, especially PRD tourists who visit Hong Kong several times already. Western tourists, on the other hand, are interested in leisure and entertainment activities in Hong Kong.

• The HK/Macau/PRD triangle will become the most important cluster for tourism. The most important thing is to grow the pie (Hong Kong/Macau/PRD).
• Hong Kong needs to transfer our know-how, management capacity, quality and professional services to Macau and PRD to develop them as our backyard. We need to “take land from China”, investing more in the north.
• The PRD should show distinct “class”: top quality services at reasonable prices, a variety of activities including culture, sports, recreation, wide choices, easy connection for travel, etc.

• Collective promotion of HK/PRD tourism is needed.
• Hong Kong also needs to develop entertainment packages to attract PRD tourists, e.g. by inviting international football teams to Hong Kong.

Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

Infrastructure coordination

• Hong Kong is an international hub, where foreigners are more confident and comfortable in regard to the protection of intellectual property and law enforcement. The PRD should be a domestic hub, being more liberal than other parts of China.
• PRD region including Hong Kong will be competing with Shanghai for inland/inward distribution. The economic future of the region depends on how effective Hong Kong and the PRD provide infrastructure to the central and western region.
• Currently there is no mechanism for joint planning. There is coordination through various liaison groups, which help information exchange between two sides, e.g. securing commitments on regional rail express line for Hong Kong/Guangzhou, and ports/logistics development.
• Municipalities in the PRD are competing not only with Hong Kong but also among themselves (One-Country-Many-Systems).
• Guangzhou has a long-term plan to invest RMB10 billion a year in transport and logistics infrastructure projects, including a new airport to be developed as a logistic centre. Also Guangzhou is developing Nansha as a high-tech centre. Together with the Yantian and Gaolan ports the competition within the region will be more intense.
• Other PRD governments will develop infrastructure of their own, thus there may be a risk of duplication.

• Today, Hong Kong's role as the trade gateway to China is under threat. Our transport and logistics facilities are no longer adequate to meet the demand of economic integration with the PRD. Our transport and logistics industries are still geared up to taking Hong Kong's own manufactured goods to market, whereas the majority of such goods are now manufactured in the PRD.
• Coordination and common planning on heavy infrastructure helps avoid duplication of resources in the PRD. Infrastructure development in the region should be integrated and complementary. Hong Kong and the PRD should join together in competing with other domestic hubs, e.g. Shanghai.
• Hong Kong enterprises could use its management expertise to help PRD governments and SOEs coordinate and implement infrastructure projects.

• HKSAR Government and the transport and logistics industry should collaborate to promote the physical integration of Hong Kong with the PRD, so that a network of roads and railways are built to accommodate a predominant flow of goods from the manufacturing centres to and from Hong Kong's sea and airports
• One of the priorities of the SAR Government is to improve inter-modal transport between Hong Kong and the Mainland to ensure the smoother flow of goods and people across the region, thus enhancing the efficiency and competitive edge of both Hong Kong and the PRD.
• Based upon the comparative advantages of different ports in the PRD region, there should be a stratified and diversified logistic and cargo-handling system on a regional scale in which a variety of cargoes can be handled separately at the appropriate port with maximum cost-effectiveness and timeliness.
• Ports in the PRD should cooperate to form a “Port Alliance” for utilisation of facilities, information sharing and joint marketing, as well as facilitating the inland port distribution network.

Logistics

• The Logistics Center that is being built at the airport will be in operation in 2003, providing experience and expertise in logistics management as well as a strategic alliance that encompasses the Mainland. This facility will no doubt facilitate the development of Hong Kong and the PRD into a regional air hub.
• PRD cities don’t have successful business model to run logistics. Also, there are restrictions in opening up logistics and distribution business.
• Coordination of the airport development in the PRD region has not been successful. Hong Kong, Guangzhou, Shenzhen, Zhuhai and Macau all attempt to be the logistic centre and build their own airports.

