Transcription
I believe Hong Kong can no longer just be an intermediary. It cannot even rely solely on this so-called super connector. Hong Kong now needs to be a participant in the entire regional economy, or the world economy. It needs to become a direct participant, or a creator, meaning an innovator. Right? So, if that's the case, with Hong Kong being so small, the only way to truly integrate, meaning we must walk together with the markets in Southeast Asia. I think Hong Kong should instead focus on re-examining, not on attracting. Instead, let's discuss whether Hong Kong will experience structural unemployment after a few years. This will also hold us back. The Editor-in-Chief and the entire team today, we are very fortunate to have Professor Emeritus, Professor of Economics, and also a renowned figure whose work has long been an academic classic. Professor Chen, a Legislative Councillor, has been at the forefront of policy for many years, and has experienced multiple economic structural transformations in Hong Kong. Today, he will guide us from the perspective of global powers to Hong Kong's new position. Professor, you are most welcome to our program. I know that this period's research on the comparative advantages of Asian economies, in your 1976 doctoral dissertation, you discussed the four small dragons at that time, which included South Korea, Taiwan, Hong Kong, and Singapore. After so many years of economic development, decades of economic development, how do you think Hong Kong's positioning and its advantages are still there? And how should the future proceed? The basic economic development of the Hong Kong dragon was industrialization, using an export-oriented approach. Previously, economists believed that for a country to industrialize, it first needed protectionism to protect its growing industries before exporting. But Hong Kong, due to its internal market being insufficient, had no choice but to rely on exports for its initial industrialization. At that time, the overseas situation also allowed for the sale of products. Singapore was also a very small economy. When it couldn't merge or cooperate with Malaysia, it also had to adopt an export-oriented approach to industrialization, similar to Hong Kong. This export-oriented industrialization was the main strategy for Hong Kong. South Korea and Taiwan originally adopted protectionism, but later, through a series of economic reforms and liberalization, they also relied on overseas markets to support their industrialization. This model led to the economic success of the four small dragons. But after several years, things have changed. The biggest change is that at that time, the entire international community was moving towards trade liberalization. But today, we know that the global economy is fragmented. So, compared to the past, you have already made significant progress. The second is technological change. In the past, technology was at a very low stage, and everyone could produce relatively labor-intensive industries. Today, that's not possible. Everything is AI, everything is high technology. So, the whole thing has passed. What should Hong Kong focus on now? What it needs to consider is that with a population of over 7 million, it is still a small economy. How can it increase its scale? It has reached the stage of economies of scale. To what extent is it constrained by overseas markets and AI technology? It can be said that without scale, it cannot be scalable. China has a population of 1.4 billion, so it has a great advantage. So, how can Hong Kong, in this new situation, with overseas trade pressures, and behind it, significant technological changes driven by AI, face this? Professor, you just mentioned de-globalization. Hong Kong has always played the role of a super connector or intermediary. Hong Kong is a small open economy. In this situation, is it at a great disadvantage? Like South Korea, one of the former four small dragons, it has a population of tens of millions, so it has a market. But Hong Kong does not. So, under this trend of de-globalization, how can Hong Kong transform, or even what kind of transformation do you think is very necessary? Hong Kong is very lucky. I always say Hong Kong is lucky. Every economic crisis has been an opportunity. For Hong Kong now, the most important thing is that it has the mainland behind it. With the mainland's 1.4 billion people, let alone the mainland, the Greater Bay Area alone has nearly 100 million people. So, in Hong Kong's current situation, it must move forward. I believe Hong Kong can no longer just be an intermediary. It cannot even rely solely on this so-called super connector. Hong Kong now needs to be a participant in the entire regional economy, or the world economy. It needs to become a direct participant, or a creator, meaning an innovator. Right? So, if that's the case, with Hong Kong being so small, the only way to truly integrate, meaning we must walk together with the markets in Southeast Asia. Hong Kong still has advantages. They have not disappeared, such as finance. In the past, people used to say whether Hong Kong would become a financial center. I believe this is a complete misunderstanding. Hong Kong has many fundamental factors for its currency, its capital flows, its free market, and many people, a lot of experience gathered to become a financial center. But today, this market needs to be broadened. It cannot just be an intermediary; it must also be a participant. In terms of finance, Hong Kong needs its own new markets and new products. For example, we have recently launched our own initiatives, such as offices, or gold trading platforms. We need to think of many new things. It's no longer as simple as connecting. We have our own products, we have our own