ECONOMIC DIPLOMACY
Hong Kong the Super-Connector to China and Global Markets
By Kirtan Bhana
1 October 2024
In a significant diplomatic and economic outreach effort, Mr. Herman Tse, Head of Business and Professional Services at Invest Hong Kong (InvestHK), joined forces with South African Consul General Mojalefa Mogono to lead a delegation from Hong Kong to South Africa. Their purpose was to inaugurate a Business and Investment Round Table, aimed at exploring and cementing commercial, legal, and investment ties between Hong Kong and South Africa. This delegation not only highlighted Hong Kong's pivotal role as a "super-connector" between China and other global markets but also marks a promising step forward for South Africa in strengthening ties with one of the world's most dynamic financial hubs.
The delegation laid the groundwork to strengthen bilateral cooperation across various sectors. The inclusion of legal experts highlights a commitment to navigating the regulatory frameworks of both regions smoothly, acknowledging the importance of common law—prevalent in both Hong Kong and South Africa—in establishing seamless cooperation. This shared legal foundation provides a distinct advantage, simplifying commercial contracts, business registrations, and dispute resolution processes, accentuating Hong Kong's strategic positioning as a gateway for African enterprises looking to expand into Asian markets.
Hong Kong has long been recognized as a critical link to China’s vast commercial opportunities, serving as a bridge between global markets and the world’s second-largest economy. With its strategic location, robust legal system, cutting-edge infrastructure, world-class financial services, and unique cultural blend, Hong Kong offers a fertile environment for businesses seeking to capitalize on Asian and Chinese markets. Speaking to the Diplomatic Society, Mr. Tse emphasized Hong Kong's readiness to serve as a "super-connector," enhancing trade flows and facilitating business ventures between China and Africa. This vision aligns closely with the China-African Cooperation Action Plan launched during the recent Forum on China-Africa Cooperation (FOCAC), initiating a collaborative environment where businesses from both regions can thrive.
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The timing of this delegation is particularly pertinent, occurring in the wake of the FOCAC summit in Beijing, where China underscored its commitment to deepening its ties with African nations. With South Africa as one of its foremost African trade partners, Hong Kong’s engagement with the nation reflects broader strategic interests as well. As Mr. Tse explained, Hong Kong’s “One Country, Two Systems” model, rooted in the Sino-British Joint Declaration of 1997, enables the region to maintain a distinct legal and economic identity from mainland China, which is particularly appealing to international investors. This unique arrangement allows Hong Kong to function as a quasi-independent economic entity with its currency, the Hong Kong Dollar, and a governance framework that supports a free-market economy underpinned by common law—a framework highly compatible with South Africa's own.
Investment Advantages: Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)
A crucial part of Hong Kong's appeal lies in the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), a free trade agreement offering preferential access for Hong Kong-based companies to the mainland Chinese market. Under CEPA, companies headquartered in Hong Kong can enjoy zero tariffs on goods of Hong Kong origin entering the mainland and favourable terms for service sectors, creating an attractive gateway for South African firms seeking to penetrate Chinese markets. Mr. Tse highlighted CEPA’s advantages, emphasizing its role in enabling companies to enter the Chinese market with unprecedented ease while benefiting from Hong Kong’s established business infrastructure.
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Invest Hong Kong, as a government department, has been at the forefront of promoting investment opportunities, attracting businesses from both mainland China and abroad to establish and expand their presence in Hong Kong. Under Mr. Tse’s leadership since his appointment in December 2019, InvestHK has supported numerous foreign businesses in sectors as varied as financial services, trade, and dispute resolution. He brings to the role a wealth of experience, with a background in electrical engineering, an MBA, and 25 years in banking. His expertise has been instrumental in facilitating this latest delegation to South Africa, a country he sees as ripe with potential for investment synergies with Hong Kong and China.
The Greater Bay Area Initiative and Emerging Opportunities
Hong Kong’s economic future is also strongly tied to the Greater Bay Area (GBA) Initiative, which links nine cities in Guangdong province with the special administrative regions of Hong Kong and Macao to create an integrated economy of over 86 million people and a GDP exceeding $2 trillion USD. The GBA Initiative is set to transform the region into a world-leading technology, finance, and trade hub. By focusing on sectors such as international finance, trade, and transportation alongside burgeoning fields like aviation, intellectual property, technology, and the arts, Hong Kong is positioning itself as a hub of innovation and cultural exchange.
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For South Africa, the GBA offers fertile ground for collaboration in high-growth sectors, including fintech, biotech, artificial intelligence, and advanced manufacturing. Mr. Tse identified these industries as having the potential for enormous growth, highlighting that South African companies could benefit greatly from partnerships in these emerging fields. With Hong Kong’s commitment to building a supportive ecosystem for innovation, South African firms in health and wellness, new energy, and data science are ideally placed to take advantage of these opportunities.
South Africa’s Unique Cultural Industry Offerings
Consul General Mogono has played an active role in bridging trade and cultural exchanges between Hong Kong and South Africa, pursuing numerous initiatives to facilitate a mutually beneficial relationship. Recent exchanges have focused on cultural industries, highlighting South Africa’s rich heritage and unique products, from artisanal teas to fine wines. These initiatives reflect a broader commitment to deepening ties beyond pure economic interests, recognizing the importance of cultural connectivity in fostering enduring relationships. By supporting exchanges in arts, culture, and tourism, both regions can further enhance mutual understanding and create a platform for continued economic cooperation.
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Mogono’s dedication to his role is evident in his work to secure agreements that promote South African culture and products within Hong Kong, an effort that not only benefits local producers but also brings a piece of South African heritage to Asian markets. His efforts have seen a noticeable increase in cultural awareness, opening doors for local businesses to showcase South Africa’s unique offerings.
Legal Practitioners Streamlining Cross-Border Business
The inclusion of legal practitioners is a commitment to overcoming potential legal and regulatory barriers to cooperation. The shared common law system between Hong Kong and South Africa provides a sturdy foundation for collaboration, simplifying the process for companies on both sides to understand and meet regulatory requirements. Legal experts in the delegation were tasked with addressing legal compatibility and working towards streamlining business operations, making it easier for companies to establish a foothold in either region.
These legal practitioners are expected to play a pivotal role in facilitating cross-border investments by developing a framework that minimizes bureaucratic obstacles, reducing the time and costs associated with compliance and due diligence. This shared legal foundation is especially relevant in sectors like financial services, intellectual property, and dispute resolution, where transparent and predictable legal systems are essential for building investor confidence.
A New Chapter in Hong Kong-South Africa Relations
The Hong Kong delegation’s visit to South Africa for the inaugural Business and Investment Round Table marks a new chapter in Hong Kong-South Africa relations, laying the foundation for a partnership grounded in shared economic interests, legal compatibility, and cultural understanding. Mr. Tse and CG Mogono’s efforts have not only reinforced Hong Kong’s position as a super-connector but also highlighted the potential for South Africa to leverage Hong Kong’s expertise and access to the Chinese market through a common legal and regulatory framework.
As the world’s third-largest financial centre, Hong Kong stands as a vital partner for South Africa as it seeks to expand its trade horizons and connect with the growing Asian market. With promising MOUs in place and more to come, this partnership reflects a shared vision of mutual prosperity, paving the way for stronger, more resilient economic ties between South Africa and Hong Kong. The next steps promise to be exciting as both regions continue to build on this foundation of trust, innovation, and shared growth. - TDS