For Meeting on 21 March 2016 Paper Ref: CSD/1/2016

Commission on Strategic Development

Progress Report on HKSAR’s Participation in the Belt and Road Initiative

(Translation)

Objectives

The Belt and Road Initiative and its development not only have significant impacts on China and some 60 countries along the Belt and Road, but also bear far-reaching implications for future global development. Studies on the Belt and Road Initiative around the world have mushroomed. Many countries and regions are actively exploring ways to participate in the Belt and Road Initiative. As an international metropolis, it is important for Hong Kong to examine in great detail and seize the development opportunities to be brought about by the Belt and Road Initiative to Hong Kong, China, Asia as well as the world with a view to bringing the future development of Hong Kong to a new height and benefiting Hong Kong people at large.

2. At the meeting held on 3 July 2015, the Commission on Strategic Development (CSD) had initial discussions on the key role Hong Kong could play under the Belt and Road Initiative1. To facilitate Members’

1 An initial analysis on the background, objectives, principles, directions, priorities and key role Hong Kong can play is set out in the CSD Paper No. CSD/2/2015.

- 1 - discussion, this paper gives an account of the latest developments as regards the Belt and Road Initiative, participation of the HKSAR Government, as well as views on how Hong Kong may further participate in the Belt and Road Initiative.

Planning and coordination at the central level

3. Upon authorisation of the State Council, a document entitled Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (Vision and Actions) was jointly issued by the National Development and Reform Commission (NDRC), the Ministry of Foreign Affairs and the Ministry of Commerce on 28 March 2015. Its contents cover mainly policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond (collectively known as “five areas of connectivity”). Inspector Ou Xiaoli, head of the Office of the State Council’s Leading Group for Advancing the Development of the Belt and Road Initiative, briefed reporters in late October 2015 that both the central and local governments were proactively pushing ahead with the formulation and execution of relevant supporting policies and implementation plans in relation to Vision and Actions2.

4. At the central level, the Central Government has required relevant departments to formulate supporting policies and implementation plans by the end of 2015. As of October 2015, about 10 departments had completed the work. According to news reports by Mainland media2, the State Administration of Taxation has issued the Circular on Implementing the Requirements of the Belt and Road Development Strategy and Doing A Good Job in Tax Services and Administration, while the General

2 Wang Erde, 22 October 2015, “Relevant departments of the State Council to complete implementation plans for the Belt and Road by end of this year”, 21st Century Business Herald, http://m.21jingji.com/article/20151022/b3d9c4841faaa771fc5294e995c03649.html.

- 2 - Administration of Customs has released the Implementation Suggestions on Working Out the Planning for the Belt and Road. Other central ministries having completed the work included the NDRC, the Ministry of Commerce, the Ministry of Industry and Information Technology, the Ministry of Transport, the Ministry of Land and Resources, etc.

Implementation plans at the local level in the Mainland

5. At the local level, according to information published on the webpage of the NDRC, the alignment of implementation plans among provinces, autonomous regions and municipalities directly under the Central Government (collectively Provinces) has basically been completed. The respective positioning, key missions, major projects, as well as organisation measures are set out in Annex 1. Guangdong is the first province to submit its implementation plan and have it approved. Details of the plan are set out in Annex 2. The implementation plans submitted by Mainland provinces and municipalities are fairly detailed. Many of them are good reference for Hong Kong.

Participation of the HKSAR Government

Relevant statements made in Vision and Actions

6. Vision and Actions has outlined the roles Mainland Provinces, as well as Hong Kong, Macao and Taiwan might play under the Belt and Road Initiative. Statements directly related to Hong Kong are extracted as follows:

• We should give full scope to the role of Qianhai, Shenzhen; Nansha, Guangzhou; Hengqin, Zhuhai; Pingtan, Fujian Province, etc. in opening up and cooperation; deepen their cooperation with

- 3 - Hong Kong, Macao and Taiwan; and help to build the Guangdong-Hong Kong-Macao Big Bay Area.

• Regarding Hong Kong, Macao and Taiwan, we should leverage the unique role of overseas Chinese and the Hong Kong and Macao Special Administrative Regions, and encourage them to participate in and contribute to the Belt and Road Initiative. We should also make proper arrangements for Taiwan to be part of this effort.

7. As stated in Vision and Actions, Hong Kong should capitalise on its unique advantages and actively participate in and promote the Belt and Road Initiative. When introducing the Belt and Road Initiative and the joint development on 15 October 2015, Zhang Jianping, Director of the Department of International Cooperation at the Institute for International Economic Research of the NDRC, remarked that Hong Kong, as the most internationalised city of China and having global influence in the future development of the Belt and Road, would become a very important pivot city during the implementation of the Belt and Road Initiative3.

