Lord Davies of Abersoch
Lord Davies of Abersoch現為Corsair Capital的主席及合夥人，LetterOne公司副主席和Teneo公司顧問。Corsair Capital是一所專注於金融服務業的私募基金公司。
Lord Davies的職務廣泛，包括擔任皇家藝術研究院信托、Jack Wills 和 the Garden Bridge Trust主席；並於2009年1月至2010年5月期間，任英國貿易、投資、小商業及基礎設施部部長（Minister for Trade, Investment, Small Business and Infrastructure）。
Prof Stephen S Roach
Prof Stephen S Roach現為耶魯大學Jackson Institute for Global Affairs的高級研究員及耶鲁管理學院高級講師。曾服務摩根史丹利達30年，擔任摩根史丹利亞洲的主席及首席經濟學家，帶領世界各地的頂尖經濟學家團隊。
Prof Stephen S Roach一直是美國華爾街最具影響力的經濟學家之一。1982年，在未加入摩根史丹利之前，他曾是美國聯邦儲備委員會及布魯金斯研究院的研究員。Prof Stephen S Roach於紐約大學取得經濟學博士，先後為美國外交關係協會、大都會藝術博物館財務委員會、環保基金中國顧問會（the China Advisory Board of the Environmental Defense Fund），及威斯康辛大學經濟顧問局成員。
Mr Jean-Pascal Tricoire
Mr Jean-Pascal Tricoire在1986年加入施耐德電氣，並於2006年獲委任為總裁及行政總裁。2013年該職位名稱改為主席及行政總裁。
Mr Jean-Pascal Tricoire主要負責施耐德電氣在法國以外地方的營運工作，包括意大利、中國、南非和美國。由2002年起，他擔任國際營運部門的副行政總裁，並於2004年被委任營運總監一職。2009年起擔任法中委員會主席。趙國華先生持有電子工程學士及工商管理碩士學位。
Dr Allan Zeman
盛智文博士GBM, GBS, JP，是蘭桂坊集團主席，該集團是香港蘭桂坊的主要業主及發展商。
盛智文博士曾於2003年7月至2014年6月期間擔任香港海洋公園主席。盛博士亦是西九文化區管理局董事局成員，及表演藝術委員會主席。他亦為香港機管局董事會成員及香港公益金名譽副會長；此外，亦擔任經濟發展委員會委員、香港總商會理事會成員、香港加拿大商會理事會成員，以及西安大略大學毅偉商學院亞洲顧問委員會成員。2015年1月，盛博士獲香港特別行政區行政長官委任為APEC Business Advisory Council (ABAC) 的香港代表。
Dr Victor K Fung
馮博士同時擔任中國石油化工集團公司、周大福珠寶集團有限公司及土耳其Koc Holding A.S.的獨立非執行董事。他亦是美國Prudential Financial, Inc亞洲區諮詢會主席。
The Future of China
Mr Tung Chee Hwa
Friends and guests, good afternoon and thank you for joining us. It is not often that we can gather such a distinguished group of speakers as we have today to discuss a topic so close to our heart and so important to our future. I’d like to extend my heartfelt gratitude to the speakers for agreeing to share their wisdom and experience and to our guests, all of you, for giving up your time to be with us.
Our mission today is to shed light on how the world and Hong Kong can ride the wave of China’s rapid growth and development. China and her economic future and influence are topics on everyone’s lips, in local markets, in the academic world, and on the world stage. In this modern age of Facebook and Twitter, we constantly get snippets of information about what is happening inside China, and sometimes you may think you know what’s going on there. But sometimes you may not be sure at all.
China has been developing so fast that we need to be constantly on the alert to keep up with what is happening there, so that that we can more intelligently assess her position today, her opportunities in the future. And this forum is put together for that purpose. Today, we have the honor, as I said earlier on, of the presence of our forum of 4 distinguished speakers to give us their views on China from a world perspective. One each from the United States, Britain, France and one from our very own Hong Kong. Before they take turns to speak, I would like to first share my own observations and experience to highlight some of the important events and developments that have been shaped modern-day China.
Over the past few decades, I have had the privilege of observing China’s enormous success at close range, many twists and turns and many hard lessons that we learned. All I can say is that the success of modern China is not accidental. It is based on adherence to many, to her many fundamental beliefs. One of these beliefs is the need for interdependence and collaboration with the world outside. China’s desire to putting this principle into practice could not be better demonstrated than by the diplomacy champion, by President Xi Jinping in the past two and a half months. During this period of time, President Xi undertook 6 state visits, beginning in the United States, followed by the United Kingdom, Vietnam, Singapore, Zimbabwe and South Africa. In between these meetings, he also attended 5 multi-lateral conferences, beginning with a number of important meetings at the United Nations in New York, then on to the G20 Summit in Tokyo, followed by the APEC meeting in Manila, the Climate Change Conference in Paris, and finally, finally thesummit at the forum on China-Africa cooperation in Johannesburg. While at the fringes of the G20 meeting, he also attended the BRIC Head of State informal meeting. Furthermore, taking advantage of the number of multi-lateral meetings, Mr. Xi met more than 30 state or government leaders on the fringes of multi-lateral meetings for separate bilateral discussions over issues of mutual interest. During those two and a half months, in between overseas visits, Mr. Xi attended to the affairs of the state in Beijing. During that time, he separately received visits from Chancellor Merkel of Germany and President Hollande of France for bilateral discussions.
That was intense, right? But intensity of President Xi’s activities highlights the great importance China attaches to good international relations, and his message to his hosts overseas was loud and clear: that China desires to pursue peace and shared prosperity under the principle of mutual respect, non-interference and leveraging each other’s strength to create win-win situation. President Xi stressed China’s recognition that we live in an interdependent world, a world that faces many challenges, as well as changes, and it is only through collaboration that we can overcome many of the difficulties the world faces, such as economic growth, fighting terrorism, or overcoming climate change. In these gatherings, President Xi and his colleagues were received with great respect and enthusiasm everywhere they went.
I would now go on from that, I would now like to elaborate on some of China’s contribution internationally in the recent years. First, China played a significant role helping the world to recover from a global financial crisis of 2008, contributing over 50% of the global GDP growth from 2009 to 2011. More recently, even though the Chinese economy has entered into a new normal, growing at about 7%, her contribution to world growth still stands at above 30%. Second, China has been playing a significant role in helping to resolve or mitigate crises in global hotspots such as North Korea, Afghanistan and Iran. She also leads all other UN Security Council Permanent Member Nations in providing UN Peace Keeping Forces around the world. Third, China is looking for ways to boost the economic growth globally, but particularly in the developing world. Her “One Belt, One Road” strategy would not only help China, but also many countries in South East Asia, South Asia and Central Asia; countries in Middle East and Europe may also benefit.
The support of, for Asia Investment and Infrastructure banks suggest enormous interest of many countries to turn this initiative into reality. In Africa, at the recent China-Africa Summit in Johannesburg, the two partners sought ways to leverage China’s new normal economy and Africa’s effort to move away from over-reliance on natural resources to another win-win situation. The meeting ended in a hopeful note. Fourth, we should all rejoice that the Paris Climate Change Conferences have come to a successful conclusion. Since Copenhagen’s unsuccessful conference 5 years ago, China’s national policy has been to work toward the successful conclusion in Paris. Some two years ago, China and the United States, as the 2 largest emitters of green house gases, agreed to together take a strong lead to ensure the Paris Conference would come to a successful conclusion. This has now come to fruition. And you may wish to know that, during the final days, actually of the conference, when there were some difficulties, the Chinese delegation played a very effective role to bring about the happy ending. I hope this can give you an idea of how much China has become engaged with the rest of the world. Let us now move on to the topics of China’s past and present.
China’s today is a story of hope and optimism. China’s past is a different story. And appreciating the past in one way, is the one way to better assess her future. China’s decline begun towards the end of Qing Dynasty. The Revolution in October 1911, which was started by Dr. Sun Yat-sen, brought about the fall of the Qing Dynasty, and at the same time, ushered in new hopes, high hopes, for China’s renewal. But unfortunately, chaos, warlordism, civil war and the Japanese invasion and occupation ensued, all which caused the prolonged period of pain and destruction. It was not until 1949 that the People’s Republic of China was established. But by that time, after years of disorder and devastation, the country was financially bankrupt and there was hunger in parts of the country. Infrastructure, housing, schools and other social welfare services needed to be built. New political institutions needed to be established. The work ahead was enormous. But at last, the country was united as one and true nation building could begin. Of course mistakes were made during the Cultural Revolution, but since the Reform and Opening Up Policy, which was initiated by Deng Xiaoping in 1978, real development took hold, launching China on an irreversible trajectory towards modern statehood. Today, a market economy is striving; essential physical infrastructure has been built; education, health care and other social services has been made widely available since 1978. For over 30 years, the economy expanded at the rate of 10% per annum. Today, even under the new normal, the economy is expanding at 7%. Urbanization has progressed and livelihood has improved dramatically. Throughout all these, 700 million people, and I repeat, 700 million people were lifted out of poverty. Today, China is the second largest economy in the world, holds the largest foreign exchange reserves and is one of the two largest trading nations in the world.
Never before in the history of mankind has so much being achieved for so many people in such a short time, such a short period of time. Many wonder how China’s miracle has come about. Some of the reasons are external—the unprecedented expansion of global trade and the heightened use of science and technology to improve productivity globally, have benefited China to a great extent.
Indeed, China has been able to seize upon these unique opportunities very effectively. But more important are internal reasons. First, the smooth transfer of leadership based on meritocracy has been institutionalized. Second is the ability to, of the Chinese leaders to formulate sound long-term macroeconomic and geopolitical policies and to effectively implement very complex policy initiatives. Leaders under the guidance of the ideology and principles were not intimidated by the necessity to challenge old thinking and make fresh changes. They responded promptly and acted flexibly. This mindset is the key to set China on the trajectory of high-speed growth. Third, and just as important, is because of the hard work of the Chinese people and their determination to succeed. Additionally, the expansion of freedom in the country has lifted the innate entrepreneurial and innovative spirit of Chinese people. Today, private sector accounts for more than 60% of the GDP of the country, and that figure is continuing to rise.
Throughout this period, since Reform and Opening, China’s singular focus was on speeding growth and lifting people out of poverty. And they have succeeded. Also, post-2008, the focus was also on combating the financial crisis at home and abroad. They were the right priorities. But unfortunately, insufficient attention was paid to other important issues, such as on environmental protection and on governance, the lack of which exasperated corruption. Fortunately, China’s political system can respond quickly and effectively to correct these errors. This is being done and being done with the support of the people. Indeed, initial results are encouraging.
So much about the past and the present, what about the future? To understand what China is going through, we need to know her vision of the future and visualize her roadmap and blueprint that have been laid out. Let me talk about this vision. By 2049 when People’s Republic marks its centennial, China’s vision is to join the ranks of the developed countries of the world. What we would expect to see is that the already giant economy will once again transform itself in the decades towards that centenary. This will not be just an economic target alone; China’s leadership well-recognizes that a pure economic target is not enough. A world-developed economy, a fair distribution of wealth, a decent living standard, a healthy environment, a civic, civil and upright society and just society governed by the rule of law, this is China’s vision for the next few decades. To that end, its economic structure needs to be adjusted accordingly, and growth would be more focused on overall quality rather than quantity. So while China’s vision is clear, how will she get there? These days, one often reads or hears about corrupt officials or executives or SOE getting prosecuted. Indeed, anti-corruption campaign is an important part of China’s four-pronged nation building strategy, and a critical part of its vision. The strategy is to build not only a well-off society, but also further reform the social and political institutions to ensure a fair equitable society governed by law rather than by people and led by a party that’s clean, conscientious and care for her people.
With regards, you may wish to know, with regards, to the 13th 5-year plan. The timetable is for National People’s Congress to pass the plan in March of next year. In this plan, China expects...I laughed because my friend Stephen Roach yesterday corrected me about when China will pass the 13th 5-year plan. He’s the expert from America. This plan...in this plan, China expects her GDP to double by 2020 as compared to that of 2010. Chinese leaders understood that 10% per annum growth rate since the Reform and Opening Up in 1978 is unsustainable. Through this new 5-year plan, China would take a path of a new normal, moving away from an over-reliance on exports, investments and cheap labor to one that relies on consumption, on the service sector and on science, technology and on knowledge. The new normal holds the key for the future. It is supported by 5 anchors. The first is innovation, which can move the economy forward. Second is coordinated development of her various regions to avoid duplication. Third is sustainable development. Fourth is continued reform and opening up. And fifth is the sharing of prosperity for all.