• With our well established strengths in global trade – in terms of infrastructure, knowledge, experience, reputation and track record – Hong Kong can, and should aspire to be the supply chain management center of the region.
• Based on a Chamber’s survey, it is slightly worrying that only 38.8% of respondents believed that PRD considered Hong Kong a trading and logistics centre. This may be due to the fast development of trading and logistics of the PRD itself. Much more will need to be done if Hong Kong were to become PRD’s logistics centre.
• We can help PRD improve the investment climate in infrastructure, to benefit them; and remove barriers in logistics, to benefit Hong Kong.
• Container train can be a solution to improve congestion in roads and ports.

• Hong Kong and PRD governments should consider to set up integrated “Logistic Circles”: container airports and major ports as hubs, railways as the framework and land transport as the pillar, facilitating cargo movement with highly efficient operations and new technology.
• One possibility is to give rebate to municipalities for cargo coming through Hong Kong.
• The West Rail Port Rail Line should be speeded up.
• The Airport Authority has proposed the development of a logistics park in Northern Lantau in close proximity to the airport to create a hub to service high-value and time-sensitive products like computer parts and components, and pharmaceuticals that can be handled or processed in Hong Kong before their onward transfer to the PRD by air, land or sea.
• Similarly, goods from the PRD can be handled in the same manner before their onward transfer to regional or international destinations.

• The dual checking system for cargo at the border is a persistent systemic problem.
• There are inefficiencies in the current system such as the public cargo works areas (PCWA).

• Terminal Handling Charge (THC) is high in Hong Kong but Yantian is catching up. Due to this and other obstacles, American and European carriers are reluctant to land in Guangzhou.

• Information sharing is needed to reduce congestion at customs. Hong Kong Customs used to be more open to new technologies and measures such as pre-arrival clearance.
• Hong Kong and PRD are looking for co-location to implement single checking system or joint customs, in line with international practices.
• Hong Kong needs to find ways to facilitate the simple transfer of cargo without the PCWA.
• PRD ports should be allowed to compete, as cost will be reduced and new services will emerge, so that ports services can out-do that of other competitors.

• New technology should be deployed at the border to effect efficient clearance.
• The processes at the border should be re-examined to effect efficient clearance. The possibility of joint customs should be examined.
• The PCWA should be abolished and the operations moved to the River Trade Terminal and mid-stream operations.

Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

• Hong Kong will lose attraction if we go down-market.
• The current strategy of the Tourism Board is not to aim at quantity, but to attract high-end customers i.e. businessmen.
• Retail is not an economic driver. The sector can look after itself and develop appropriate market mix if Hong Kong’s economy runs well.

• Hong Kong retailers are reluctant to bow to the inevitability of gradual integration.
• To become the Fifth Avenue, the traditional buy-and-sell operation should be upgraded with more varieties, better quality, value added as well as integrated services such as customers’ consultation.
• The shopping ambience should be improved in the retail districts.
• There should be visitor-friendly policies such as visa relaxation to attract the growing middle class in China.
• Product promotion can be done by internet selling to pre-arrival tourists, if the restrictions on internet and entry permit are relaxed.

• Besides relaxation of business visas, registered Shenzhen residents with household ID cards should be able to enter Hong Kong freely.

• Hong Kong SME retailers are moving their low-middle range merchandises to PRD. It is a natural market movement just like tailor services in the past.
• Retail sector in the PRD is rapidly developing now, and will be accelerated with the relaxation of restriction in five years.
• Experience in value added services can be easily acquired by PRD retailers, so Hong Kong need to find new means to maintain a premium.
• Services are relatively more expensive in Hong Kong, but tourists will still come to Hong Kong to “experience” a first-class city, which cannot be imitated by the PRD in 15 years.