The National 13th Five-Year Plan

8. The Central Committee of the Communist Party of China’s Proposal on Formulating the Thirteenth Five-Year Plan on National Economic and Social Development (the Proposal) promulgated by the Central Authorities on 3 November 2015 expressed clear support for giving full play to the unique strengths of Hong Kong and Macao to elevate their positions and functions in China’s economic development and opening up to other countries, as well as “in consolidating Hong Kong’s status as an

3 “NDRC: Hong Kong may become an important pivot city for the Belt and Road”, 16 October 2015, Wen Wei Po, http://paper.wenweipo.com/2015/10/16/HK1510160043.htm.

- 4 - international centre for financial services, shipping and trade for participating in China’s two-way opening up and the development of the Belt and Road Initiative”. Hong Kong should seize the golden opportunity of participating in the Belt and Road Initiative, and capitalise on and give play to its unique advantages.

2016 Policy Address

9. Following the announcement of the Belt and Road Initiative, the CSD commenced discussions on the subject in July 2015 to examine the roles Hong Kong could play under the Belt and Road Initiative, including serving as the capital formation and financing centre, offshore Renminbi (RMB) business centre, international asset management/risk management/multinational corporate treasury services centre, trade centre, global operational support centre, maritime and aviation centre, international legal and dispute resolution services centre, headquarters and professional services support centre, talent training base, and centre of people-to-people exchange for Belt and Road, etc.

10. Having made reference to the above discussions, views of the general public, experts and scholars from Hong Kong, Mainland and overseas on Hong Kong’s participation in the Belt and Road Initiative, as well as the internal research and analysis conducted by the HKSAR Government, the Chief Executive elucidated in detail in his Policy Address, which was announced in January 2016, how Hong Kong could participate in the Belt and Road Initiative. Relevant content extracted from the Policy Address is set out in Annex 3, while salient points are summarised as follows.

- 5 - Highlights of 2016 Policy Address concerning Hong Kong’s participation in the Belt and Road Initiative

Positioning

By leveraging the combined advantages of “one country” and “two systems”, Hong Kong can perform its role as a “super-connector” and demonstrate its functions and roles in the following five areas:

• Platform for capital formation and financing, and global hub for offshore RMB business • Trade and logistics platform • Trading environment • Platform for professional and infrastructure services • Strengthening people-to-people bond

Priority areas

1. Platform for • To provide various countries with the capital capital required for infrastructure construction. formation and • To strive to set up a platform conducive to the financing, and development of Islamic finance. global hub for • Having indicated to the Central Government our offshore RMB intention to join the Asian Infrastructure Investment business Bank (AIIB). • To continue to promote the offshore RMB business and further upgrade and bring into full play our functions and services as a global hub for offshore RMB business. • To serve as an ideal platform for RMB capital and risk management for Mainland and international enterprises and financial institutions.

- 6 - Highlights of 2016 Policy Address concerning Hong Kong’s participation in the Belt and Road Initiative

2. Trade and • To serve as a major platform to promote trade and logistics logistics under the Belt and Road Initiative, and give platform play to its role as the most important centre in Asia for conventions and exhibitions, sourcing and business matching. • To provide support services such as project feasibility studies and risk assessment, research and development, financing and management for major infrastructure. • To continue to seek to discuss Air Services Agreements with other aviation partners along the Belt and Road with a view to reinforcing Hong Kong’s position as an international aviation hub.

3. Trading • Through fully leveraging our advantages under “one environment country, two systems” and a high degree of autonomy, to strengthen economic and trade ties with our major trading partners along the Belt and Road, promote outgoing and incoming visits by senior officials and conclude Free Trade Agreements as well as Investment Promotion and Protection Agreements with these countries. • To set up Economic and Trade Offices (ETOs) in the Belt and Road countries, and to set up a new ETO in Indonesia in 2016 and another in Korea as soon as possible. • To step up research efforts and establish databases for the reference of the business sector.

- 7 - Highlights of 2016 Policy Address concerning Hong Kong’s participation in the Belt and Road Initiative

4. Platform for • To provide consultancy services for regions along professional and the Belt and Road and participate in the operation infrastructure and management of their projects. Hong Kong services enterprises may, having regard to their own strengths, invest in suitable projects and/or participate in the construction of industrial parks. • To provide professional international legal and dispute resolution services, and assist in developing a sound legal risk management system. • To allocate $200 million to support Hong Kong professional services sector in their exchanges and cooperation with the Belt and Road countries and other regions outside Hong Kong (including Mainland China), and the related promotion and publicity activities.