For a country of this size, this new normal is a brave new world, but it is the only way to move forward. The country is still faced with enormous challenges, particularly in the areas of industrial over-capacity, an aging society, the need for health care improvement and eradication of poverty. All these challenges will be tackled. Indeed, the upcoming 5-year plan vows that the remaining 70 million who still live in poverty in China shall be lifted out of poverty by 2020.
Realizing China’s vision, roadmap and blueprint, is not easy. The road is fraught with challenges, predictable and unpredictable, domestic and international. However, there is reason to be optimistic. Why? First, China would benefit from the enormous size of her economy: a huge population, a large and maturing middle class market, together with progress in science, an enormous progress in science and technology. Second, Chinese leaders clearly understand that only with persistent reform, the implementation of the rule of law, the building of a just society and the sharing of prosperity and leadership that, leadership by a clean and conscientious party will China be able to achieve its economic and social development goals. Three, internationally, China would do her best to embrace peace and shared prosperity, growing together with its neighbors and beyond to achieve better standard of living.
As the Chinese saying goes, and here I quote: “Peace with neighbors brings prosperity at home.” Even for her own self interests, China would develop and maintain a good neighbor policy while keeping amicable relations with other big powers based on the new concept of major power relationship. China will also continue her effort to deepen and to broaden her opening up to the outside world.
Ladies and gentlemen, realizing vision 2049 is realizing the Chinese dream. 2049 is many years away. The road forward will be full of challenges, both domestic and international. But given that we have achieved what we have achieved in the last 66 years as a country, since the establishment of the People’s Republic of China, I’m full of hope that the political institution and the support of the hard working people, there is a good chance to deliver that vision and that dream.
I would now like to turn your attention to Hong Kong. In our recent history, despite the ups and downs all over the world, Hong Kong has been a reasonably fortunate place. Financial crisis of 2008 left such a long tail of destruction that today some countries are still trying to recover. But from 2011 onward, Hong Kong’s unemployment was only 3.3%; our household income since 2011 has increased at the average of 6% per annum. We continue to run huge fiscal surpluses. There are many reasons for this. But one of the most important reasons is the economic growth in China, which has really bolstered Hong Kong. Indeed, throughout Hong Kong’s history, our fate has been inextricably, always inextricably linked to Mainland China. Indeed, the China factor is Hong Kong’s no. 1 competitive advantage. Under the one country two systems, we can enjoy the one country aspect as China’s economy continues to grow; at the same time, we maintain our way of life including practising our common law, legal system under the two systems. Having the best of the both worlds makes us unique comparing to other cities such as Singapore or Shanghai. Second is the competitiveness, competitive advantage derived from her status as a cosmopolitan international city. Hong Kong is more international than any other cities in Asia. We have a substantial proportion of people who have been educated overseas or have overseas links. These advantages make Hong Kong a super connector between China and the rest of the world. Third is our competitive advantage of having the best service industry in Asia, including financial services, legal services and services in health care and education. We are a centre for tourism and world-class hotels and restaurants, offering robust year-round calendar of entertainment and conference events. Hong Kong also has stunning, stunning natural beauty. Our fourth competitive advantage is our easy access to information, capital and talents around the world. These factors, together with our knowledge of China’s market, provide a unique soil for innovation, opportunities and economic growth. These four big competitive advantages place Hong Kong in a unique position to ride Hong Kong’s wave of develop-, to ride China’s wave of development. As China marches forward towards her vision 2049, her economy will continue to grow, the RMB will move towards greater convertibility, her standard of living will improve, and the country will require professional services of a high standard, all which Hong Kong can provide. A super connector, Hong Kong, can link the 13th 5-year plan and “One Belt, One Road” strategy to a global audience. And finally, China’s effort to balance her own regional development will open up many new frontiers for Hong Kong entrepreneurs, particularly those with experience in the Pearl-River Delta of Guangdong. The Asian regional economy will also continue to grow. Hong Kong, situated in the heart of Asia, can provide high-end services to the region, as we have done for decades, except now we can do much more.
Friends, China’s current rise promises another surge of opportunities for Hong Kong. Unavailable anywhere else and not seen in history before, the prospect for Hong Kong’s future under the “one country, two systems” is very bright.
Hong Kong is not without its challenges—the stagnation in our legislature and generally in our political system, the total lack of understanding of what’s going on in the Mainland by many people and the need for more proactive government involvement in rapidly changing world are issues need to be confronted. I’m hopeful that in the years to come, these issues can eventually be resolved or be successfully tackled.
Friends, ladies and gentlemen, to conclude, I’d like to say a few words to the people of Hong Kong, and in particular to the young people of Hong Kong, because it is the future we’re talking about. It is your future we’re talking about. Over the past year, I paid special attention to the voices of the Hong Kong youth. I know that you have many concerns about Hong Kong. You’d like to see a more just and fair society, more affordable homes, a better education system that can equip you in a changing world, and understandably more opportunities for upward mobility and etc and etc. This is your wish. This is certainly my wish. This is the wish, actually, of all of us, and it’s the direction that we should be moving in.
I’m sure the majority of Hong Kong people want us to participate actively to support China’s rise and to benefit from China’s rise. I believe many youth will think the same way. Yes, it is for us to take this on, however to do this effectively, we must understand China better: her history and her culture, her challenges and her opportunities. How would you get to know China better? To start with, I suggest you devote your time and effort to crisscross China, to visit and engage people on the Mainland, to understand their challenges and their aspirations, spend some time in schools on the Mainland, maybe through exchange programmes, take some postgraduate courses there, or intern in the business in China. In whatever form, a commitment of time and energy would be necessary. Well-equipped with your knowledge of China, you’ll be better prepared to take on whatever challenges, or jobs or careers you may wish to take on, whether it is in Hong Kong, in China or all around the world.
Young people, you’re so lucky to be young at this sort of time. I wish I am so young. From my own experience, anything you do that would make Hong Kong and China better will be that much more of a fulfilling life. Finally, I promise, if you should undertake such effort, I just want you to know Our Hong Kong Foundation will be putting together in place, plans and programs, to assist you along the way. Thank you very much.
How the World Looks at China
Lord Davies of Abersoch
I wanted to start by getting everybody who owns a mobile in both rooms to put their hands up. This is a test to see whether the other room is still awake. Hands up if you own a mobile. Okay. I’d like to speak to one or two of you in the back who don’t own a mobile, because you need to get with it. I lived in Hong Kong for many years. It is a place that’s very important to me, to my family. And indeed my daughter and son-in-law live here today. And you know, the reason I asked about the mobile is that, if we look back over the last 15 years in the world, with the internet, the whole world, the way we communicate just change beyond comprehension. Everybody connects now through their mobile devices. But everybody expects an integrated seamless experience online, whether you are in China, or whether you are in Wales, or indeed Africa. The whole way we communicate just changed. Consumers are going to expect their brands can anticipate their needs and wants and deliver them online instantly. Hands up those of you who shop online. You know, because we are communicating and connecting a different way, whether you are Chinese, British or American, the world have become a smaller place. Product lifecycles are shorter. Corporate lifecycles are getting shorter.
But I want to take you back to 1817, it’s a long time ago. The reason I’m taking you back to 1817 is because of an Irish singer and poet who wrote a poem, and his poetry contained a line, the reason this poem became famous is because it had an expression towards Edward Dayes. And what he said to people was nothing changes. It doesn’t matter how fast you see the pace of change; nothing really changes. It is interesting to reflect, that in 1817, in 1820, China was the biggest economy in the world. It is interesting to see that, at that time, everybody was complaining about the rich-poor divide, and about the pace of change. So maybe nothing has changed since those days. But when we look at the world today, we are in a period of extraordinary change. Living in the UK, when I look at the world, I see China as the most fundamentally important country and has an impact on everything that I see in my life time. But across the world, we’ve got quantitative easing, I still don’t know what it means. I’m hoping that Stephen might explain that later on. We got low inflation, we got low interest rate. People are living a lot longer than they used to. In the iron age, those many sort of ages ago, people were living until 26, and now the average age is, say, 83, or in excess of that in certain countries. And many of the young people in this room and in the other room will live way pass 100. The population of the world has increased from 5.6 billion to maybe 7 billion in 20th. There’s more and more people on the planet. They’re communicating with each other in a different way. They’re living longer. And there is a huge move across the world, not just in China or India but wide across the world: they’re moving to cities. But as this happens, the divide between the rich and the poor is perhaps getting wider. And in the 34 member states of the OECD, the richest 10% are earning 9.6 times the poorest 10%. That, at the end of the day, is not sustainable. But we’re living in the world where commodity prices have collapsed, causing huge problems and issues and may well lead to an adjustment at one level is good, but at another level is bad. But as I look at the world today, I see problems in the Middle East where your friend is your enemy, and your enemy is your friend. It is now an extraordinarily difficult situation for ordinary people like myself to understand what’s going on. But one thing is for sure for my generation and the young people here in this room: it has to get sorted. The Syrian situation, added to Iraq, the instability in Afghanistan is desperate and cast a cloud on the world of today. There may be a solution, but it’s not clear. Terrorism is on the increase, the desperate event in Paris a few weeks ago broke the whole world and shocked the whole world and made everybody wonder what was going on. In Europe, being very parochial, we have millions of people in a refugee crisis. And where should they go? Where should they live as they try to leave the war-torn territory. So what’s that gonna do with you or with China or with Hong Kong? Well, it’s the world we’re living in today because we also have an IT revolution. We talked about the Industrial Revolution, but today, in the world I’m living in, we have an IT revolution going on, combined with the social media revolution that is changing not just the way we communicate, but it’s changing every business model of every company irrespective of their industry. And if you are running a company or a division and you don’t think that is the case, then clearly your businesses won’t survive.
But basically, as the world becomes more transparent, it also exposes more and more bad behavior. It exposes corruption. It exposes the bad things that have gone on whether it’s in FIFA, whether it’s in the Volkswagen, in the IWF the athletic institution, and it follows on for the banking crisis. So trust is a great word to use. It’s very difficult to build it, but you lose it very quickly, and in the corporation, the world of corporates, but also in the world of politics, trust is being eroded.
But what this IT revolution does is allow disrupters to change the industry landscapes, and it will, in due course, increase pressure on listed companies. So there is a move of capital out of the listed companies into the private world. But what social media also does, and it makes it very difficult for large countries like China, it results in a huge rise in populism. Because the immediacy of every bit of information, it makes it very very difficult, it’s easy to talk about being a politician or a leader of a country, but it’s actually very difficult to do it. I only did it for 2 years. I call it the dark side of my life, no just respect to any politician. I realized how difficult it was. It’s a very difficult task. But there is no doubt the social media and the internet is making it an even more difficult job. It also means that it doesn’t matter whether it’s in Hong Kong or China, or indeed anywhere else in the world, in order to avoid the rise of the Left or the Right, politicians have to become much better at communicating their vision for the place, the country or indeed the city.
Just one or two comments on the industry that I know well, which is financial services, the reality of that industry, it is still recovering from the crisis. So right across the world, we’re in a period of extraordinary challenges, extraordinary change. The talent is on, the search for talent is on, and it is interesting for those of you that are young in the audience. I think you are in the most incredible position, because you are learning and close to the most important country in the world. The rest of us on the other side of the world envy the access that you have to China. And it is something that you have to embrace, not push away. But there is, as well as everything is going on in the world, there is also a new attitude amongst the millennial generation. I can’t confirm that none of our speakers qualifies as members of the millennial generation, not even Allan. The millennial’s attitude...okay, I knew he would, I knew he would. But millennial’s attitude to work-life balance is different. Their attitude to home ownership is different. The way they look at the world is different. Today in my world, the older generation is looking down for wisdom to the young to keep up with the pace of the change, not the other way round. It’s a very interesting reflection on the world of today. The other thing that’s happening is back to the issue of the internet. Tim Berners-lee invented the World Wide Web in 89. You look at the way that the world has been so profoundly changed in that period, and you look at the mobile, which was, some would argue about who created it, but it was created by John Mitchell of Motorola in 1973, and it weighed 2 kilos the first one. You know, and the ones you’re all waving around are not weighing 2 kilos.
