HK scholars: A Super connector HK pinned in the map of B&R Initiative

By Wu Zheyu | chinadaily.com.cn | Updated: 2016-03-01 17:32

China's leadership launched the Belt and Road Initiative to "promote economic prosperity of countries along the B&R and regional economic cooperation, strengthen exchanges and mutual learning between different civilizations, and promote world peace and development.",according to an action plan, jointly released by the National Development and Reform Commission, the Ministry of Foreign Affairs and the Ministry of Commerce.

As the window to China, what will be Hong Kong's role be? Leung Chun-ying describe Hong Kong as a super connector of three platforms when involving B&R Initiative in 2016 policy address,while what has Hong Kong government already done to take this role? To seek the answer to this question, we interviewed Lamson S. Lin, assistant research officer of the "One Country Two, Systems" Research Institute in Hong Kong and Dr. Simon Shen from the International Affairs Research Center at the Hong Kong Institute of Asia-Pacific Studies. They shared us their views from the perspectives of strategic background, role definitions and the challenges of the coordination between different regions. Here are the excerpts of the interviews.

Lamson S. Lin, assistant research officer of the One Country Two Systems Research Institute in Hong Kong. [Photo provided to chinadaily.com.cn]

CD: Could you introduce about the strategic background of Belt and Road Initiative according to your understanding and what's the role for Hong Kong in this initiative?

Lin : Under the leadership of the CPC, the Chinese people have laid a firm foundation to accomplish the first Centenary Goal of comprehensively building a moderately prosperous society by 2020. By that time, China will have become the world's biggest economy. Hence China has the responsibility to build a new world political and economic order. Influential international organizations led by China, such as the Asian Infrastructure Investment Bank (AIIB) and the BRICS(Brazil, Russia, India, China and South Africa) illustrate China's willingness.

Given that proposing a strategy of a peaceful rise is not an easy thing, especially olitical disputes and misunderstandings should be avoided. In this sense, it's quite ingenious to use the cultural symbol of an ancient silk road, which delicately combines international strategy and historical origin, and effectively reduces the wariness or caution of other countries.

After 1997 , Hong Kong's economy has been connected more tightly with the mainland's development, sharing the same fate and facing similar challenges. Hong Kong local government expresses from time to time that it would be more than happy to serve the role of super connector by contributing its valuable experience in competitive industries to coordinate with the central government's strategy of "going out "and "bringing in ".

Shen: Compared with the US, China maintains a relatively fast economic growth which makes it fair that China pursue stronger discursive power and international impact on international affairs, naturally lead to structural friction with the US around specific issues.

The US has undertaken a high profile "Pivot to Asia" adjustment based on the geostrategic consideration. Therefore，it seems insightful that China chooses a westward advance in the strategic space of central Asia, central Europe and even Europe as a whole to avoid a head-on confrontation with the US in Asia. From an institutionalism perspective, the Belt and Road Initiative contains regional cooperation organizations like AIIB, which is a sound attempt to build an international institute that better suits regional integration and China's development. It reveals an energetic and promising style of leadership.

Simon Shen, professor from International Affairs Research Center at the Hong Kong Institute of Asia-Pacific Studies in The Chinese University of Hong Kong.[Photo provided to chinadaily.com.cn]

CD: As for role definition, could you explain how HK would perform as the platform for capital formation and financing first?

Lin: HK should continue to function as a key offshore RMB market. HK is currently the largest offshore center for the RMB. Some of the currency from the capital pool would flow back to China, while the majority would be put into facilitating foreign companies to use RMB when fund raising, trading and financing.

From this platform HK has the potential to play a vital role in fostering internationalization of the RMB in ASEAN regions. Companies from the mainland may face limitation in their knowledge of regional disparity when branching out in these areas. HK could offer assistance as follows:

First, it has an abundance of professionals with comprehensive international background to offer services in individual projects and cases;

Second, various financing channels are available, including equity listings, syndicated loans, private equity funds, ordinary bonds and Islamic bonds. The central government could encourage companies from the mainland to register in HK or cooperate with HK corporations to invest in ASEAN markets. Hong Kong has long provided services for various RMB inflow and outflow transactions with itself and mainland and offshore markets.

Moreover, Hong Kong's vibrant offshore RMB foreign exchange market offers many varieties of financial products. It would be an ideal platform for RMB formation, financing and risk management.

The HK government also has a strong desire and intention to join the AIIB, proposing to provide mediation and arbitration services in Hong Kong.

CD: HK has long been a trading port. What kind of new contributions would the HK government provide through involvement in the B&R initiative with respect to trade and logistics?

Lin: Hong Kong Trade Development Council (HKTDC) has already prepared investigations and surveys about the countries and emerging markets along the B&R, and also plans to set a Web Special with reports and data about the B&R for the convenience of anyone interested.

In order to ensure a steady trade and investment environment, the HK government has already signed Free Trade Agreements and Protection Agreements with countries along the B&R initiative. For example, as of September 2015, it had signed avoidance of double taxation agreements with 32 most important B&R trading and investment partners, such as Indonesia, Malaysia, Kuwait and the United Arab Emirates.

The HK government plans to establish a "single-window" in border ports, reduce customs clearance costs, and improve customs clearance capability. In addition, the Hong Kong Trade Development Council (HKTDC) is also working on facilitating mutual recognition of Authorized Economic Operators with regions along the B&R to let qualified businesses enjoy more convenience. For example, at the end of 2015 the HK government confirmed the process of signing an Authorized Economic Operator agreement with Malaysia.

CD: What preparation has HK government done to strengthen its role as professional and infrastructure services supplier?

Lin: Firstly HK could continue to contribute support in various areas including accounting, legal, investment environment and risk assessment, environmental consulting, construction and project management. It has the ability to, for example, provide consultancy services for regions along the B&R and participate in the operation and management of their projects. What should be carefully noted is that, according to the HK government's 2016 policy address, it will allocate 200 million dollars to support professional services sector connections with B&R countries and other regions outside Hong Kong (including mainland). This allocation could promote related publicity activities, and be a solid foundation for this platform. It will definitely benefit all stakeholders including individual corporations.

CD: What challenges does Hong Kong government face in the connector role ? Especially when it comes to the challenges of the coordination between different regions?

Shen: First, the economic development model of HK was inherited from traditional free trade theories, which apparently differ from the patterns of central Asia and the Middle East.

Second, the B&R initiative is a huge trans-regional strategy,with high standards and requirement for coordination and cooperation between different branches of the HK government, and with various local governments of mainland China aand of the B&R countries.

Currently, the Hong Kong Tourism Board and the Hong Kong Trade Development Council are positioned to take on major responsibility for the related work.