Ladies and Gentlemen, Good afternoon!

It gives me great pleasure to be here and to be addressing such a distinguished audience.

Before I begin to explain quite how Hong Kong management consulting firms can help clients successfully invest in China, I would like to speak, first and foremost, however, that it is important to understand Hong Kong’s current economic situation by summarizing our economic position of the year passed. Not only are we the world’s freest economy but we rank 2nd as the largest source of outward foreign direct investment (FDI) in Asia. In addition, we again place 2nd as the largest FDI recipient in Asia. Thanks to the combined efforts of our government and local business people, the 2004 post-SARS economy quickly shows signs of rapidly returning to pre-SARS levels.

During the first half of last year, when the epidemic was at its zenith, Chinese exports jumped by one third year on year while imports surged by an impressive 45%.

Industrial production was also up 16% in the same period, a remarkable figure given that China’s main industrial region, the coastal southeast, was hardest hit by the SARS outbreak.

The current year sees the introduction of Closer Economic Partnership Agreement ("CEPA") signed between Hong Kong and China for China to give a front start to Hong Kong prior to China joining WTO in 2005. Without any business restriction, CEPA allows a Hong Kong management consulting firm to only invest a sum say US$12,000 to set up a wholly-owned management consulting company in China. This has offered an unique opportunity to Hong Kong’s management consulting firms to enter China’s market place. The fact is: for many years now, Hong Kong consultancy firms have been actively and enthusiastically involved with mainland businesses. Consequently, we are now developing increased recognition by both Chinese enterprises and the Chinese government. In addition, the pioneering work carried out by Hong Kong consultants in China has led to an in-depth knowledge of Chinese commercial law and practices. This highlights the benefits of working in China through Hong Kong.

For your background information, under CEPA and effective from the 1st January 2004, Hong Kong will receive preferential access to the Mainland’s markets, over and above China’s WTO agreements. In terms of Hong Kong’s manufactured products whereby there is 30% on Hong Kong added value or transformation of substance, they will now be able to enter China at zero duty. In the first instance and with effect from 1^st June, 2004, 273 products were ear-marked for the 2004 commencement date, with further concessions promised by the 1st January 2006.

China announced the signing of the second CEPA on the 27^th August, 2004. This second arrangement has reflected a further support to the recovering Hong Kong’s economy on better terms than original promised.

A list of another 713 products was declared to be duty free with 529 tariff codes from the 1^st January, 2005, even one year ahead of the original promised date, and another 184 tariff codes from 1^st January of the following year.

By the second CEPA, the Mainland has also agreed to broaden the liberalization for 11 out of the 18 service sectors, enjoying preferential treatment under CEPA. The 11 sectors are legal, construction, distribution, transport, freight forwarding, medical, audio-visual, accounting, banking, securities and futures and individually owned stores.

This significantly strengthens Hong Kong’s position as the platform for you and your clients to do business in China. Under the provisions of CEPA, one could be forgiven for thinking that only Hong Kong companies will benefit from such an agreement but this is not the case.

Overseas companies focusing on the abovementioned service sectors (including management consulting which was given the first rank in the first CEPA), interested in developing their China business strategy, can also make use of the Articles of Association of CEPA as well, provided that they fulfill the Hong Kong company requirements by either registering as soon as possible or partnering with Hong Kong based companies. Foreign manufacturers or traders of goods can either partner with or outsource to any company, Hong Kong based or otherwise.

In China, Hong Kong’s management consultants can provide a wide range of consulting services from financial, marketing management and human resources to public relations services and general management consulting services. This is based on the United Nations Classification of Management Consulting services (UN code 8685), which China has both accepted and adopted.

I would like to share with you a small example of the sorts of things that we are capable of doing. Acting as the principle management consultant, in conjunction with a technical expert and a legal expert, a Hong Kong based management consulting company provided services for a leading emerald cutting and marketing enterprise owned by a Greek family and based out of New Jersey, U.S.A. The services provided began with a feasibility study, the application of business permits and licenses, the recruitment of trainers and workers from Brazil and Columbia and the setting up of an accounting, audit and tax records system as well as financing. The result was the establishment of a pioneering local Hong Kong cutting operation for the supply of cut, polished gems worth somewhere in the region of US$60 million. These were then distributed around the Far East with significant sales to China visitors to Hong Kong. The company is now contemplating to branch out operations to South China.

There are many factors that one needs to take into account when attempting to do business in China via Hong Kong. Most importantly we need to address the question of why Hong Kong is the obvious choice to most international firms of management consultants as a stepping-stone for entry into China. In a survey published by the Index of Economic Freedom (IEF), Hong Kong has, for the ninth year in a row, been named the freest economy in the world. This is because our economic policy is one of free trade and free enterprise with a market open to all. There are no barriers to trade, no restrictions on investments and no foreign exchange controls. There is freedom and ease for setting up Hong Kong companies, owning land and properties, employing workers with staff access to China, and all you can do for a legitimate business. Hong Kong has a strong record of rule of law of which benefits for the protection of investments will continue to accrue under the respected one-country, two systems arrangement.