As we look at the future, and we look at the poem this gentleman wrote in 1817, what does it mean for China, what does it mean for Hong Kong? China is catching up at a huge speed. It will pass the USA and the gap with Europe and other countries is narrowing on a daily basis. And the 13th economic plan will face the many challenges that I’d described in setting the context for the world. But China has a burden of responsibility as a superpower. It has been too dependent on exports. It had had a non-balanced economy. It has an aging population. It is growing old before it is growing rich. The challenges of climate change are profound not just for China, but for the rest of the world and hopefully, some progress has been made in Paris. But as China’s GDP reaches what, and Stephen will correct anything I say, the economist can then come on the stage afterwards and correct me, but if you say China’s GDP, I’m waiting for him to nod,has reached 10.4 trillion dollars in 2014, he’s nodding. And you know, and the reality is that it accounted roughly for 13.4% of the world’s economy and 59.5% of the size of the US. Those numbers are only gonna go up.
The reality is, that the Chinese economy is...it will have stumbling blocks; it will have all sorts of bumps in the road. It does need to make sure that the property market doesn’t get overheated. It absolutely needs to cut its over-capacity in certain industries. It absolutely needs to make sure that the financial risks built up in the financial services industry and the other parts of the economy don’t bring it down and cause a global crisis. It has to become a creator, not a copier. But the reality is, that the world now needs to see innovation coming out from China as it is doing. But I would say, the bigger issue is, while as the Chinese government is recognizing these issues, recognizing that it has a big challenge with the internet, with media, with keeping the country together, I think we, and the rest of the world, have to accept that their model has to be a little bit different to ours. They have to make sure that the rich-poor divide is addressed in a way, in the same way that the rest of the world is pursuing it. But I wanted to link the state of the world with the state of Hong Kong. You know, my statement is that the whole world is dependent at the period of fast change on a successful China that is at the top table. As China moves from a rural economy, agricultural economy to urban economy, the one thing that is gonna change the world is Chinese travellers are going to profoundly change the international travel market, but also change the way we look at China. I had a perception of Hong Kong and of China that was wrong before I came to live here. I learned so much about face, about culture, and actually about China. I do believe that the people of Hong Kong and the people of the world have to embrace China and have to engage with it rather go against it. So, if China has a seat at the top table, it will, and Stephen will obviously predict the exact date they’re going to liberalize the economy. But clearly, from my perspective, for a global integrated economy where the world has too many currencies, too much volatility, the sooner that Renminbi becomes a reserve currency, the better; the sooner that we have China at the table, all of us together on the signed global WTO agreement, the better; the sooner that we redesign the architecture for running the world with so many of the organizations too western-based, so Asia, and China in particular, developing an infrastructure bank was a good idea, because too many of the institutions were western-based.
For me, Hong Kong is a centre of diversity, innovation and creativity. It is one country, two systems. Just like the UK, it has, we should embrace Europe, it has to address a number of issues. It has to, in Hong Kong, address the rich-poor divide. You can’t talk about surpluses and having reserves without addressing the challenge of the people who have not got enough. You can’t be a country that attracts foreign direct investment, which Hong Kong does, without addressing the needs of the poor. You have to, in my view is easy for me to say, because I don’t live here, and therefore people can’t attack me tomorrow, but it is the reality is housing has to be get sorted. Land has to be released for housing. Leaders, easy to say, leaders have to lead. This is a message to every LegCo member. You have to lead. Leaders don’t spend their lives criticizing. Leaders have to have a vision for Hong Kong as a gateway to China. It is a wonderfully attractive tourist destination, for Mainland Chinese but also other nationalities. You discard China at your peril. You have here electoralregime, strong airport, transparent and efficient environment, you need to get pollution under control. Young people across the world have high expectations, but they also have to realize that the brand of Hong Kong is very dependent on inward investment. And we must make sure that in discussing the future of Hong Kong, that we don’t affect the brand and tarnish it. This place has such talent, vibrancy, history and the unique position, but it cannot become a place of negativity, inwardness, viciousness and just criticism.
So my final 2 comments on Hong Kong, it is that...when I look at what needs to be done and how we do it, you’re slipping behind slightly, because you’re going too inward-looking. This whole place is becoming and attracting inward investment and being a gateway to China and to the rest of Asia. It has to have clusters of activity so that you become a centre of innovation. As I said before, you have to sort out land for housing, so that everybody is able to live in the right sort of place. And as you have an aging population, you need to make sure that medicine is modern and efficient. And finally, if you’re going to be, and Hong Kong has to be, a leader, then you have to be specialist in IT. And finally, make sure that the reputation and brand of Hong Kong stays as the place to invest in. Thank you.
Get Ready for the Next China
Prof Stephen Roach
It is a real pleasure to be here and share this... stage with such illustrious group of speakers, especially my dear friend, who I have so much respect for, Mr. C.H. Tung. It’s an honour to be here and back in the city that I’m so fond of having lived here for many years myself. The topic is an exciting topic, and so when I was invited to speak about perceptions of China from the Hong Kong point of view, from the global point of view, I jumped at the occasion. This has become my passion in terms of trying to get the China view right around the world.
6 years ago, I accepted a teaching position at Yale, because I felt that United States in particular was lacking in an updated perception of China. I’ve taught a course at Yale, which I just gave my last lecture of the 6th year I taught the course on last Wednesday. And there were 200 students in the class, and they are studying right now for their final exam, which will be given this Friday. And there’s going to be the material that I’m going to be presenting here, they will be on their final exam, so you are all sworn to the secrecy. If any of you have students in my class, I know who they are. The oldest civilization in the world is the most dynamic economy in the world today. And what you know about today’s China will be nothing compared to what you will need to know about the next China, which is the title of the course that I teach at Yale.
So I wanna just give you some brief overview of what I think the key variables will be in shaping and defining the next China, its opportunities, its challenges, its risks, as well as the main drivers of dynamic change. I’ve been optimistic about China for a long time,and I’ve also been a user of powerpoint for an even longer period of time myself. I’ve been told that a chart is worth a thousand words, so I’m gonna hopefully stick to my allowed time and use some of these slides to make that work.
These are...this is taken from an article that I wrote maybe 4 and a half years ago when I laid out my long optimistic case on China in keeping with David Letterman, you all have heard of him. My top 10 reasons as to why I was optimistic on China at when I wrote this. And of course as luck could have, I wrote the article right here when the growth rate was peaking and ever since then it slipped down, down, down, down and it looks like I’m completely wrong. But my first point of view is, this is the headline GDP of China. The story of China is not headline GDP but the pieces of the puzzle and the important shift in the mix of the Chinese economy. The strategy of the transformation in China is conveyed in this rather complex framework here, rest on 4 key building blocks: driving more employment, boosting wages, providing a safety net for Chinese people, and then implementing all of the reforms required to build this consumer-led next China. The polices have been put in place for frame initially 5 years ago by the 12th 5-year plan, updated 2 years ago by the Third Plenum of the Central Committee of 18th Party Congress, and the results have been generally good, but not uniformly positive: good progress on employment through growth of the services sector, good progress in raising real wages through urbanization, disappointing progress in providing funding for social safety net and mixed progress in thorny areas of implementing the reforms. Let me just highlight a little bit more detail each of these pieces. Here’s the services sector.
When the 12th 5-year plan was enacted in March 2011, the state’s goal was to raise the size of the service sector from 43 to 47%. In the first 3 quarters of this year, the number is 51.6%. Well in excess of the plan. And yet the Chinese services sector is still the smallest services sector in the world today, nothing but upside. Why are services important? Right here, jobs per year of output. In services, it takes 30% more workers to generate the unit of output than it does in secondary, in manufacturing and construction. What does that mean? That’s a question in my final exam and I’m not gonna tell you the answer. Actually, it means that you can generate as many jobs in the services sector by growing 7%, which is the C.H. said the new normal as it used to take with a GDP growth at 10%. Slower growth does not jeopardize labor absorption in the next China. Wages, urbanization. Urban workers in China make...opps, that’s the trouble of me in this stupid...ok... make 3 times their counterpart in the rural area. And look at the urbanization, 1980, less than 20% of the Chinese population lived in cities. Today, the number is 55% and rising rapidly, heading up to at least 65 to 70% by 2025 to 2030.
The safety net is an area of disappointment especially given the rapid aging of the Chinese population, which is now begun in earnest. But the safety net has universal, near universal enrollment, and health care, and close to that, in retirement, it has very little in the way of assets to support the benefits to both of these systems, which needs to pay out. That’s what the pie chart shows you right here. You have about the assets from the management in the nation-wide retirement system, national social security, local government social security, private sector pensions; you have 570 dollars of asset per worker. Money does go a long way in China but 570 dollars doesn’t do it for funding a lifetime of retirement. Implementation, there was a huge focus being put on this right now by the current leadership, especially by President Xi Jinping. Its focus is very reminiscent of a similar structure that was introduced by Deng Xiaoping in the late 1970s, early 1980s and addresses some of the inertia of the reform implementation mechanism that has been stimy and stuck in the NDRC, the National Development and Reform Commission.
The missing piece of the rebalancing equation, from my point of view, is in fostering incentives for people to stop saving at a fear and spending at a security. And in the 5th Plenum of the Central Committee of the 18th Party Congress that took place in October this year, just literally 7 weeks ago, the communique that was passed by the Central Committee did frame the broad outlines of the upcoming 13th 5-year plan. There were a number of things that jumped off the pages. I read that the communique with the one that really, was I think the most important, was the section at the bottom here, focusing on the missing pieces of the social safety net that have yet to be fully enacted and hopefully will be enacted in the 13th 5-year plan. Consolidating the retirement and health care systems for both rural and urban workers. Underscoring the need to raise taxes on state-owned enterprises to fund the asset-sufficient social security system. Allowing benefits to be portable for some 270 million migrant workers in China.
And then of course to celebrate the shift in the family planning policy from 1 to 2 children. This is an important breakthrough in my view. The key will be in implementation. Now, having laid out the broad strategy what China is trying to do, I’ll be the first to concede as I said at the outset that there are huge debates over the so-called “hard-landing” “soft-landing” in China, and I’m certainly not in the hard-landing camp. This chart just underscores the dichotomy that exists in the debate. The fixation outside of China and sometimes inside of China are around indicators like this that drive the old manufacturing model: electrical power generation, industrial output. They are weak, because this is the sector that is now being marginalised as the red line treasury in service sector grows in ever greater importance in driving the next or new China. In the first 3 quarters of this year, the services sector treasury expanded two and a half percentage points faster than the than the manufacturing and construction sector. The focus outside of China is incorrectly on the blue line, which is sagging, and is ignoring the red line that is rising, and that’s why I said on the outset: don’t pay attention to the headline GDP, you must locate shifts in the mix of the GDP.
The acid test, and this is an exhibit I used in my mid-term exams, so this is a fair game for you to report back to your children. Most of them did very well on the test, but there are a few, whose parents are in this room, who should be ashamed of the performance of their kids. How, the question on the mid-term was, how can an economy whose growth rate is slowing turn in such spectacular results on employment. And the answer is, as I said at the outset, if you are shifting to a sector like services, which generates more jobs per year of output, you can continue to generate high employment even in a slowing GDP growth environment. The optimism needs to be tempered by a dose of realism as well. And I wanna just close with a brief discussion of what I called “5 imponderables” in the Chinese rebalancing story. The idea that not only do you have to shift the sector’s economy, but you really have to affect the way in which individuals behave as spenders as oppose to savers. We saw such a tangible nature of a spark, what really gets the process going. Then there is this China gripe, there is the doomsday crowd that worries about asset bubbles, credit bubbles, corruption, frictions in the South China Sea. I wanna pay some lip services to that. And then there is a notion of politics in a one-party nation, how important is that in shaping and driving the next China, and then finally, by 6 o’ clock tonight, I’ll get to the notion of China’s role in the world. First, it’s easier to boost the income of Chinese people, this is the income share of the Chinese GDP, than to reduce the fear driven excess of aprecautionary saving.