way of doing things. We are already participants and creators. But the market is small. Our financial sector, I know, is already moving towards the region. Many clients are in the Greater Bay Area, and many businesses are in the region. So, besides helping investors go global, it can also provide capital for domestic investors to go global, and facilitate business exchanges. I think this has already been achieved. What is more difficult for Hong Kong is another area that must be done: innovation. Hong Kong's foundation for innovation is different from finance. In terms of scientific and technological innovation, we have always felt that Hong Kong, being so small, shouldn't spend so much on basic research and development. We can rely on others; they have already done it. We can just import and buy, right? But this is different. Previously, R&D as a percentage of national income, as a percentage of Hong Kong's total gross production, was less than 1%. Today, it has improved to about that level, but compared to other places like Singapore and South Korea, the resources we allocate to research and development are very small, so our foundation is relatively weak. The government has been working on this in recent years. But today, R&D as a percentage of national production is still around 1%, and there is still a long way to go. So, in terms of scientific and technological innovation, I think Hong Kong really needs to do a lot more. You mentioned increasing Hong Kong's productivity or competitiveness. There are three key factors: the first is institutions, Hong Kong's institutions include government institutions, regulatory institutions, and legal institutions. Hong Kong's institutions are its strengths, but maintaining good institutions requires maintaining the first "I". The second "I" is infrastructure. There is no problem with Hong Kong's infrastructure; it is very well done and convenient. The third is innovation. Innovation is not just about money; it's also about talent. Hong Kong is relatively lacking in talent. How do we attract talent? The government has launched many incentive programs, but have we truly attracted the most suitable talent for Hong Kong's innovation and development? I think we still need to observe. So, we need to continue to maintain these three "Is" for Hong Kong's competitiveness. Let's take a break and continue our discussion. Your insights into the situation and how to advance. News completion. NTV, everyone. We are talking about the dual impact of TV and radio. Tianlian jointly produced a cross-era new program. Editor-in-Chief, host, every week, heavyweight financial figures offer strategies for the development of the economic market. Guests are truly insightful. In the financial sector, it is said that we can offer some incentives to some companies or industries that we really want to attract to Hong Kong. So, we offer very low tax rates. Professor, do you think that's not the most important thing? I don't think it's the most important thing. In fact, the entire investment environment, perhaps more than giving them some benefits at the beginning, what we call the "front end," meaning at the beginning, you give them some benefits to attract them. But what about the overall tax rate, is it 15%, 17%? I think that's not very important. When attracting them, I think you can't just tax them if they don't make money. Taxing them is useless. Moreover, in that regard, we have adhered to the system. Under the leadership of the OECD, there is a global minimum tax requirement that Hong Kong must comply with. That is to say, the minimum effective tax rate you can collect is 15%. You cannot go below 15%. If you go below 15%, you might be violating the rules. So, I think, but Vincent, for Hong Kong, I think it's more important to re-examine, not to attract. Let's discuss whether Hong Kong will experience structural unemployment after a few years. This will also hold us back. Yes. And the Basic Law stipulates that it must be reviewed every two years, right? So, it's difficult to say whether Hong Kong has structural unemployment. There are some arguments, right? The government might say no, some people say yes, right? But let's not argue. Let's prove it with facts and conduct research. Because I remember Hong Kong, it should be in 1976, after a comprehensive review, there was no such thing. There were only some fragmented or specialized so-called information committees to do some work, but no comprehensive review of taxation. Because today, you really need to review it. Your revenue sources, for example, your income sources must be stable and must increase. For example, in the past two years, we have focused heavily on ESG, environmental aspects, and AI. So much trade in services cannot be seen and may not be taxed. So, how to face this new environment? Do we need to, like Singapore, impose carbon taxes for environmental purposes? This is a source of revenue. Some countries already have some so-called digital trade taxes in the AI field. You might not be able to tax them. How will we collect revenue in the future? I think we need to review comprehensively. Or robots. Do we have GST, so-called value-added tax? We discussed value-added tax more than ten or twenty years ago. As a result, Hong Kong people did not like value-added tax. Value-added tax was originally a good source of revenue. Instead, I think in that regard, the middle class should pay attention. Because for many years, the tax bracket, meaning every tax bracket, from HK$50,000, from a certain percentage up to a maximum of 17%, and the highest tax rate is around 15%. I think 15% is reasonable, but what about the tax bracket? For so many years, it has changed to HK$80,000. When you raise the tax bracket, middle-income individuals will