Our location at the southeastern tip of the mainland gives us a huge advantage over our closest competitors.

It seems that nowadays Hong Kong and the Pearl River Delta (PRD) are intrinsically linked, and with good reason. Topographically, Hong Kong is situated at the mouth of the Pearl River and the area within China has developed remarkably rapidly in the past twenty years. With no less than 8 million workers in the PRD employed by Hong Kong factory owners, and a few millions more working for various companies from Taiwan, Japan, Korea and Europe, the PRD is the hub of light industrial manufacturing. This provides enormous opportunities for European management consultants who are well known for their state-of-the-art industry related management skills, to cooperate with Hong Kong firms to offer service to over 10,000 Hong Kong invested China enterprises just in Dongguang city alone. For your information, the combined cities of the PRD have all developed over the past two decades and have created a consumer market, which, according to the 2000 consensus, is in excess of 40.77 million people around Hong Kong.

It is also the most prosperous region in China with the highest GDP per capita and just two years ago in 2001, the combined trade export of two cities, Shenzhen and Dongguan, doubled the trade export of Shanghai. An impressive statistic considering just 20 years ago Shenzhen, just over the Hong Kong border, was a simple fishing village with a population of 30,000 people.

There are talks going ahead in Hong Kong at present concerning the construction of a US$160 billion road bridge linking Hong Kong with Macau and Zhuhai currently due for completion between 2007 and 2010.Further to this it has also been suggested that by 2005 the subway systems of Hong Kong and Shenzhen will be connected by one super network thereby making traveling between the two cities easier than it has ever been in modern history.

Hong Kong has an established relationship with the Pearl River Delta as aforementioned. Concurrently, Hong Kong also has an established Government- to-Government Liaison Group with Guangdong Province in respect of all cross-border development between the province and Hong Kong.

There is also a newly formed cooperation group of governors linking up nine provinces in South China (below Yangtze River) with Hong Kong and Macau. This liaison group has united a total population of over 450 million. The arrangement is well known as "9+2" with regular coordination meetings between governors of the nine provinces and the Chief Executives of the two Special Administrative Regions.

Along side with the above development are many city-to-city cooperation committees existed in the last two to three years. The most notable ones are the Shanghai and Hong Kong government work group, the city of Beijing and Hong Kong government work group and several similar bodies helping each other to achieve win-win situations. City of Beijing, in particular, has brought to Hong Kong investors a total of 236 projects last month, along side many more projects for the 2008 Olympic in Beijing.

The above government cooperation has demonstrated a strong commitment of China to help to build a stronger-than-ever Hong Kong economy. This also creates a venue for Hong Kong businessmen to have the first-hand access to the most affluent cities of China which will benefit all Hong Kong registered companies.

The facts that I have presented to you this afternoon speak for themselves.

The foreign direct investment in Hong Kong has always been substantial. The pattern for the last decade was the moving of Hong Kong manufacturing to the North whilst the local economy was transforming into a knowledge based economy now with 83 or more percents of GDP from services income.

This change has actually caused an influx of overseas companies to establish their regional offices in Hong Kong. Up to 2^nd June, 2003, a total of 3,207 overseas companies have established 966 regional headquarters and 2,241 regional offices in Hong Kong.

The number has actually grown steadily since 1996, the year before the handover of the sovereignty of Hong Kong when there were existed a total of 2,307 overseas companies represented by 816 regional headquarters and 1,491 regional offices respectively.

Of the above figures, European companies has established a total of 264 regional headquarters in Hong Kong compared with 242 from USA, 168 from Japan and 84 from Mainland China, ranking European as having the largest number of regional headquarters established here.

In respect of regional offices, European companies also has 598 offices in Hong Kong in additional to the earlier mentioned number of regional headquarters. This has also ranked European on the top having the largest number of regional offices in Hong Kong topping 498 from USA, 442 from Japan and 148 from Mainland China.

In this time of global economic expansion and the lowering of trade barriers, I firmly believe that China is the next country where economic growth can only continue to develop, and European investment can be beneficial to all parties involved. Hong Kong and China are so fantastically dynamic, vibrant and conducive to business there really is no other option. European investment in China via Hong Kong is achievable, but only with the help of experienced and knowledgeable management consultants, like your goodselves, and with us, able to guide your clients along the sometimes complicated but always rewarding path to success. Also, management consultants like your goodselves can offer services, with us, to tens of thousands of Hong Kong and foreign invested enterprises in China to improve their competitiveness rewarding us with a strong growth in professional fees.

Thank you all for your kind attention.