China can get income up, by expanding the services sector and by urbanizing its work force, but it can’t somehow yet, convince individuals to save less. It’s got to crack that conundrum. This is a question of my final exam; you cannot repeat this outside of this room. The exam is given this Friday. Now, this may be one way to do it and this is very consistent with what Lord Davies just said, in focusing on millennials. Now, unlike him, I am a millennial; I was made the honor of a millennial by my students at Yale. But every story I’ve ever seen of structural change speaks of the glacial change of the road to structural change. By definition, it really is difficult to turn around the large super tanker, even one that is going at the high speed as the Chinese super tanker’s been going at for 35 years. But what surrounded us are new technology has a disruptive influence, they can really alter the path very quickly, and China has 2 aspects of a catalytic spark that can really set this rebalancing to consumer-led next China on a much quicker course than many think. The confluence of the millennials who are as nonconforming a cohort in the population as any in the internet. I mean, look at here’s...Chinese internet users community back in 2007 just surpassed that of the United States as the largest internet community. By the way, Lord Davies, it was Al Gore who invented the internet, you forgot to mention that. But the Chinese internet community draws anything that we have in excess but sure it’s the size of its population and the penetration rate, now only about 43% of the Chinese population, is a good deal more to go. These are...this is the distribution of internet usage by each category in China with these 3 cohorts identified as the millennials. And you know, look at China’s millennials: 414 millions of them, 30% of the total population and they account for about 70% of all the internet users in China. Millennials are digitally equipped, savvy, globally aware, nonconforming and you listed very well many of the very different characteristics they have as consumers, which I think is a potentially very exciting development in igniting the consumer-led rebalancing of China.
The gripes, I’ll be brief here, I focus on 2 things that I think needed be addressed on the downside of the Chinese emergence and transformation right now. One, debt. China’s debt to GDP ratio has risen a lot since the crisis, but China is not the next Greece, is not the next Japan, but it’s going up too much that it must be addressed and included deleveraging of the overly levered property sector. I would also say that China is facing a conundrum when it comes to its global posture with frictions in the South China Sea, an increasingly serious problem from my point of view that has created tensions with the United States and with 9 of China’s neighbors juxtaposed against China’s outward-facing “One Belt and One Road”, it is a broad vision of regional integration. Can it have frictions and harmony in the same neighborhood at the same time? That must be resolved. Fourthly, the leadership of modern China has framed its approach to the transformation of its economy around 2 broad creaters. Wen Jiabao, 8 years ago, stated very clearly that the Chinese economy was strong on the surface, but beneath the surface unstable, unbalanced, uncoordinated and unsustainable. That sparked a very intense internal debate that culminated in the passage of the 12th 5-year plan and a commitment to the rebalancing framework that I started my presentation out with you today. Xi Jinping updated this 5 years later, drawing all the rebalancing framework of Wen Jiabao, but articulating a much broader vision for the future wrapped around the rubric of the China dream. And his focus, most importantly in my point of view, was on empowering a new mechanism on governance to implementation of reforms, including the very important anti-corruption campaign, very controversial, which must be successfully accomplished if Chinese individuals are to establish trust with the institutions and the security that those institutions offer for the future. And then there is a ...the long standing historical tensions that always seem to arise as the dominant power is faced with the pressure from below of the rising power. This is a chart that shows the ratio of GDP, China to the US. And in late Qing Dynasty, it has been a round trip, and China is back. Not tomorrow, but today. And how China and the US address disparity in economic power through comparable parity and military geostrategic power remains a big challenge for both nations. There was, you know, C.H. was present to see this a very important state visit between President Xi and President Obama in September. A number of big issues were discussed. There has been some progress, but there has been some disappointments in other areas, especially with respect to the all-important Bilateral Investment Treaty (BIT), a critical initiative that needs progress to open both economies to each other.
The challenge, as well as the opportunity is illustrated by a chart that I’ve used for years in my classes and even in my days in Morgan Stanley that underscore what the future is like. These are the sectors that you’ve heard before from C.H. in particular this morning, this afternoon, that drove China for 30 years that have now run out of sustainable fuel. And this is the sector that is on the outside looking in, it is just starting to notch up from the bottom. What it takes to get China into a more balanced sustainable growth model is the subject of my course and hopefully a reflection of a number of the building blocks that I’ve elaborated on this afternoon.
The final thing I just wanna underscore is this pet-peeve mind, the biases that have been evident for a long time in the west in mis-diagnosing, misunderstanding China. A book that changed my life was written by a professor who preceded me, a very illustrious professor I couldn’t hope to ever achieve the stature and fame that he has achieved, historian Jonathan Spence, Yale Professor of course. But he wrote a book, he probably wrote about 30 books on China, but he wrote a book in 1998 called The Chan’s Great Continent, and the subtitle was “Chinese in western minds”. He found through a very careful forensic history about what 800 years I guess, or 700 years of looking at western views of China that sadly, ironically, the West always saw China the way it saw itself. It was never able to get out of its skin. It goes back to Marco Polo, who wrote eloquently of the canals of 13th century Peking. The only problem was the canals were in Venice; they were not in Peking. And it goes all the way through till modern-day luminaries such as President Richard Nixon and his misperceptions of China. My fear is, ladies and gentlemen, we continue to do that today and until we update our biases on China and the West, we’re going to get China wrong. And I dare say, the same thing holds true for all of you in Hong Kong: you must update your views of China as well. That remains my passion as an educator and a challenge that I throw out to all of you today. Thank you very much.
How the World Views China
Mr Jean-Pascal Tricoire
I have been a resident of Hong Kong for the past 5 years. I am a really happy resident of this beautiful city. But I’m also French. As the topic of today: Views of the Outer World on China, I’m going to take my French hat. As I wanted to be perfect, I’ll make sure that I keep my French ascent during all speech. You are going to appreciate that default.
It’s very difficult to speak after Mervyn and Stephen. I think that given all the figures on Hong Kong context of Stephen that has spoken on the politics and history, so there is not much more to save for me. There is one thing that I’d like precise to say that I’m not a teacher so if you want to speak to your kids about what I’m going to say, you are most welcome. And I’m not going to sue you.
To the question of what’s the view from the outside of China, I think one of the answers that you would have from me is that I was living in China in the 90s and I was part of people who created China, from 10 people at that time to now 30,000 people. I did, I have no kids at that time, now I have kids, so I’m not free anymore. I took that time, not only to do business, but to crisscross China. China was somewhat unrecognized and disappeared. As China is changing so fast, I keep crisscrossing China, I go there every month. But one answer to the place of Hong Kong to mainland China, I decided, 5 years ago, to come here, in Hong Kong, to manage a global company.
What a simple answer to a question, for me, is China is back to where its name is saying – the Empire of the Middle – is back at the centre of the world economy. What China’s future direction shaped in fact the future of the world, at least it shaped the future of my industry. What I’m going to do today is to speak – I’m only going to speak my industry, because I know only that. At least on that, I can try to share what I know.
What I will explain to you, is over the past 30 years, the empire growth of this country have made that China has become the epic centre of my industry, on my company, so much so that I decided to come back here, as I say, to be more precise, to move our headquarters in Hong Kong, so that in fact that Schneider Hong Kong has been the biggest beneficiary of the growth of China.
So, first let me introduce you to my company in a few words, so that you understand the context of what I’m going to say. Schneider, in a few words, is a worldwide specialist in energy management and automation. We are technology provider, so when we speak about smart homes, smart buildings, smart cities, smart grid, greener centre , industry 4.0 is very likely to integrate a lot of Schneider technology, because in all those spaces, we lead at a global scale. Our turnover is more than US$30 billion; we employ over 180,000 people. One of probably our unique features at Schneider, is our very large presence in Asia, because Asia became last year our largest region, out of North America, out of Europe. So actually, we are here, because Asia has become undoubtedly our first region.
We operate energy, and we believe that access to energy is a undisputable rights to each person on the planet. Unfortunately, today we do not have a reliable access to energy. And at the same time, we also believe that the way that we consume and produce energy today is unsustainable. Everything that we do at Schneider is to make sure we have it all. We want energy for all, possibly clean, and we want for all a cool, that means not hot, a livable planet. All the technology we develop at Schneider is to reconcile these energy deadlocks.
So enough on Schneider. What about China? So, for any business, China has become very central. Take simple figures cannot be contested. 20% of the world population, which is the base of economy, 12% of the world’s GDP. When you put it in parity in purchasing power, which is probably a fairer reflection of reality, 17% of the world economy. When you speak to people like us, we strive on investment, which in our jargon we called CAPEX. 37% of the world’s CAPEX, more than 35% of the world CAPEX in the past 15 years, means for many of our industry, you have to be in China if you want to be relevant in the world.
To a large extent, China pulled 15% of the growth of the world in the past 15 years as CH said before during the crisis. 50% kind of pull the world outside of GFC. But when I look at my customers in China. Is anybody working for China? Mission manufacturers, engineering companies, real estate companies, resource companies, or gas, any kinds of minerals, everybody was working for China. For many of our customers, China was representing 30-50% of the world market. So, a massive amount of their potential sales.
So, I would say, in the past 15 years, the world owed a lot to the development of China. Well, for our industry in particular, China has become the in epicenter of the world with an unprecedented growth in urbanization and electrification. If you look back in the 30 years, China has urbanized just over 600 million people, which means in 30 years, urbanizing some of Europe on the west in 30 years. What we had done in those parts of the world in 150 years. In electrification, China has become central to any agenda that has become the biggest electrical power base of the world, 1200 gigawatts.
I took back my figures of the past. In 1980, I’ll take a unit of accounting which is the power base of France, which is very relevant to me, maybe not to you, but to me it’s relevant. 1980, electrical power base in China, Alpha France, which is equivalent to Mexico today. 1990, China passed France; 1995, passed Germany, I’m speaking of electric or generation based: 2000, passed Japan; 2005, acceleration, out of Europe, which is roughly out of the US. 2014, passed the US and passed, of course, Europe. Such base and scale of installing electric or power has never been met anywhere in the world – unique in the world, unique in the history of humanity! Just to tell you, during 10 years, 15 years, China has built every year equivalent of Australia or France, one of Australia, two of France, every year. So when my board was telling me, what are you doing in China? I was saying, I’m building a new France here!
The striking things you have to realize, we, most of us probably, born privilege with electricity, come in, for granted. But there are those people who don’t have access to that. When you don’t have access to energy, you know you can’t do anything; you can’t educate, you can’t have a proper wealth in your family. In 30 years, China made sure you can go to any place in China, China made sure that everybody has access to reliable electricity everywhere, except for the nomadic people that lived on Xizang (Tibet) or Nei Menggu (Inner Mongolia). So this is unique in history. Yet I’m not an economist, therefore I’m going to say a lot of blunders, but please…
I just think it is the beginning. When you look at the GDP per capita in PPP, China’s GDP is US$11,000 per capita. Integrated Mexico is US$16,000. One-fourth of Europe, one-fifth of the US. So if you assume that it’s legitimate for Chinese people to aspire or get access to get the same level of development as Europe or the US, you are at one-fourth of the journey, as simple as this. Or even if I’m wrong by a unit, it’s one-third, but it doesn’t change much. I think, when people say, China is throwing down these things. Well, take an example, in the next coming 5 years, China is going to urbanize 200 to 300 million people, which is out of Europe. Speak about business opportunity, the capacity to architect, out of Europe, in terms of cities, in the next coming 5 years, I’m not speaking of the next 15 or 50 years.
But there is a price to pay for that, which is more than any country in the world, China, because of its unique characteristics, is facing a major environmental deadlock. The country is already the world largest emitter of CO2 since 2006, responsible for 28% of the world CO2 emission. The country is also the largest importer of fossil fuels, which makes it terribly dependent strategically from other countries. Pollution is reaching unlivable levels. I lived in Beijing in the 90s. The sky was blue. We used to ice-skate under the blue skies, not the case anymore. In the north, some newspapers mentioned recently, the particles could cause as much as 5.5 years of life expectancy. Resources scarcity is becoming a big problem. Actually we cannot speak for everybody, but the biggest problem might be water. 5-7% of the world’s fresh water reserve in front of 20% of the population, most of it is polluted. Actually, 50% of the water in the city is awfully polluted.