5. Strengthening • To increase the number of offers under the Targeted people-to-people Scholarship Scheme by about 100 in phases, and bond inject $1 billion into the scholarship fund for this purpose, with a view to attracting more students from the Belt and Road countries to study in Hong Kong and encouraging the interaction of Hong Kong people with those of the Belt and Road countries. • To enhance cultural exchanges with the Belt and Road countries through performances, exhibitions, seminars, forums, etc. • To explore the feasibility of expanding the youth exchange programmes to cover more Belt and Road countries.

- 8 - Highlights of 2016 Policy Address concerning Hong Kong’s participation in the Belt and Road Initiative

• To liaise with community organisations in Hong Kong with a view to establishing and enhancing the connection and cooperation with their counterparts in the Belt and Road countries.

Organisation measures

A steering committee for the Belt and Road chaired by the Chief Executive will be set up for formulating strategies and policies for Hong Kong’s participation in the Belt and Road Initiative. A Belt and Road Office will also be established to take forward related studies and coordinate work, and liaise with the central ministries, authorities of various Provinces and municipalities, as well as various stakeholders.

11. Specific progress in the various priority areas is set out as follows.

Platform for capital formation and financing, and global hub for offshore RMB business

12. The HKSAR Government indicated to the Central Government in December 2014 the intention for Hong Kong to join the AIIB. The response of the Central Government has been positive. The HKSAR Government has also deployed officials to participate in the preparation work of the AIIB as members of the Chinese delegation. Moreover, the Financial Secretary attended the opening ceremony of the AIIB cum the inaugural meeting of its Board of Governors and Board of Directors held on 16 January 2016 in his capacity as a member of the Chinese delegation. The HKSAR Government will continue to discuss with the Central

- 9 - Government and the AIIB the specific arrangements for Hong Kong to join the AIIB as a non-sovereign territory.

13. The then AIIB President-designate visited Hong Kong in late August 2015 and met the Chief Executive, the Financial Secretary, representatives of the Hong Kong Monetary Authority (HKMA) as well as the Bank for International Settlements respectively to discuss issues concerning cooperation.

14. Regarding efforts to encourage/help Mainland enterprises involved in Belt and Road projects and relevant enterprises in the Belt and Road countries to secure financing in Hong Kong, the Hong Kong Exchanges and Clearing Limited has been making use of different platforms, such as local seminars and meetings with local intermediaries or potential issuers, to encourage Mainland and overseas enterprises to raise capital in Hong Kong through listing. The HKSAR Government has also, via cooperation platforms with Mainland Provinces and municipalities (including Guangdong, Shanghai, Fujian, etc.), encouraged Mainland enterprises to list or issue bonds in Hong Kong.

15. To further leverage and enhance Hong Kong’s function as a global hub for offshore RMB business and provide various RMB services for the Belt and Road Initiative, the HKSAR Government has included elements in relation to exploration of business opportunities presented by the Belt and Road Initiative in its discussions with the industry and in its efforts to promote the RMB business platform of Hong Kong. The HKSAR Government has also held discussions with relevant central ministries on the Shenzhen-Hong Kong Stock Connect and enhancement of the Shanghai-Hong Kong Stock Connect.

16. As regards developing Hong Kong as a wealth and risk management services centre for the Belt and Road projects, the HKSAR

- 10 - Government also implemented various measures, including the implementation of the Mainland-Hong Kong Mutual Recognition of Funds Arrangement on 1 July 2015. As at 19 February 2016, the Securities and Futures Commission has authorised 25 Mainland funds for public offerings in Hong Kong under the arrangement, whilst the China Securities Regulatory Commission has approved six Hong Kong funds for public offerings in the Mainland. On insurance coverage for major infrastructure, as provided in the Agreement on Trade in Services under CEPA, existing measures under the Guangdong Agreement has been extended to the whole Mainland, which encourages Mainland insurance companies to cede their business to Hong Kong insurance companies. In addition, the HKMA will continue to encourage enterprises to issue sukuk through the Hong Kong platform. On the other hand, to attract multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong, the HKSAR Government has proposed amending the Inland Revenue Ordinance to allow, under specified conditions, interest deductions under profits tax for corporate treasury centres and reduction of profits tax for specified treasury activities by 50%. The relevant bill was introduced into the Legislative Council in December last year.

Trade and logistics platform

17. In 2015, Invest Hong Kong worked in partnership with relevant organisations in Guangdong and Macao to organise joint investment promotion activities in Singapore, Indonesia and Malaysia. Invest Hong Kong is discussing with Guangdong and Macao on collaborative projects to be conducted in 2016. The preliminary proposal is to hold the said activities in European countries.

18. In 2015, the Trade Development Council (TDC) set up a “Hong Kong Pavilion” in a number of major economic and trade expositions held in the Mainland to promote various professional services of Hong Kong.

