New
Opportunities through Hong Kong – the Belt and Road Initiative
The inaugural Belt and Road Summit was held in the Hong Kong Convention and Exhibition Centre in Hong Kong on 18 May 2016. The Summit brought together top policymakers from around the world, key figures from international institutions, and business leaders from renowned global enterprises. Christopher Yu, commercial partner of Fairbairn Catley Low & Kong, attended the Summit.
The Summit
The theme of the Summit was “Navigating a World of New Opportunities through Hong Kong”. This full-day event comprised a high-level symposium, a keynote luncheon and panel discussions on topics such as policymaking, cross-border connectivity and Hong Kong-ASEAN partnership. The Summit was honored by the presence of the Chairman of the Standing Committee of the National People’s Congress of China, Mr. Zhang Dejiang, who delivered the keynote speech for the Summit. As part of the programme, three concurrent investment and business matching workshops were held.
Belt and Road Initiative
In March 2015, China issued a document entitled “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”, outlining the ideas and blueprint of the Belt and Road Initiative. The Belt and Road Initiative refers to the land-based “Silk Road Economic Belt” and the seagoing “21st Century Maritime Silk Road”. The Initiative aims to spur economic and social development in these regions by fostering closer economic, trade and cultural co-operation. The far-reaching Initiative covers over 63% of the world’s population across more than 60 countries from Asia to Europe via Southeast Asia, South Asia, Central Asia, West Asia and the Middle East, accounting for around 30% of the world’s GDP and over 30% of the world’s merchandise trade. Closer connectivity among Belt and Road economies offers companies unparalleled opportunities to tap new markets and explore the potential of emerging economies including China, ASEAN, the Middle East, and Central and Eastern Europe.
The Initiative aims to connect Asia, Europe and Africa along five routes. The Silk Road Economic Belt and 21st Century Maritime Silk Road focus on: (1) linking China to Europe through Central Asia and Russia; (2) connecting China with the Middle East through Central Asia; (3) bringing together China and Southeast Asia, South Asia and the Indian Ocean; (4) linking China with Europe through the South China Sea and Indian Ocean; and (5) connecting China with the South Pacific Ocean through the South China Sea.
Focusing on the above five routes, the Belt and Road will strengthen collaboration along six international economic corridors: the New Eurasia Land Bridge, China-Mongolia-Russia, China-Central Asia-West Asia, China-Indochina Peninsula, China-Pakistan, and Bangladesh-China-India-Myanmar.
Goals of the Initiative
The five major goals of the Initiative are policy co-ordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds.
Policy co-ordination means that countries along the Belt and Road will, via consultation on an equal footing, jointly formulate development plans and measures for advancing cross-national or regional co-operation; and jointly provide policy support to project implementation.
With regard to facilities connectivity, effort will be made to give priority to removing barriers in international transportation passages, advancing the construction of port infrastructure facilities, and clearing land-water intermodal transport passages. The connectivity of infrastructure facilities, including railways, highways, air routes, telecommunications, oil and natural gas pipelines and ports, will be promoted.
In terms of unimpeded trade, efforts will be made to resolve investment and trade facilitation issues, reduce investment and trade barriers, lower trade and investment costs, as well as to promote regional economic integration.
Regarding financial integration, steps will be taken to enhance co-ordination in monetary policy, expand the scope of local currency settlement and currency exchange in trade and investment between countries, deepen multilateral and bilateral financial co-operation, set up regional development financial institutions, and enhance the ability of managing financial risks.
In terms of people-to-people bonds, actions will be taken to promote exchanges and dialogues between different countries, and strengthen mutual understanding.
Silk Road Fund and Asian Infrastructure Investment Bank (“AIIB”)
The US$40 billion Silk Road Fund was established in December 2014 with its founding shareholders including China’s State Administration of Foreign Exchange, the China Investment Corp, the Export-Import Bank of China and the China Development Bank for the purpose of financing the Belt and Road Initiative. It invests mainly in infrastructure and resources as well as industrial and financial cooperation.
The AIIB was set up to address infrastructure needs in Asia. AIIB focuses on the development of infrastructure, energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban development and logistics.
Why Go Through Hong Kong
Hong Kong is a “super-connector” between Mainland China and the rest of the world and is well-placed to help companies to seize the new opportunities offered by the Belt and Road Initiative. Here you can count on our robust fundamentals, such as common law system, independent judiciary, low and simple tax structure, liberal trade and investment regimes, extensive international networks and free flow of information, capital, goods and talents. Most importantly, our professional service providers are internationally qualified and possess breadth and depth in their expertise for managing large international projects such as those in the Belt and Road Initiative.
Despite financing from the Silk Road Fund, AIIB, and other institutions led by the PRC Government, a shortfall of around US$8 trillion will need to be financed for the Belt and Road related infrastructure. Leveraging on our highly efficient capital market and sophisticated infrastructure, Hong Kong is an ideal fundraising and financial management hub for large scale infrastructure projects. The Hong Kong Monetary Authority will establish an Infrastructure Financing Facilitation Office in mid-2016 to provide a platform for pooling the efforts of investors, banks and the financial services sector to offer comprehensive services for infrastructure projects.
As an investment hub, the tax treaty benefit under the PRC-Hong Kong Double Taxation Arrangement will provide investors with high tax efficiency.
Hong Kong is also the world’s largest offshore RMB business hub with the world’s largest offshore pool of RMB funds. With growing economic and trade connectivity between China and countries along the Belt and Road, RMB will be more widely used in the international markets and the demand for RMB trade settlement and financing will be significantly increased.
Hong Kong’s cluster of local and international lawyers, accountants and management consultants offers a wide range of services for a variety of business sectors. Professionals in our firm can assist clients in setting up companies in Hong Kong, conducting legal due diligence, preparing commercial contracts and providing help in dispute resolution, notably in the area of arbitration.
Conclusion
The Belt and Road Initiative offers companies unparalleled opportunities to tap into new markets and explore the tremendous potentials of the countries along the Belt and Road. It also offers abundant opportunities to legal professionals to expand their practice. Through the collaboration of our member firms, we should have an advantage in seizing these opportunities.