pay the 15% tax later. Of course, this means a loss of revenue for the government. But are there other areas to supplement? For example, high-income earners, those earning over tens of millions annually, do you have a special tax bracket? Because since last year, those earning over HK$5 million have a different so-called standard tax rate. Can we think about it further? Can we further equalize the tax burden between middle-income and high-income earners? I believe a comprehensive review of Hong Kong's tax system is needed. I believe it is necessary, not just to attract foreign investment, but the entire economy is facing a new situation. So, should we review our tax system to maintain a relatively long-term balance? I hope this can be done. If Hong Kong continues to not review its tax system, and continues on this path, do you think it will lead to structural unemployment in the future? I cannot say for sure. Of course, it also depends on many so-called revenue sources, such as more income from the stock market, property market, and stamp duty. When there is more income, it doesn't matter. But these are not always sustainable. So, there is a possibility of structural crisis. In fact, if we don't have some restrictions on expenditure, we have had discussions, both in the Hong Kong government and among ourselves, about so-called fiscal policies, and their proportions. For example, the proportion of recurrent accounts and the consolidated capital account. The Hong Kong government is now also borrowing money, issuing bonds. What should the proportion be? Let's not follow Japan and the US, exceeding 100% of GDP. These so-called rules, fiscal rules, perhaps we should all review them. Not only income but also expenditure. And at the cost level, every city economic activity, should we really look at the economic benefits of city economics? Is it worth it? Is the benefit commensurate? The government is now issuing bonds, which is one of the revenue sources. Do you think this is appropriate? But in fact, the government has two sets of accounts. Its fiscal revenue. But at the end of the year, there is a balance sheet. When revenue and expenditure are balanced, it enters another account. Theoretically, borrowing has two sides: one is revenue, and the other is debt. We usually look at the budget, the figures given at that time. So, issuing bonds is considered revenue. But I think how it is entered into the accounting books is not the most important issue. The issue is that the bonds issued should be used for capital investment, all or most of them. Hong Kong does not allow bonds to be used for operating expenses, i.e., recurrent expenditures. And can we support the expenditure that needs to be made? Where is our limit? And what is the market's acceptance? I don't think we need to worry about how it is entered. There are two ways to look at it. The problem is that I think the entire fiscal system, both in terms of assets and revenue, may need a comprehensive review. Earlier, we talked about Hong Kong's economy needing to transform. Transformation requires a lot of money. As you mentioned earlier, technology, our foundation is very strong. If you want to develop, you need to invest a lot of money in R&D. Even in the mainland, which covers one-third of Hong Kong's land area, it requires trillions of dollars. So, expenditure is seen to be continuously increasing, but our revenue is narrow. As you mentioned, we rely on stamp duty, or even land sales in the past. But these are not regular income sources. So, this is also a problem. You see the expenditure, but you can't get the revenue, right? We are very happy to know that Hong Kong has the so-called "Ten-Year Plan" and will align with the national "14th Five-Year Plan." But the Five-Year Plan may not be enough. In terms of fiscal development, even Shenzhen has a good technology city or university town. So, in this situation, we may really need a ten or twenty-year projection. What revenue can we obtain? I believe there is, but it requires detailed consideration. The return on investment in technology is very uncertain. So, in the current economic instability, you need to provide a baseline scenario, an optimistic scenario, and a standard scenario, with several different scenarios to look at. It seems like we are moving towards initial development, with many things. But does the government truly understand the different situations? Does the government have enough contingency plans? Do you think we haven't seen that yet? I don't see the government having such information or perspective. It seems to assume that investment will always yield returns and will be spent. I think the government's current view is too optimistic. Many governments in the AI era, amidst optimism, also have contingency plans. They know that the returns from AI can be negative, or very large. We are not yet able to accurately predict this. So, this is what I want to say: it seems we are currently too optimistic. Too optimistic, thinking that what we are doing is the right path and the returns will be very good. But the actual situation may not be so. You mentioned, for example, new taxes on AI, robots, or digital trade. Do you think these should be collected? How do you want to collect them? You may not be able to collect them. Their transaction costs may be very high, and administrative costs may be very high. But I think you cannot ignore them. These things need to be considered effectively. I don't have a solution, but I think many new situations and new factors have emerged. But the government needs to bring them up, or even, I think, together with experts, to conduct a comprehensive consideration. The time for this program has come to an end. We will see you next time. This is the sound. Well, no.