- 11 - The TDC is also preparing to hold the “CEO Forum” and “SmartHK” expositions in the Mainland in May 2016 to explore how Hong Kong services can assist Mainland enterprises in seizing the latest development opportunities brought about by the Belt and Road Initiative. Moreover, the TDC will continue to organise visits for the industry to launch major publicity campaigns in regional hubs of countries along the Belt and Road for promoting the products and services of Hong Kong and opening up new business opportunities for Hong Kong enterprises.

19. The TDC has included sessions on the Belt and Road Initiative in major international forums and expositions held in Hong Kong, such as the Asian Logistics and Maritime Conference in November 2015, the Business of IP Asia Forum in December 2015 and the Asian Financial Forum in January 2016, to encourage the business sector to explore business opportunities from the Belt and Road Initiative. The HKSAR Government and the TDC will co-organise the first Belt and Road Summit in Hong Kong on 18 May 2016. Principal officials, representatives of international organisations and experts from the business sector and related industries of the markets along the Belt and Road will be invited to examine in detail the new business and cooperation opportunities brought about by the Belt and Road Initiative for various industries, including finance, logistics and maritime, professional services, cross-border investment, infrastructure development and international trade, as well as the unique role that Hong Kong can play under the Belt and Road Initiative.

20. The TDC launched a Belt and Road Portal in December 2015 to provide the latest and comprehensive information on the business environment with a view to assisting the industry to seize the business opportunities presented by the Belt and Road Initiative and to expand their businesses by identifying suitable business partners through the platform and services of Hong Kong.

- 12 - 21. As far as furthering the development of Hong Kong’s maritime transport services is concerned, Hong Kong is now having sea freight shipments with more than 40 Belt and Road countries. Moreover, Hong Kong has signed agreements on double taxation relief arrangements (including the comprehensive avoidance of double taxation agreements that cover shipping income) with 25 Belt and Road countries, namely, Austria, Belgium, Brunei, Mainland China, France, Germany, Hungary, Indonesia, Italy, Japan, Kuwait, Malaysia, Mexico, Holland, New Zealand, Qatar, Romania, Russia, Singapore, Korea, Spain, Sri Lanka, Thailand, United Arabia Emirates and Vietnam. The HKSAR Government has invited some Belt and Road countries to sign agreements on double taxation relief arrangements for shipping income. In addition, the HKSAR Government will establish the new Hong Kong Maritime and Port Board in mid-2016 to study and formulate strategies and measures to promote the long-term development of the maritime transport services.

22. As for air transport, of the some 60 countries along the Belt and Road, Hong Kong has signed Air Services Agreements or international Air Services Transit Agreements with 404 countries. The HKSAR Government will continue such efforts and seek to discuss new Air Services Agreements with other aviation partners along the Belt and Road as well as expand the existing aviation arrangements in a bid to reinforce Hong Kong’s position as an international aviation hub. Moreover, the Airport Authority Hong Kong (AAHK) will establish a civil aviation academy to nurture local and regional aviation management talent. With the rapid development of the international civil aviation industry, it is stated in the Budget that the HKSAR Government will examine the use of tax concession to boost

4 These 40 Belt and Road countries include Austria, Bahrain, Bangladesh, Belarus, Belgium, Brunei, Cambodia, France, Germany, Greece, Hungary, India, Indonesia, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Maldives, Malaysia, Mexico, Mongolia, Myanmar, Nepal, Holland, New Zealand, Pakistan, the Philippines, Korea, Oman, Russia, Saudi Arabia, Singapore, Sri Lanka, Thailand, Turkey, the United Arabia Emirates and Vietnam.

- 13 - aircraft leasing business and explore business opportunities in aerospace financing. At the same time, the cap on the withholding tax imposed by the Mainland on royalties paid to aircraft and ship leasing businesses has been reduced from 7% to 5% with effect from end-2015. This arrangement will enhance Hong Kong’s competitive edge in attracting aerospace financing business.

23. The AAHK is actively implementing the three-runway system (3RS) project, the efforts of which include the detailed design of associated works, implementation of proposals for financial arrangements, and undertaking of a series of mitigation measures as required by the environmental impact assessment report and the Environmental Permit. Meanwhile, the 3RS project is also undergoing statutory procedures concerning reclamation works and draft outline zoning plan amendments. The procedures are expected to be completed in mid-2016. The AAHK anticipated that upon the full operation of the 3RS, the additional capacity can at least meet the air traffic demand of the Hong Kong International Airport up to 2030. It is estimated that the annual passenger throughput will increase to about 100 million passenger trips while the annual cargo throughput will increase to 9 million tonnes5 by then.