• Hong Kong should develop high-end niche retailing to become the Fifth Avenue in the region, while PRD should develop mega retail centres. They both serve as magnets to tourists.
• For imported goods there is a price gap due to import duties. Even if China lowers its tariffs gradually, the operating costs in PRD will go up so there will still be a gap. This “Fifth Avenue” image should be emphasised in promoting Hong Kong.

• The key is “packaging”, providing variety, quality services at reasonable price. This “Fifth Avenue” image should be emphasised in promoting Hong Kong.

Subject matter

Description and prospect

Issue/Subject of Interest

Recommendation/Way forward

• The rapid industrialisation in the PRD has led to the problem of environmental degradation. The major cross-border issues of concern are water supply, air quality and waste treatments. Hong Kong has transferred our environmental problems to the PRD by relocating factories. It should have a responsibility towards the PRD environment.
• Population growth generates more waste and sewage. Economic development leads to the growth of factories and power stations. With increased interactions between Hong Kong and the PRD, it is expected that more and more cross-jurisdictional problems related to infrastructure development and environmental protection will surface in the coming years.
• Although there is a growing awareness of green living among the PRD middle class, pollution will still grow further. Integration is not only continuing, but extending to other economic, community and social arenas. Therefore, environmental objectives cannot be achieved by dealing with condition in Hong Kong alone. Local policies must be complemented by measures in the surrounding region.

• Inefficiency leads to environmental problems, e.g. inefficiency in technology produces air pollution, and inefficiency of power/materials usage produces wastes.
• The HKSAR government collects a lot of useful data but they are not properly collated and analyzed. There is also a lack of collaboration between the public sector and the academic community.
• Cooperation between HK/PRD in urban planning and development should emphasise on control of region-wide environmental and ecological impacts.
• Pressure needs to build up from the middle class to effect changes.
• Hong Kong and the PRD region apply their environmental laws and standards within their own separate jurisdictions without a mechanism to resolve conflicts.
• China has promulgated a series of environmental laws and regulations at national and local level, but enforcement is a problem as environmental measures are not fully implemented by local authorities.
• Cross border environmental issues are dealt with by ad hoc bilateral working groups. There is lack of political will to formulate practical rules of game.

• “Pollution knows no border,” and therefore environmental issues should be dealt with in macro-level policymaking. Coordinated multi-disciplinary efforts have to be undertaken, e.g. through a Regional Environmental Arrangement.
• Common environmental standards should be set up. Cross-border environmental laws and regulations should be considered by the governments in the PRD region.

• A mentality of “pollute-first clean-later” still dominates, although there is growing awareness among PRD governments to deal with environment issues. There is a need for modern environmental control technology to be more widely used.
• Environmental services and recycling industries are not strong in the PRD.

• Experimenter – Hong Kong could become a technology centre to attract and experiment advanced environmental technologies in the world before they are “exported” to the PRD.
• Consultant – Hong Kong could become solution provider, serving as a base of technology transfer, i.e. waste-to-energy technology.
• Educator – Hong Kong could help facilitate the use of environmental technology in the PRD so that resources could be utilised more effectively.

• Financier – Hong Kong has the capability to set up financial contracts to facilitate environmental services in the PRD.

• Hong Kong has the potential to become a centre of environmental services. This sector should be given emphasis in the Services Promotion Programme.
• Investor - in the absence of cross-border jurisdiction, Hong Kong government may think of investing in Dongjiang river so that it can put pressure on the water pollution issue as an investor.

Institutional structure

• The institutional arrangement is complicated, e.g. Hong Kong has to deal with three authorities for water supply issues.
• Civil society is not strong in PRD and environment is not a priority for PRD governments.

• In addition to enforcing environmental measures, there is also a need to deal with the institutional structure.

• Information sharing and collaboration across the border on environmental issues should be facilitated. A “Regional Environmental Institution” should be established as a formal mechanism for settling intra-regional environmental problems, supported by a non-political “Sustainable Development Council” for the whole PRD region.