But one has to recognize that liabilities like these, environmental liabilities, come in front of remarkable achievements. And I want to say them again, I mean, developing in 30 years, what we, in the west, had done in 150 years, making sure everybody has electricity. I want to emphasize what CH was saying before. In the past 20 years, the world has taken out 1 billion people out of extreme poverty, 700 million came from the development of China. When people say, China’s development is a bit concerning. China has exited 700 million people out of poverty. Environmental impact has to be put in prospective. Of course, China has the biggest CO2 emission. But average per capita emission is 300 million tonnes of CO2 per person per year. It’s one-fourth of Europe, and one-sixth of the US. So, it’s just the beginning. Therefore, you can blame China, but every time someone is blaming China for environmental issues, just remember, it’s one-fourth of Europe and one-sixth of the US.
So, what we know, my conclusion is that, it’s just the beginning of the development, but it has caused radical innovation, because it’s kind of, already, unsustainable from the environmental point of view. Now the good news is that, China has decided [on the] transition to the new normal. I won’t go back into that. But in my industry, it means something that is more environmentally friendly, and more innovation driven. On the contrary, I think people should realize that it is becoming the biggest laboratory for energy-efficiency on low carbon innovation.
So on energy-efficiency, China is a country of engineers. They have realized soon enough that the best way to generate energy was to save energy. On their system today, it’s quite inefficient. So they have devised in their 5 years’ plan, for the first time is the rendition of energy intensity of 20% and China did 90% of reduction [from] 2005 to 2010. The 12th 5-year-plan, to bag this objective to 17% more, we are almost the end of it, and the objective would be met. Added on that, the facts that 10% of the energy mix should come from renewable. So, in the past 5 years, China has taken the challenge to become the first producers of solar panels and windmills. There were lots of resistance, but they broke the cost point of solar systems by 80% down. So what it used to be a non-competitive energy is now becoming competitive and reparative on many places of the world. It has already the biggest installed capacity in solar. In 2013, it installed 12 gigawatts, no other countries has done more than 8 gigawatts in a year. It is the first installed based power for wind, at 75 gigawatts today. But the plan for 2017 are staggering. So multiply by 3, solar capacity to 70 gigawatts. Multiply by 2 wind power, to 150 gigawatts. And on reach 50 gigawatts in nuclear, which sometimes is a controversial energy, but it is a low-carbon energy.
I was in COP 21 last week in Paris, on the role of China, is reaching an agreement. So China has taken quite a strong commitment in COP 21. In the face of one of the greatest [problems] that China is facing, which is of climate change, China is committing to peak national emission by 2030 which is, when you are at one-fourth of your development journey, it’s quite a commitment. It has committed to reduction in carbon-intensity by 60-65% by 2030, respect to 2005. To be compared with the commitment of the US of minus 20-25%. Minus 65, minus 25. Europe [is] at minus 50. So it is a very strong commitment. It has announced that clean energy will be from 10% today, 15% in 2020, and it will be 20% by 2030. It will implement a carbon rate by 2017, unified under territory, not many places have that. It committed to audit and rebought on the environment. And of course, environment protection has become big on the political agenda in every city because you need to breathe. But China is already moving to change the situation.
What about Hong Kong here? Look, I lived in many cities during my career. I have to say that Hong Kong is really a great city, in terms of waste disposition, the efficiency of the waste management. And let me tell you why we have purchased so much in Hong Kong and why there is so much investment in Hong Kong. Of course, it’s Hong Kong has an open and reliable system, including the solid legal system on an open internet. I was asking one of my Mainland Chinese friends why he was visiting Hong Kong. He said, “Well, at least I can go on Google!” And I can still go on Baidu. It’s the same, right? An unmatched capability in services and particularly, in finance; efficiency and flexibility in business with an excellent infrastructure, efficiency demonstration translating in efficient tax regime, which is particularly attractive for companies and entrepreneurs, and for talents of the world, openness to people. This is a very cosmopolitan city, like New York, like London, like the big centers in the world. A place in Asia where business are often designed and meet for creativity, a place which is far better environmentally than many places in the rest of China, though I think we can do even better. We have to make Hong Kong an epitome of green city because all of the world, all of Asia, is looking for that. I like Hong Kong, but all of my neighbors are bankers or lawyers. So I’d really appreciate that Hong Kong has taken under development of technology, where start-ups are developed and supported by excellent universities and The Science and Technology Park. And the Hong Kong’s trading expertise is, of course, tremendous success for the “one-way-one-belt” [One Belt, One Road].
Our company, Schneider Electric, exemplifies the results of Chinese’s success on the results of Hong Kong’s attractiveness. Today, China represents 15% of the business of Schneider, 17% of white counts . As I said we have 30,000 people in China; 2,000 in R&D developing IP in China. We have 30 plans. We are presenting directly to 250 cities; I’ve not yet been to all of them, thanks God. We have developed numerous collaborations with local and international companies. What I’d like to tell you we moved our headquarters to Hong Kong 5 years ago because of the unique impact of China’s development on our industry. But we moved our headquarters to Hong Kong 5 years ago because of the unique characteristics of Hong Kong in China. As I have now become a convinced and passionate resident of Hong Kong, I really believe that we all need to strive to keep the characteristics of Hong Kong unique, and keep the city where it has always been, one step ahead of China of every step of its evolution. The only to keep that leadership place is to keep changing and innovating and not to look back and to dream about Hong Kong of the past but look forward and invent the Hong Kong of tomorrow. We need to keep the ambition of Hong Kong to set a forth front as the most advanced and the most livable city in Asia.
With that, I thank you for your attention and your patience for my accent. Thank you!
Young People - Don't Miss the Boat
Dr Allan Zeman
I think we have very very good speakers. I learned a lot. I have been here for 48 years in Hong Kong, but just to talk about, when Mr Tung called me and said, "We want you to speak about "Young People - Don't Miss the Chance." First they said Young Man of the Chance, I said, "No, there's also women." So let's call it, Young People, Don't Miss the Chance. It's something that very very important.
My history with China goes back many many years. 35 years ago, may be 36 years ago, I opened my first fashion business in Li & Fung in the supply chain management, the fashion industry. I'm supplying garments all over the world. I decided that in those years, China was a place to go, but 36 years ago, I opened up my first office. And it was in Chang Sha, in Hunan Province. Mr Tung won’t remember many many years ago, when he was the Chief Executive, we were having dinner at the US Consulate General’s House. I was telling him the story. He said to me, "Why did you choose Chang Sha of all the places?" I said, "that's was the young man. I was really a millennial, I still am." I said at that time, "That was the birthplace of Chairman Mao. So that was head office of the China. I'm a creative guy. Why not go the head office?" That was really gave me the experience. I'm just going to tell you a bit more about the old China. And how we have moved into the new China, and why there are such opportunities in China.
In those years, I still remember, Jean Tricoire talked about energy. In those years, staying in the hotel was something really unique, because the power can go on and off, on and off. At night time, at 6:00 pm, we had nothing to do. We finished dinner with nothing to do. No place to go, and there's no power in the hotel. So we play ping pong by candlelight. This is a true story. Breakfast in the morning, there was a lot of food for those year in China, breakfast will start at 6:00 in the morning, between 6:30 and 7:00, then the chef of the kitchen then used to go home. In so if you came after 7:00, there's nothing. We have to go to the kitchen ourselves. We have the office there. We have to open up the fridge with very very limited food. It was a totally different lunch at 11:30 to 12:00, and dinner was 16:30 to 17:00. That was it. it was a very very different place. We used to take the train from Guangzhou to Changsha. 14 hours overnight on a train, on a hard seat, sitting with a PLA. Many of them lying in the aisle. It was something really really unique. Some of us were clever to pay off the conductor, there was one cart with sleeper's bed, but you have to pay internally. You can't buy outside. So that was the system. You have learned that people were very very simple. The people are not bad. The people in general, even though Changsha was a hot bed of the original communism, the people are very very good. I learn about the country, I travel the country. Every place was a picture in my mind. Sitting on a train, looking out the window, you can put a frame around all the scenery. It was all green. There was no pollution. Everything was beautiful.
It was just something that was really really important, the last thing I'm going to tell you is, one day, I decided I could take an airplane from Guangzhou to Changsha, because I don't want to sit 14 hours overnight on the train. The airplane was 2 hours. That was the Russian llyushin, the propeller planes. And we get on the plane, there was no air-conditioning. They would give you the fan, they used the fan. I was of course the last passenger boarding the plane as usual. What happened was, they told me all the flights were full. All the seats were full. There's no way to sit 14 hours on a train so I said to myself, "this is crazy!" I used my "gui lo" face which I used many many times. Even though I'm Chinese inside, but "gui lo" on the outside. So I waved my boarding pass and said, "I have a boarding pass." They said, "No no ...no seats". I was very very persistence because in China you have to be persistent. The thing is, there are so many people, and everyday they face problems. Just crowds everywhere. So you learned to be one of the locals and so I show my boarding pass, and the stewardess was just very clever. She took a stool out in the airplane, put in the middle of the aisle, told me to sit. No seatbelt or anything. When you are a millennial, you can do those things. Today you've never dreamt of doing those things. I sat for 2.5 hours without a seatbelt in the middle of the aisle, but I didn't have to sit on the train for 14 hours. But I saw the changes taking place in China. China is moving. I'm not going to give you all the graphs. We have the best economist in the world, giving us the graphs and telling us about how China has changed and is changing. But I saw, I could experience the changes that were taking place.
In 1997, when everybody in Hong Kong was very very worried about the future of Hong Kong, how are we going? Are we going back to China? I myself was very confident. I have all the confidence in the world because everything that I experienced. I saw the changes that were taking place in China. And to me, it was just something so amazing, and I had all the press sitting in my office in 30 June 1997. All talking about how everyone in Hong Kong would be walking around with handcuffs. And that was the end of Hong Kong. In Fortune magazine, and if you remember, it's said this is the end of Hong Kong. No future for Hong Kong. And I looked to them like they are crazy. And I said, you guys don't understand. They thought into the night of 1 July that the tanks from China will be coming across the border, and that was the end of our freedom. But if anything, Hong Kong has become even freer today under China. I know the Hong Kong people, the young people have a lot of problems. We face a lot of problems about housing prices. People are worried about their future. I mean this is something that every country in the world young people everywhere in the world is going through. I've seen the changes taking place. And as many as Mervyn Davies said, this is changing the world very very rapidly. In a short period of time, it's what the young generation is growing up with, the older generation did not grow up with this. This is divided in the world between the older generation and young generation. Two-year-old is on the internet today playing games. When we were young, we played with shoe boxes. We didn't play with the internet. We didn't know that the internet existed. And the hardest thing is for the older generation to understand the young generation. And that's the one of the problems we face in Hong Kong. Because young people think that the older generation said that they are radical and they don't understand. Everything has been given to them on a silver platter. But what's happened is that young people today are very innovative, very creative. Because the internet's connected the world. Social media is something today there's no secret. And you look at China. China is leading the world. In connectivity, I'm in China right now I have projects going on in China, we've got a 5 million square foot project under development at the moment in Shanghai. My partners are Lee Wai Kang whose now in TVB in Hong Kong，the major shareholder in TVB and many many other companies in China. So I'm in the middle between China and the United States. Different cultures, they don't understand one another. I'm there trying to bridge the gap between the two. And it's working very well.
But I see the changes the young people in China are so creative. If we look at now, Jack Ma of Alibaba. I went to the Foundation that Alibaba has given out 1 billion Hong Kong dollars to help young people start up companies, the innovation. I looked at how it helped 17 young people got together in Hangzhou in a room, and decided on an idea and on a dream something that is going to make their dream come true. They start with it. People thought they are crazy. But they solve the future, and they cast China needed something like the internet, like online shopping, the platform that they created.