Trading environment

24. The HKSAR Government and the Association of Southeast Asian Nations (ASEAN) are actively working towards a free trade agreement (FTA), with six rounds of negotiations completed. Negotiations are expected to be concluded by the end of 2016. Investment agreements have been initialled with Bahrain and Myanmar respectively, which will be concluded once the necessary internal procedures are completed by the

5 In 2015, the passenger throughput of the Hong Kong International Airport was about 68.5 million passenger trips while the cargo throughput was 4.38 million tonnes.

- 14 - relevant parties. The HKSAR Government is also continuing its investment agreement negotiations with Russia and the United Arab Emirates. The Chief Executive announced the launch of investment agreement negotiations between Hong Kong and India during his visit to India this February. In addition, the HKSAR Government has all along been exploring the possibility of having negotiations with the European Union (EU) for an investment agreement. In a strategy document released last October, the EU has indicated its interest in having investment agreement negotiations with Hong Kong. The HKSAR Government will continue to push ahead with such negotiations with the EU.

25. To strengthen economic and trade ties with our trading partners along the Belt and Road, the HKSAR Government will also explore the possibility of allowing Hong Kong to join the FTAs that have been concluded or will be concluded between China and its trading partners, including those with the Belt and Road countries.

26. Moreover, Hong Kong has endeavoured to enter into comprehensive avoidance of double taxation agreements (CADTAs) with its trading partners. 34 CADTAs have been signed so far, including those signed with Romania and Russia in November 2015 and January 2016 respectively. The HKSAR Government will continue our negotiations with other countries (including the Belt and Road countries) so as to conclude CADTAs as soon as possible for promoting trade between Hong Kong and the countries concerned.

27. To further facilitate trade, the Commerce and Economic Development Bureau (CEDB) is planning to set up a dedicated office to coordinate with the relevant departments and engage the industries to work out the detailed design and implementation programme for the “trade single window”. The implementation of the “trade single window” will facilitate one-stop lodging of all documents and submissions to various government

- 15 - departments for trade declaration and customs clearance. It is expected that the first phase of the initiative can be launched in 2018.

28. The HKSAR Government has so far signed Mutual Recognition Arrangements (MRAs) on Authorised Economic Operators (AEO) with the Mainland, India, Korea, Singapore and Thailand, enabling accredited enterprises in Hong Kong and other signatories to the MRAs to enjoy customs facilitation such as reduced examination or prioritised clearance. The HKSAR Government will sign a MRA on AEO with Malaysia, another Belt and Road economy, on 17 March 2016.

Platform for professional and infrastructure services

29. The Eco Expo Asia, an annual event co-organised by the Environment Bureau (ENB) and the TDC in Hong Kong, is one of the important eco-expos in the region. It can serve as a cooperation platform for the Belt and Road countries and regions in areas such as environmental protection, energy saving and carbon emission reduction, as well as combat of climate change to facilitate exchanges and cooperation among government officials, environmental professionals and green enterprises. Last year, the ENB and the TDC jointly invited the Belt and Road countries and regions to participate in the Eco Expo Asia. Environmental protection officials of India, Malaysia, Russia and the Philippines and buyers from over 30 countries and regions along the Belt and Road, such as Kazakhstan, Iran, the United Arab Emirates, Poland, Vietnam, Thailand, Singapore and Indonesia took part in the 2015 Expo. The ENB will continue to invite the Belt and Road countries and regions to participate in the Expo to be held in October 2016.

30. The Development Bureau and the TDC are now exploring the feasibility of cooperation on conducting a market analysis and research on how to facilitate participation of the Hong Kong’s construction-related

- 16 - sectors in the Belt and Road infrastructure projects. According to the initial discussions, the sectors in general are keen to participate in the Belt and Road infrastructure projects. Besides, they generally support the establishment of an effective information and communication platform to facilitate their participation. The HKSAR Government has already put forth a proposal to the Ministry of Commerce on the cooperation between the construction sectors of the Mainland and Hong Kong to open up markets in infrastructure construction related to the Belt and Road.

31. The HKSAR Government strives to develop Hong Kong as an international legal and dispute resolution services centre for the Belt and Road. In December 2015, the Secretary for Justice met with representatives of the Department of Treaty and Law of the Ministry of Foreign Affairs at a senior official meeting to exchange views on the role that Hong Kong might play under the Belt and Road Initiative. Between 2015 and March 2016, the Department of Justice (DoJ) organised or participated in “Seminars on the Legal and Dispute Resolution Services in Hong Kong” in Chongqing, Chengdu, Beijing, Shanghai, Guiyang and Xi’an respectively, during which relevant services that could be provided by Hong Kong’s legal and dispute resolution professionals when Mainland enterprises developed overseas markets under the Belt and Road Initiative were introduced to representatives from the legal profession and the business sector of the Mainland. In addition, the DoJ plans to organise or participate in promotion activities in Wuhan, Kunming and Nanjing in 2016.

32. The HKSAR Government has all along been encouraging our professional services sector to enter the Mainland market and develop new markets overseas. Also, it was announced in the 2016 Policy Address that $200 million is allocated to support the sector in enhancing exchanges and cooperation with the Belt and Road countries and other regions outside Hong Kong (including Mainland China), and promote related publicity activities. The HKSAR Government will work out the specific

- 17 - arrangements in consultation with the sector, with the aim of enhancing the competitiveness of Hong Kong professional services in markets outside Hong Kong.

Strengthening people-to-people bond

33. To contribute to the strengthening of people-to-people bond, it is necessary to capitalise on Hong Kong’s advantages as an international city to enhance educational, cultural and youth exchanges, with a view to securing the acceptance of the Belt and Road vision by the people of the Belt and Road countries.

34. The Education Bureau (EDB) and the Indonesian Ministry of Education and Culture signed a Memorandum of Understanding (MoU) on education cooperation on 16 December 2015 to enhance education collaboration between the two places. The launch of the Hong Kong Scholarship for “Belt and Road” Students (Indonesia) was announced on the same day, whereby ten Indonesian students enrolled in publicly-funded undergraduate programmes in Hong Kong each year will be offered scholarships starting from the 2016/17 academic year.

35. In February 2016, the EDB launched a new scheme to provide subsidies for needy post-secondary students to participate in exchange activities in the Belt and Road regions. Each student will receive a subsidy of up to around $50,000 for participation in exchange activities twice in such regions during their studies.

36. The HKSAR Government encourages Hong Kong students to study languages of the Belt and Road countries for enhancement of their abilities to communicate with people of these countries. Examinations on six other language subjects, i.e. Hindi, Urdu, French, German, Japanese and Spanish, are currently offered to candidates in the Hong Kong Diploma of

- 18 - Secondary Education Examination. International examinations administered by the Hong Kong Examinations and Assessment Authority (HKEAA) include the Arabic language. The HKEAA plans to administer an examination on the Tamil language in 2016, and will explore the feasibility of introducing examinations on other languages of the Belt and Road countries.

37. To enable our students to understand the significance and importance of the Belt and Road Initiative, knowledge about the similarities and differences among the Belt and Road countries and regions in terms of their historical, economic, religious and cultural developments and local mores can be incorporated into the curriculum and activities (such as thematic studies, or activities to gain experience, on land-based Silk Road and Maritime Silk Road) pertaining to a range of subjects including Chinese History, Geography, History, Religious Studies, Art, Technology and Liberal Studies. This will make it easier for our students to accept one another, cultivate friendship and create collaborative opportunities during their exchanges in the Belt and Road countries. In November 2015, the EDB launched a Seminar Series on the Belt and Road Initiative, which attracted more than 300 primary and secondary school administrators, principals and teachers to join. The EDB plans to organise more seminars of similar nature in 2016. On curriculum development, the Curriculum Development Council (CDC) established the Ad Hoc Committee for Revising Junior Chinese History and History Curricula (Secondary 1-3) in late 2014 to conduct an overall review of the current Chinese History and History curricula at the junior secondary level. In late November 2015, the CDC held a professional sharing session on the way forward in revising the curricula, during which teachers were consulted about the introduction of topics such as “Opening Up of the Western Regions and the Silk Road in the Western and Eastern Han Dynasties” and “Rise of Islamic Civilisation” as proposed by the committee. Moreover, the EDB is preparing a learning

- 19 - and teaching package on “The Art of Dunhuang Grottoes: Cross-Key Learning Area Resource Package with Video Clips”.

38. As regards Mainland exchange programmes for students, the EDB organises such programmes (for example, starting points of the Belt and Road or coastal cities such as Xi’an, Dunhuang, Fujian, Yangjiang city of Guangdong Province) in line with the school curriculum to enable students to understand the significance and importance of the Belt and Road Initiative through activities like briefing sessions, site visits, expert talks and thematic studies. At the same time, the Quality Education Fund will make the Belt and Road a priority theme to enrich students’ learning experience of the Belt and Road and offer more teachers’ activities related to it.

39. Regarding cultural and art exchanges, the HKSAR Government has so far signed a total of 15 MoUs on cultural cooperation, many of which are entered into with the Belt and Road countries, including the Philippines, Singapore, Vietnam, Egypt, Israel, Croatia, Italy and Russia. The HKSAR Government is also discussing with India on the signing of an MoU on cultural cooperation.