On 11 November, I saw Jack Ma in APEC in Manila about three weeks ago. And it was just after 11 November. You know on one day, they sold 14.2 billion USD in 24 hours. Never in the history in the world has that happened. A Chinese company, not an American company, not a European company. 14.6 billion in 24 hours. 5055 million customers with 1 billion products, 60% from overseas. So talk about connecting the world, they are connecting the world. It was just amazing that Jack told me in the afternoon that most people don't know they have to slow down the sales because they realize that they were tied up with logistics in China for 3 weeks if they continue taking the sales because the delivery of all the goods. They have to slow down the sales! What's going on? The opportunities Pony Ma....I'm using names Robin Lee, who were just the same as all our Hong Kong Youths, our young people in Hong Kong. But the opportunities in China are immense!
I went as a young man. I went early into China. I saw the changes taking place in China. What frustrates me is watching what's going on in Hong Kong? I did an interview with Bloomberg China about 7 months ago. They put my face on the cover with my tongue hanging out. And I said Hong Kong is stuck during the interview. I was serious about that because I saw all the new words that I learnt filibuster in LegCo, things that are slowing down the progress of Hong Kong. 3 years to pass an IT Minister for LegCo to finally give money to pass an IT Minister. If anything that 's a crime. In the world today, the world is moving so quickly. Where is Hong Kong? We are falling behind! Mervyn Davies right said, he's an outsider looking in. Hong Kong has moved inward. We have to pick ourselves up. We have to give young people the opportunity to really make a place for themselves, to really expand.
I get almost everyday people calling my office to come up with new ideas for investment and venture capital. We just started a company to invest in young people. I see the creativity that we have in Hong Kong. There's no difference for young people in China. If we look at Shenzhen, many years ago, when Deng Xiaoping was around, they showed me Shenzhen and that was going to be the new future hub economic zone of China. And I thought they are crazy because I saw fields. They showed me the same thing while I was in Shanghai. They show me Pudong across the river, I remember once Zhu Rongji was there. And looking across the river, and I said these guys are dreaming. But Zhu Rongji and Xi Jinping had the right idea, had the right dream, the China dream. And they are making the dream a reality, we need the Hong Kong dream. And the only one that could make it happen are the people in this room, the people in the other room, the people around in Hong Kong, and the government, and the legislators, people who can work together. At the moment our community is very very divided. And there's something that is terrible because in English there's a saying, "Divided we fall, united we stand" When you are united, you will have the best brains in the world. Hong Kong has always been, the strength of Hong Kong. I mean I love China, I love Hong Kong. I went as far as changing my nationality, many of you know, I gave up my Canadian passport, which is the safety net for many many people. And I said, "No, I'm going to become Chinese." Because I saw the future of China. I saw the future of Hong Kong. And I don't want to see Hong Kong fall behind. This is really a chance to pick ourselves up. Shenzhen in a short period of time has become the silicon valley of China. And it's just incredible what is going on there. And Shanghai....I am in China once every ten days with all the projects I keep getting because Lan Kwai Fong, now as you heard before, Xi Jinping and Li Keqiang want to change the economy from 100% export driven to consumer drive economy. Consumer driven, what is that mean? That means areas like Lan Kwai Fong, which is consumer driven, that's music to my ears. And I get calls on a daily basis from every government official in China. They want a Lan Kwai Fong.
Hong Kong has so many brands. Even when I was the chairman of Ocean Park, I got calls on a daily basis why can't we expand the Ocean Park into China? Hong Kong is capable of building wonderful brands. I think it's so important to Hong Kong. It's very low tax base. For people who are entrepreneurs, the low tax base and the rule of law, the two things go hand in hand with business. Those two things that are so important. Young people, if you make the beauty of Hong Kong, if you make money, you can keep your money. I said as a19-year-old I moved to Hong Kong because I made my first million USD when I was 19 years old. And I thought to myself but I had to pay tax in Canada. And I said how much is the tax? They told me 50%. I said 50%, you are kidding. Who gets the tax? They told me socialized medicine, socialized this, socialized that, etc. I haven't paid for it. I said, "Well, having a million still a lot of money to a 19-year-old. I have a million not as far as I get....I got to pay tax, just for corporation. I got to pay personal. I think I've rounded up for a hundred thousand from my million, that's a lot money to a 19-year-old, I didn't have any money.
But I came to Hong Kong, when I heard the tax at that time in Hong Kong was 15%. That was like a dream. I have been here for 48 years because I see the potentials of Hong Kong. I have not been to Canada for 15 years now. I have no idea of what's going on. I just realize that they have a new Prime Minister who is a very good looking guy. That's why I don't know who the previous guy was. But I know about Hong Kong and China politics. I can tell you while I was at the APEC conference, I spent an hour with Xi Jinping in a private room with some of the other members. He's a very very bright man. Very very smart. He only wants good for China. He only wants good for Hong Kong. You can see China now has taken on a new role in the world. And really through peaceful means....everybody is coming to China ..... When Xi Jinping went to the UK, to London, Mr Cameron welcomed him and do everything possible to sign agreements with them. After that, Mr Hollande came running and Angela Merkel came running, "don't forget us" "don't forget us". It's different from the old days. Everybody wants to do business with China. And China will continue to grow with this leadership, Li Keqiang is encouraging young people to start their own business. Private enterprise is very very important. SOEs are on the decline. But the people in the west don't understand. I always tell foreigners who want to understand about China, the one thing I always tell foreigners is, if you want to understand China, you have to understand one word, it's called "stability". China will do everything to keep a stable China. And it's better for the world if there's a stable China. A stable China means one thing, everybody has a job, everybody is working. So sometimes they do things, when the government intervened in the stock market because the stock market was falling overnight. They did it for one reason, not because they want to hurt people, they want to help people, to keep stability. In essence they got criticized by many people in the world, they said, "No, this is not the free market...this is not whatever..." Free market is good up to a certain point, as long as it doesn't hurt people. When it starts hurting people, then government has to step in. And so what they did was to stabilize the market to make sure that the market wouldn't be in a free fall. And then everybody would have problem.
These are things that are very very important. Hong Kong people need to understand. We cannot keep criticizing. Hong Kong people, we need tourism. China is changing so rapidly. This year, 116 million outbound tourists will leave China travelling around the world, Europe, Japan, United States, everywhere, Australia, all over the world, the Arctic Circle. You name any place in the world, you can put your hand on a map, and you'll find mainlanders just there. It's something that's changing the world. They say in the next year, 200 million people will change the world.
Travel makes you smart. The more you travel, you more you see new cultures, new ventures, new things. And you come back, and you demand change for your home and the way you live. And China is changing because of that. That's something it happened in Hong Kong in the old days, before Tiananmen Square when we're living in flat that have no lobby, didn't have a kitchen, the toilet was small, the flat was very very tiny. After many people went to Canada, put their kids in Canada, Australia, they saw that apartment buildings need a beautiful lobby, need a health club, need a nice kitchen. Everything change, so the same thing is happening in China. So Hong Kong people, it's just not young people, all people, young people have the opportunity to be part of it.
As Mr Tung said in his speech, yes, go to China. The more you go to China....China is a fascinating place. It's one world, but it's 40 different cities, 40 different countries. I mean basically you have so many different places that you can visit, it's mind boggling. And you learn so many things. You will see the opportunities when you go with eyes open, thinking about creatively. Think out of the box. China wants brands today. The more they travel, the more they want brands. And you have the ability to create new brands, and to create new things. So don't get left behind. It's something that is very important. The other thing, the only way that I've said earlier, we have to stick together. Governments, not everybody always loves government, not everyone always loves leaders, all over the world, it's not just unique in Hong Kong. But we hurt ourselves by not supporting our government, we are only hurting ourselves. And I have said this many times, we just went through "occupy Central", which was a new awakening for many young people, who was actually in a way good because it awakened young people to the future they really care about, to the future of Hong Kong. And if you look at today, yes we voted down at the end of the day. I talk to the pan-democratic who are friends of mine, and I said, "We voted down in LegCo the vote for universal suffrage, but at the end of the day, who won?" Because in 2017, we are going to have an election again for the new Chief Executive. And only 1200 people again are going to vote for the Chief Executive. So who was the winner? All of the Hong Kong lost at the end. The pan-democratic didn't win; pro-Beijing people didn't win. We are back to the same system, so we have to think beyond. We have to not let a small group of people hijack us. That's something really important because today with social media, you can....one person carrying a British flag and it goes viral throughout the internet, and looks like everyone in Hong Kong is against China. That's not the truth.
My businesses are all being with young people, and understanding young people. I do a lot of public speaking to universities and to young people. And I know people love Hong Kong. And they care about Hong Kong. And most of people care about China, but China is changing so quickly. And again the most important thing is for everyone in this room to get into China, understand, start the business. Don't be afraid to fail. You just pick yourself up and you will be successful in the end.
So I know I'm running late in time, but I just want to finish by just saying – it's a pleasure to have lived here in Hong Kong for 48 years, I plan to live here for another 48 years at least. And I can tell you, anyone that really wants to do well, have confidence in yourself. Be positive. Hong Kong is always built on a can-do spirit. And it's always the strength of Hong Kong. We are in an open society, anyone can say whatever they want here. As one of the speakers said earlier, if you want to Google, you can go to Google. Not a problem. Anything you want is a available right here. Hong Kong will continue to attract all the greatest companies of the greatest names in the world because there's handful of great cities in the world, New York, London, Paris, Hong Kong, Shanghai. Maybe five or six great cities. It's not Kuala Lumpur or Jakarta. Hong Kong has a brand, as long as we can keep that brand, Hong Kong in partnership with the "One Country, Two Systems" and eventually will be "One Country" but there's nothing wrong. By this time, there's "One Country" without the "Two Systems", China will be very very close to Hong Kong because they see the changes taking place. So have confidence. Don't worry about a thing. I can tell you, the future is in our hands, is in our young people's hands. Don't always listen to the older people, they are not always right. So move ahead, have confidence in yourself. And let's create great businesses for Hong Kong. Thank you very much.
Dr Victor Fung
Good afternoon ladies and gentlemen, I just like to first of all my very own welcome to all of you. I think I have never witnessed so many people sat so long with speeches. I'd also like to commend all our participants in the other room. I have been looking at the screen, and not one of you left the room. So this is really great. I'd like to first of all just thank all our speakers including Mr Tung who would be with us momentarily with this fantastic speech. We talked about subjects that the speakers talk about everyday. But we always look at it from inside, we tend to focus internally all the time. It is really great to have some people that would actually give us a perspective from the outside looking in. I think this is extremely valuable. Let's have a round of applause for all our speakers.
Before I open up to your questions, ladies and gentlemen, I'd like to throw a couple of questions by myself to the panel, just to get things started. I'd like to just first of all say, I think Stephen, you touched on the idea of "One Belt One Road". I think that has been a very hot topic obviously has been discussed by the Chinese leadership. And it has been a very important topic for people in Hong Kong. You guys have a sort of touch on it, I just like to address that question to you. What impact does "One Belt One Road" really have? When you are actually looking at China, looking at the region, is it going to be a major factor? Is it going to be a big difference to the political and also to the development of business opportunities, and so on. Maybe you can start with whoever else. Would you want to jump in?
Mr Stephen Roach
Yes, potentially it certainly could. There's a long and rich trading history on the original Silk Road. But it's pretty clear that there's an enormous gap on the infrastructure that is lacking to make the trade route in keeping with what the world needs. The Asian Development Bank and the new AIIB have estimated that there's about 8 trillion dollars that needs to be spent on infrastructure between now and 2020, to bring us large pan-regional area of the speed. And to the extent China can drive that through ambitious foreign policy and initiative. That's positive for China, that's a positive for Eurasia, North Africa, and even in Continental Europe, will be benefited from itself. It's got enormous potential, it's also got practical significance for China, with all the excess capacity that can be directed at providing construction activities and materials will be needed to fill the infrastructure gap.
Dr Victor Fung
Jean-Pascal, how about you? From a businessman's perspective, is it going to be really meaningful in terms of business opportunities? What role do you think Hong Kong can really play in the "One Belt One Road?