40. The HKSAR Government will continue to provide funding support to the Hong Kong Arts Development Council and major art groups, with a view to encouraging cooperation with artists and art groups from the Greater China region and around the globe to organise various activities such as performances, exhibitions and forums in Hong Kong to promote Hong Kong as a regional platform for cultural exchange. Moreover, the Leisure and Cultural Services Department plans to stage a series of Belt and Road culture-related exhibitions in the next few years. Examples include an exhibition entitled “The Impact of Chinese Tea Culture and Export of Tea Ware on other Cultures” to be held in mid-2016 and a joint exhibition entitled “Across the Oceans ‒ Essence of Cultural Heritage of Eight Cities

- 20 - along China’s Maritime Silk Road” to be held from October to December 2016.

41. The HKSAR Government will encourage community organisations to hold youth exchange activities incorporated with Belt and Road elements under the Funding Scheme for Youth Exchange in the Mainland, and consider expanding the International Youth Exchange Programme and the Summer Exchange Programme to cover more countries along the Belt and Road.

42. The Home Affairs Bureau is liaising with local non-government organisations in a bid to establish and enhance connectivity and cooperation with counterparts in countries along the Belt and Road. The TDC has also written to various trade associations and bodies, youth organisations and consulates in Hong Kong to solicit their support for the Belt and Road Summit.

Other areas

43. As regards the development of platforms for diversified tourism, the Hong Kong Tourism Board will continue stepping up cooperation with Mainland tourism administrations and the Macao Government Tourism Office in promoting “one trip, multiple stops” tourism products. Through various occasions and activities, the Tourism Commission also encourages the trade to seize the opportunities to explore new tourism markets in the Belt and Road regions. Building on the vision of regional cooperation advocated by the Belt and Road Initiative, the Tourism Commission entered into an agreement for cooperation on tourism with the Guangxi Tourism Commission on 15 December 2015 to jointly plan and promote “one trip, multiple stops” itineraries through further consolidating the vast tourism resources of both places; enhance the competitive edges of the tourism markets to attract more regional visitors and expand the market shares; as

- 21 - well as jointly negotiate, design and plan “one trip, multiple stops” tourism products and itineraries, so as to build up a tourism branding for the Pan-Pearl River Delta Region.

44. As for the development of platforms for emerging industries, our emerging industries can provide assistance and services in relation to the Belt and Road Initiative by, for instance, offering opportunities for manpower training to the Belt and Road regions and providing them with healthcare services. Potential markets may also be opened up for our technology industries, creative industries (including the film and cultural industries) and testing and certification services.

45. On creative industries, the second Silk Road International Film Festival (SRIFF)6 was held in September 2015, in which the Hong Kong film industry also participated. The CEDB will encourage the continued participation of Hong Kong films in the third SRIFF and assist in bringing its organisers into contact with the film companies concerned. The HKSAR Government will also continue to liaise with our architecture, publishing, animation and comics, and advertising industries to explore ways to strengthen cooperation with counterparts of the trade in Southeast Asian countries such as Singapore, Malaysia, Thailand and Indonesia in areas including talent exchange and market development. For instance, the Hong Kong Institute of Architects will receive funding support from Create Hong Kong under the CreateSmart Initiative for hosting the 17th Asian Congress of Architects in Hong Kong from 26 September to 1 October 2016. As the majority of the member organisations of the Architects Regional Council Asia come from the Belt and Road regions, Hong Kong

6 To implement the vision of the Belt and Road strategy, the State Administration of Press, Publication, Radio, Film and Television stages the annual SRIFF in Shaanxi and Fujian alternately from 2014. The first SFIFF was held successfully in Xi’an in October 2014. The second SRIFF took place on 22-26 September 2015, with the main venue located in Fuzhou and the secondary ones in Shaanxi.

- 22 - can enhance exchanges with architecture practitioners from these regions through the first ever opportunity of hosting this annual event.

46. Regarding testing and certification services, the Hong Kong Council for Testing and Certification participated in a large-scale exhibition entitled “In Style • Hong Kong” organised by the TDC in Jakarta, the capital of Indonesia, in September 2015 to promote the services of Hong Kong to the business sectors of Indonesia and ASEAN countries.

47. As regards healthcare service, we can make use of the infrastructure and resources for training healthcare professionals in Hong Kong, e.g. our tertiary institutions and healthcare professional bodies, to support the Belt and Road regions in training healthcare professionals. For instance, an average of 38 students from the Belt and Road regions (including Egypt, India, Indonesia, Iran, Kazakhstan, Kuwait, Malaysia, Myanmar, Pakistan, the Philippines, Saudi Arabia, Singapore, Sri Lanka and Thailand), accounting for 22% of the total number of students, were admitted to the postgraduate programmes offered by the Faculty of Dentistry, University of Hong Kong in each of the past three years.