Mr Jean-Pascal Tricoire
Of course. First, we are leveraging our several assets for our presence in the "One Belt One Road", and six countries will have presence in most of these countries. Plus the partnership we are with Chinese companies to put together the technical capabilities of those companies with our technologies companies. On financing which are provided by the Chinese government so it creates a lot of businesses. In the building of infrastructure, let's take an example. They are going to have a route from the west of China to Europe. The route changes a lot, the logistics route in-between. What can be the role of Hong Kong? Bridging countries together. As we said several times super connect, a natural bridge, particularly on the financial setup.
Mr Allan Zeman
Yes, I can say it's a great idea. Of course the biggest problem is the 65 countries of 65 different cultures. Different cultures and different ways of doing business, and so the important thing is, for Hong Kong. Has Hong Kong fi fit into that? Haven't we atuned to really go there, going to the different countries, working together with China because.....Put in this way, the mainland companies are not just waiting for Hong Kong to take part, they themselves have a competitive business so it's something I believe we will really have to carve out a piece for ourselves. The opportunities for Hong Kong is great, and for China obviously.
Dr Victor Fung
I think Stephen, you have also mentioned China in this respect, on one hand it's reaching out for harmony and developing this "One Belt One Road", on the other hand, China is facing a lot of territorial frictions in the South China Sea. Mr Tung, I'm going to put you on the spot. What is your view about how China can handle these territorial disputes in the South China Sea? In light of the fact that it wants to build the relationship so we can also do the "One Belt One Road" strategy that brings the whole region together.
Mr Tung Chee Hwa
Let me first say this, China has 14 neighbors, probably more neighbors than any other countries on this earth. United States, north is Canada, south is Mexico, and the other two sides is South Pacific and Atlantic. Much easier to deal with. But out of the 14 nations, actually 11 on this territory, we settled all the disputes. If you think about it, the People's Republic of China was formed in 1949, many of these borders were very often just a line on the sand because in the old days, the central government was very weak. You don't know where you are, so on and so forth. But now these years, all these borders, not necessarily disputes, where is not clear or is not clear up, where it needs to be worked out, we reached agreement with 11 of them. And now that territorial dispute that is outstanding, one is India, the other is in the South China Sea, the other is Diaoyu Tai. So these are the remaining ones. They are more difficult, so on and so forth.
Let me talk about all these territorial disputes. For China, the most important thing is we want peace, we want to share prosperity. That is the constant theme. But on the other hand, I want everybody to know that from the Qing Dynasty, if we compare the territory we had at one time, China today's territory is only two third of what it was at that time. So I think that, for a Chinese person, it is very difficult when you have a nation which is now reasonably strong to be giving away territories again. If you think about all the territory disputes now around the world, they are many, if you look at them, many of them, most of them, I asked my friends, how to sort things out? The answer is always "keep quiet", "leave it alone" because we can't sort it in modern day world. No country will want to give up their territories without fighting a wall, and the best way to do it is not to do it.
So we have to understand all these dynamics in the play. All these areas of disputes, the theme is always "let's work together", "let's try to develop", "let's take advantage of each other", "let's work out a win-win situation". Let the future generation solve this problem as we can't solve today. So I want to put this in a framework, "where we are today". I have to tell you this, I have been spending a lot of time studying the South China Sea because I'm working on the US-China relationship, I don't want this relationship to go bad. If you look at this, they have historic reason for China and for myself as a Chinese to be saying, "Hey, this really belongs to China because the history says so." Actually, the International Court should be saying that it belongs to China. But never mind, we will say a few hundred years ago, Ming Dynasty already has rights for these lists, so on and so forth. But I just want to refer you to the more recent history, 1943, Cairo Declaration was made. President Roosevelt invited Chiang Kai Shek to meet in Cairo, trying to define among other things, what kind of conditions the Japanese must accept? From the victory's power, in those days, they were already thinking we were going to win the war. And the condition is that, among all the conditions, all the territories that stolen from the nations that were invaded by Japan or Germany, whatever the case may be, must be returned to the nations who lost land. Specifically, the island of South China Sea was specifically mentioned as Chinese. In fact it was in the Cairo Declaration. So it is very clear, who has the territory. It was reaffirmed that in the Boston Declaration when Truman presided over it. So that is history. In 1951, United States convened a Peace Conference in San Francisco, where nations who went to war with Japan signed peace treaty with Japan, except China was not included. Why? Because China at that time was already in war in Korea. So China was on the other camp. This was what happened. But it should not or cannot change history, the history is that it was part of China.
Let me say just a bit more because I know Victor and Eva will say I'm over-speaking. But it's emotional issue for me and I want to be very clear. The point really is this, China in this dispute is consistently taking the position, "We want peace", "We want to share prosperity", "Let's not argue about this", "Let's share the resources underneath, this is oil, we can share it”. It's continued to be the line China is doing. Right now, in fact the ASEAN countries and China are trying to find the way to define the code of conduct about how to do all these things. Throughout all these, the issues that some of the countries that really worry about is about freedom of passage. From that point of view, China is very clear. Freedom of passage for everybody has to be honoured. The people who said China is very aggressive, China is very assertive, I just want to tell you this. They are altogether in the list, about 50 of these rocks sticking out, 50 of them only, Vietnam has 30 of them, China has 8, Philippines has 8, some other countries has two or three, whatever it is. That made up about 50. If China is aggressive, China will take back all these islands or all these rocks. But China hasn't done anything, they have 8, they just keep the 8. They just work at it. Other started building airport, so China started building something. To say China is aggressive, China isn't. And then the other thing is that, China has said, "Let's share the wealth". Do you know how many oil wells have been drilled in the South China Sea? Thousand already! Over a thousand oil wells have been drilled. Do you know how many are drilled by the Chinese? You guess. It's absolutely zero. China hasn't drilled anything. So we cannot say China is aggressive, China is assertive. Because what they are saying......China knew the oil price will go down. They are smart.
Mr Tung Chee Hwa
Position taken by China is consistent actually with China's foreign policy. Very consistent with foreign policy. It is very unfortunate that Philippines government takes China to court. It's very unfortunate because I think it's really unnecessary and it doesn't really help to solve any of these problems.
Dr Victor Fung
Thank you C.H., I think what you said your speech ultimately will be the key. What is good for China? What is good for the Chinese people, is peace. I think the idea of letting the future generations solve the problem is probably very good pragmatic way of solving the current problem. I'd like to move on a problem more relevant to us in Hong Kong, that is the idea of Hong Kong's competitiveness and then I open up. I want to throw one more question at the panel. You guys have talked a lot about how the world now is moving faster, and I think a couple of you implied that Hong Kong is moving slower in the world, that's moving faster and faster. Maybe we are focusing a little too much inward. I don't know. From an overseas' perspective, what do you think it's happening to our competitiveness? How do we actually? Wherever we are? How do we improve that over time? Because it's going to be really the key to our future, our future economy and our future livelihood. Maybe Mervyn, I will start with you.
Lord Davies of Abersoch
I'm here because of the huge respect I have to C.H, but I'm going to disagree with him on a couple of things. Firstly, I think for the young generation, country boundaries are going to mean less and less in the years to come. Because they communicate and travel in a very different way. I think the one message C.H., we can have arguments all over the world, and there are just far too many of them. These politicians and leaders need to realize that we can't have any more of that. We just can’t. It really doesn't matter whether it's a rock or a Falkland Islands, whatever it is, the reality is that we have just got far too much conflict going on in the world. If that, conflict continues in places like Syria whatever, then terrorism will increase, and it will become a world in which our children will not be able to survive. So whilst I agree with your theme, I also believe that in this day and age, the leaders have got to come together and say, "We just can't afford any more of this". Because as you look around the world today without repeating what I said earlier, that's incredibly sad and disturbing to see so much conflict, and particularly in the Middle East. Hong Kong, I got that off my chest now. I think on Hong Kong, what we have to accept is that competition is intense, the pace of change is fast, and Hong Kong is going inward looking more than it used to. It is just the most incredibly exciting place, to live to do business, but on the other hand, the other places are developing clearest strategies and moving with faster speed than Hong Kong, something that Hong Kong used to celebrate and be proud of. Other people now are moving faster than Hong Kong. So it's like whether it's sports, whether it's business, if all you do is go inward talking about your budgets and talking about, you know, what's going on in the company or whatever it is, then in business you go out of business. In Hong Kong, we’re spending, people are spending too much time arguing about things and not developing a clear vision and then executing it. Whether it's on IT, whether it's clusters of activity, whether it's on embracing China, the reality of Hong Kong, it is one country two systems and the future is to embrace and be a gateway to China, not to fight against it and I believe and it's sad for me to say that the competition is faster than Hong Kong at present.
Dr Victor Fung
And I think I can't agree with you more, Mervynand also you really bring in the factor that China is now such a huge equation in the world regardless who you are and especially if you write part of China and read a very important part of China, understanding China in-depth not only by us around here but our young people is going to be the key to actually coming up... but how do you fit in (Lord Davies of Abersoch :Of course China is worrying, of course, you know, of course there’re threats, but the reality is the rest of the world is envious of what you have on your doorstep.)
How do you find the future without understanding the biggest factor that’s happening in the world today?
Mr Allan Zeman
Victor, if I can say something, I see totally different. I see the future of Hong Kong being very bright, although we're looking inward but what's happening at the moment: our district council elections that just took place a few weeks ago in Hong Kong was a real eye-opener. I think for many people who really understand Hong Kong and understand the future because you had so many young people who took part for the first time ever in district council elections and you had so many young people who got elected, who really won over some of the incumbents and this was the first time this is the beginning. I predict that for LegCo, you're gonna have again, you're gonna have more young people looking at potentially running in LegCo, you gonna have some of the older names that we got used to living with that were some very very stubborn and refused to move and refused to accept the future. These young people are going to change Hong Kong politics and the political scene in Hong Kong and so the competitiveness that we're talking about, I believe, will start to... you're gonna see some of the barriers that were clamped, that was the last number of years, that was a divide between government and pro-government and the Democrats and all that. I believe you're gonna start to see a change right now with the younger generation. This is shift taking place and that's gonna increase competitiveness, that's gonna get more agreement between people and so I look at things totally different, you know, it's always is the glass half empty or half-full. I always like to think it's half full and it’s gonna be full after a while.
Mr Tung Chee Hwa
I would really like to respond. I'm sure, you know, I have to respond to Mervyn first. Mervyn, you know, I can't be more international, I can't be more international...but I would say this, that you live in Europe, all the borders are falling away, although I thought UK didn't want to make it happen.
But you know, in China, you know, the lingering feeling about history being forgotten because of what's happening vis-à-vis Japan, but it's a huge bother for us not because of the need to revenge. China would not want to seek revenge, but China would just want to make sure history will not repeat again because the devastation is too painful. Similarly about the territorial issues, if you have been a country who’s been very strong and dominated the world, you won't be worried about these things. If you're a country who’s been beaten about for hundred years, it becomes an issue. So we shouldn't underestimate the feelings of the people in China, not nationalism, not patriotism, it's just that feeling being beaten all over the place for many many years, for hundred of years, actually. But China, the leadership in China is trying to find a way out for peaceful solution, looking for the long-term and I would really caution my friends in the West to take that into account and also to take into account not from a Cold War point of view, because we're going for peace now. So that's what I wanted to say on that front. I'm sorry I don't mean I always have to have the last word.. I assure you at home I just saw my wife come back at home, I definitely don't have the last word.
Can I just can I just say I'm full of confidence of Hong Kong and Allan spoke very eloquently just now and you all talk about the divide, I would like to council Hong Kong people that if we pursue the western democracy, there will be big divide because democracy is having different views and different views need to be expressed and it should be argued, and it should be voted on. Look at Donald Trump, if that's the way we go, we have to be sophisticated enough to learn to live with all these arguments. The question is how do you present argument, how do you make your case and eventually win the support of the people? So I'm confident for another reason because I think people of Hong Kong are very sophisticated and they want to listen to reasoned arguments and trying to come behind really intelligent leaders to move ahead and I think in the legislature, there's too much argument rather than solution for solving problems for our people. And these are the real issues. I'm confident because, as we move ahead, we would improve on these things. We’re too smart -not to improve on this. It may take a few years, but we work together. Allen, you and I, I'm also a millennial, and we all work together and get it done okay.
Dr Victor Fung
That's the only one truth here. Okay, why don't I know I'm very cognizant of the time and I'm very conscious of giving you in the audience an opportunity to ask a few questions and express you view, and so maybe, with the remaining time I'm gonna throw it open to the audience. Can you please identify yourself, ask your question and then please like Eva said earlier, please ask one question and not three.
I’m not sure (if) we can take... they will be taken care of ...okay and then what I’d like to do is maybe get three or four questions together and then I think I will ask the panel members to respond to do to what .. they would feel that they really want to make a point on. So can I have the first question? Okay, please.
My question is directed to Professor Stephen Roach. I understand based on earlier the conversation between you, Mr. Tung and you seems that US is a superpower is based on fear of the Chinese economic fast growth that under the Chinese system, which is because of Chinese culture is on the one-party system. How could we convince, China convince US, as a superpower, that based on electoral democratic system that we never want to supply the US or other parts of the outside world that our system want to supply your electoral system?
I have a question for Mr. Jean-Pascal Tricoire. I work on science education and I'm very concerned about energy problems, so I think the world agrees that we want to wipe out fossil fuel power and bring in solar energy, wind energy and if possible, nuclear fusion. So do you think this is going to be ultimately possible and when are we going to achieve it or how are we going to achieve it? Thank you.
I started my company 2 years ago. I have a question for Dr. Allen Zeman, two questions. How could you help the entreprenuers in Hong Kong. Okay, one question. One question and one suggestion. How could you help entreprenuers in Hong Kong because I started my company. I used to be in investment bank and also I work in China company, but finally I still have to start up my company, but I have a lot of difficulties in Hong Kong and my suggestion now is, I heard your your start-up and I think currently Hong Kong need(s) your characteristics to lead us. Have you considered to be the next Chief Executive?
There are very strong undercurrents of the future, you know, the one country two systems’ future. I was wondering if you would help foster relations, if, you know, people in Hong Kong and on the mainland would work together on something that consensual ,for instance, you know, clean is crucial obviously and it also affects, you know, the food chain and all that. So has this been considered and what might be the appetite for focusing on climate change or specifically for air pollution for instance. Thank you.
Mr Stephen Roach
It's about trust and it's two-way. United States and China need to come together on very difficult issues in an effort to instill better trust between one another. Cyber, territory, with all the respect to CH as well, to convert an underwater reef into a significant military installation in 18 months. It’s not trustworthy. Opening markets, to bilateral investment treaties, US and China, it's trust and transparency are absolutely essential to improving what I think is today and will be for the foreseeable future the world's most important bilateral relationship.
Mr Tung Chee Hwa
I just wanted to say this: it’s so much between US and China. Okay, There is so much commonality of interest, it’s just unbelievable and it is the commonality of interest which is helping the two countries to stay together. What Mr. Obama and Mr. Xi Jinping have decided to do is to recognize all these huge common interests whether it’s climate change, terror, about helping the recovery of the global economy and etc. even on issues such as how to govern cyberspace in the future. There’re so many things that needed to be dealt with together. And then they both very clearly acknowledged there are differences and they said differences need to be managed, will be managed and etc. The Presidents of the United States, from Mr. Nixon down to Mr. Obama, have practiced the same direction: wanting to improve the relationship. 5 leaders of China, from Mr. Chairman Mao Zedong, all the way to Mr. Xi Jinping, it's the same thing, it’s about improving the relationship because they recognize the importance of the relationship, so that is the key thing that is exactly the only key thing and I think it's important to recognize it every person who took up the ultimate responsibility as the president of the country. They look at the scenario, they say, yes, that's the only way we can go and we really need to..... on that alone, we can feel somewhat optimistic. But the work is never done, the work is never done. It's about US people in the United States and people in China trying to get to know each other better and try to move ahead, get to know each other so that we can reduce the degree of mistrust, you know, and over a period of time, maybe another 10 years, 20 years, I don't know how long. It will happen I'm quite optimistic.
Dr Victor Fung
I cannot but underscore what Mr. Tung has said. I too am passionate about the US-China bilateral relationship.What you saw happen in Paris just now could never have happened except for the fact that the US and China have really seen eye-to-eye on the important question of climate change. And I think that is absolutely a demonstration. Very quickly.
Mr Jean-Pascal Tricoire
As on your question on energy. First, I don’t believe that fossil fuels will disappear because we still have a lot of people to equip with energy and we need not one energy, we need plenty of them. And then, I really would go for whatever I love, like intermittents, so you need to deal with that. It doesn't work for every industry on those kind of things. So that's number one. Second, what is going on in energy is a true revolution. We speak about internet and the combination of the internet of seeing free renewable and storage with new cross point. It’s something which will disrupt fundamentally the industry, so be ready to brace, buckle up and see very different, and see the historical incumbentsto be really shaken. And now I think that for our generation, for your generation, I mean I stopped to get into the millennial's that are on the table, but for your generation, the fantasy capacity is that you’re gonna be seeing as many cities in the coming 40 years as I've been busy since the beginning of the history of humanity using different because the model that we have today is is unsustainable. And my last point is that the first potential is to renewable efficiency, but we’ve got to make Hong Kong much more efficient. All those buildings have not been equipped properly and we can reduce the consumption, it’s gonna be good for money, that's on money, we're gonna pay less... So it’ll be much better for air, and as Guangdong becomes more efficient it’s gonna be beneficial for all of us
Mr Allan Zeman
You know, it’s a very very good question. I get that question all the time from young people, and you know, being in business, starting up a business has always been difficult, not just in Hong Kong, everywhere else in the world. One thing I always say is if it was easy, everybody would be doing it and then it would become difficult because there’ll be a lot more competition. My advice to you is, first of all, you're smart to leave an investment banking job and decide to go into a dream that you have to become an entrepreneur. The most important thing is whatever product it is that you're in, it’s really to look at the product through customers’ eyes, not as the owner, look at how is my product different, how could do what what Steve Jobs did. Steve Jobs took, you know, in the old days, we knew about Nokia, Ericsson, Motorola, even Blackberry. All these companies distant it. Apple didn’t even exist, and looked at everything that was around because it was done by engineers and said how can mine be different. He created a logo at the back, which was an apple with a bite, and then not just a dumb Apple but Apple with a bite in it. It made the phone much sexier and nicer case. He wasn’t the designer but work with different things, came up with iTunes, was helped to change the way phones work and connectivity. And so thinking out-of-the-box, looking at your and criticizing your product and thinking how can mine be better, how can you build a better mousetrap and then seeing maybe I can go to China to get it made a lot cheaper and maybe it can be something that's very very different and looking at all the different fundamentals that get put together at having a successful business and building a team around you of young people who share the same vision, the same passion as you do and I guarantee you, and don't be afraid to make decisions and don't be a failure... because you look like you're in your 20s or early 30s, don't be afraid to fail because you learn from failure; take chances, calculated chances and I guarantee you, at the end of the day, you’ll be successful and that, you know, Hong Kong’s always been a difficult place even when I was growing up here. It was always an expensive place, but that's what creates the wonderful miracle of Hong Kong, the beauty of Hong Kong. So don't give up, just keep on going and be positive; don't be negative. It doesn't cost more money to be positive and save money to be positive and you'll it and as far as being the next Chief Executive, I thought you're my friend. I'm happy to work behind the scenes on behalf of Hong Kong and Hong Kong people and myself. I had to make sure that Hong Kong, that we don't fall behind because I see what's going on and that's why in my speech I said I'm worried, but I feel that Hong Kong people are very very pragmatic and will be able to pull it out and rise to the top again and be world leaders.
Lord Davies of Abersoch
Just on this issue of philanthropy which is mentioned, you know, connecting the two countries, I think a challenge for China, as it is for India, as it is in emerging markets across the world, is not just creating role models of success, but also creating individuals like they have and it's one of the great aspects of American society is that when you make a lot of money, you will also become great philanthropists, and you will give back. And I think it is a test for China, as it is for the rest of emerging markets that as wealth comes into society in large large amounts in order to stop this affection. Some of those key individuals also have to give back because all you do, if you show off well but don't show philanthropy, you create envy and huge divides, so I think it's a very important aspect of the evolution of an emerging market.
I am the founder of a company called Sense Speakerphone in Hong Kong and I think we’re one of the few teams that have started the company during university and then we skipped a few semesters because we’ve already paid the tuition and then we joined like a few competitions and one of the few seemed that got the money from a Silicon Valley investor, Hong Kong investor and Mainland China investors, so it’s a little background. And it’s related to music. It’s a consumer app related to the music. So my question is, especially for Allan: what are some of the things that you wish you had known when you started doing business in China, that you think has to applicable to us at the stage since we are now also doing business in China. And so this is my question. I’d like to end this question by, cause there is a song, because of the music business that we’re in, and we are from the other room, so this is the song popped up in my mind, it’s hello from Adele, hello from the other side. Thank you.
PHD student from HKU
I am a PHD student from the University of Hong Kong, I came to Hong Kong from Ukraine before I was doing research in Amenia and they have some preference as the list China has. And in Hong Kong, I was able to meet with different NGOs, civil society organizations, it’s about to organize a community in the University of Hong Kong where we could discuss it easily and understand what we can do in order to build a better future in response to gender issues. But afterwards, I was invited to Shanghai for sharing on the conference of UN and I was trying, for two months, to organize at least one meeting with representatives of NGOs, researchers, professors, but it was almost impossible. So my question is, will it be done something in the rewards of the Awareness Campaign civil society organizations, gender issues in the next five years because I have heard a lot about innovations, creativity, business development, but nothing about the Awareness Campaign, civil society and NGOs. Thank you very much.
Mr Allan Zeman
Basically, as I said earlier, China is a very big market,1.3 billion people and it's divided into so many different sections, so many different cities. I think the important thing is, first, to concentrate on a few, maybe southern China first, if that's your expertise and then move to northern China. Don't try to conquer China all in one shot at one time; go step-by-step. Also, if possible, try to find a good local partner in China who really understands the market. They were... that's like a university. They’ll be able to teach you much quicker. All my companies in China are usually with a partner and with a good partner, with a company that has shared the same vision as you do and adapt to the culture of your partner because he usually has a different culture. Okay, so well hopefully that helps you. I know it's a short, I have to give you a short answer.
Lord Davies of Abersoch
Well no. I was gonna take diversity in the widest sense if I may. I’ve been a campaigner for gender diversity in the boardrooms and in companies in UK for the last five years. The reality is, in a number of Asian markets, most of business is run by men and that has to stop. So whether it's in the boardroom, the executive pipeline or indeed right across corporate life, we have to have greater diversity. I think as regards individual aspects of diversity and inclusion, every government has to have this as the top priority because we’re in a different world, and I think too many countries and companies are not moving fast enough on it.
Dr Victor Fung
Thank you Mervyn. I think we have now more than overstayed our welcome in wrapping up this panel. I I just like to say three things: first and foremost, I think from Mr. Tung’s speech and the speech by our speakers, I think it's very important for all of us to understand in-depth China-- its past, its present and its future aspirations. It is the biggest factor that is affecting the world today and we’ve been so in the heart of China and being so close to all parts of China that is absolutely no reason whatsoever why we don't actually have a unique and in-depth understanding of China. I think this is really the first point. The second point is, from there how do we think about our future in Hong Kong, our unique position, our future competitiveness. That is what our future rest on. What does that mean for Hong Kong's future competitiveness and how do we actually strengthen ourselves in light of all the things that are happening in the world. And then finally, really is a message that all the speakers are really directing to our young people, our youth, our future. It is really up to you to get that understanding and my advice and everybody's advice is, you've got to go there yourself. Don’t just take our word for it, you go there and find out for yourself on the ground, what it's like form your own opinion and then you act from there. So for me, those are three takeaways I think for on behalf of all of us here, I’d like to thank all our speakers. It’s been a tremendous afternoon. Thank you very much.
Thank you Dr. Fung for hosting the panel, and thank you to all our speakers. Ladies and gentlemen, thank you very much for spending three hours with us. We all see that China is growing very fast, big and profound ways. We certainly hope that this is not the last forum about China that I’m going to host for you and we look forward to seeing you again in the future. Thanks ... thank you once again for coming. See you some other time. Bye-bye!
(The above text is a transcript of the speeches and discussions, and has not been reviewed by the speakers.)