Discussions by different sectors

48. Since the announcement of the Belt and Road Initiative, there have been enthusiastic discussions on the subject among various sectors of the community. Also, seminars on the Belt and Road Initiative have been held by different sectors/organisations (including business sector, overseas Chinese communities, and legal, engineering and other professional service sectors). Examples include a seminar entitled “The Belt and Road Initiative” organised by the Central Policy Unit (CPU) on 24 April 2015 with He Lifeng, Deputy Director of NDRC, as the keynote speaker; Summit Forum on the Belt and Road and Opportunities for Hong Kong held by the HKCPPCC (Provincial) Members Association Limited on 5 August 2015

- 23 - (“CPPCC” stands for Chinese People’s Political Consultative Conference); Subject Talk on the Belt and Road organised by All-China Federation of Returned Overseas Chinese and the Hong Kong Federation of Overseas Chinese Associations on 13 August 2015; 2015 Mainland and Hong Kong Construction Industry Forum co-organised by the Ministry of Housing and Urban-Rural Development and the Development Bureau on 1-3 November 2015; and the Academia International Conference co-organised by the Hong Kong Institute of Asia-Pacific Studies and the CPU on 17-18 December 2015 to explore opportunities and challenges presented by the Belt and Road Initiative.

49. Having studied views expressed via different channels such as news reports by the media, forum speeches and academic papers, more ideas on how Hong Kong can participate in the Belt and Road Initiative have been consolidated as follows.

(1) Transforming Hong Kong into a modern international trade centre7

50. As stated in the Policy Address, Hong Kong can serve as a trade and logistics platform for the Belt and Road countries. Some scholars are of the view that, given its rapid development of offshore trade, Hong Kong can play a key role in the management, consolidation and optimisation of the supply chain in international trade. Mainland enterprises may leverage Hong Kong’s strengths in areas such as digital information, branding and marketing to facilitate the extension of the value chain of joint projects to

7 “Opportunities for Hong Kong under the Belt and Road Initiative”, 22 August 2015, Hong Kong Economic Times, http://www.scio.gov.cn/ztk/wh/slxy/31215/Document/1445703/1445703.htm.

- 24 - both ends of the “smiling curve”8 when establishing their production bases overseas. The Belt and Road Initiative will greatly expand the market of Hong Kong’s offshore trade-related services, resolve the bottleneck faced by Hong Kong’s high-end service industry in its development, and help drive the transformation of Hong Kong from a traditional international trade centre into a modern international trade centre, and further into a value chain management hub for Asia, or even the globe. For example, Poland, a country producing apples for the world, is now enthusiastically promoting its products including agricultural products, dairy products, meat and fruit juice to China, Hong Kong and Asian regions. A number of Polish food producers taking part in the Polish cuisine and agricultural product promotional activities in Hong Kong have reaped good results by taking advantage of Hong Kong as a bridge connecting the Asian market and the Mainland market9.

51. There are views that the export volume of many countries along the Belt and Road is not high, which may become an obstacle to trade cooperation under the Belt and Road Initiative. Others, however, consider that this will provide a larger scope for cooperation. For instance, though Turkey has a trade deficit with China, it is planning to increase its export to China, especially for its specialties like coffee, candies, donuts, etc. Hong Kong may play an important intermediary role in all these new developments in trade.

8 A smiling curve consists of three sections – left, middle, and right. In the left section are technology and patent; in the middle are assembling and manufacturing; and in the right are branding and services. The curve represents profits. The middle part of the smiling curve shows the low level of profits while both sides of the curve represent the high levels of profits, and the resulting curve looks like a smile. The rationale behind the smiling curve is: to boost profits, an enterprise must move towards the left or right end instead of remaining in the assembling and manufacturing sections. 9 My Blog, 4 October 2015, webpage of the Financial Secretary, http://www.fso.gov.hk/chi/blog/blog041015.htm.

- 25 -

(2) Participation in the establishment of China’s overseas economic and trade cooperation zones

52. As reported by Mainland media10, at the National Business Conference concluded in Beijing on 29 December 2014, Gao Hucheng, Minister of Commerce of China remarked that the Ministry of Commerce would take forward “modern overseas economic and trade cooperation zones programme” in 2015. During an interview with the media, Fang Wei, Deputy Director General of the Department of Outward Investment and Economic Cooperation of the Ministry of Commerce, revealed that China had established 118 economic and trade cooperation zones in 50 countries around the world; among them, 77 were located in 23 countries along the Belt and Road11. These overseas economic and trade cooperation zones had become outward investment and cooperation platforms for Chinese enterprises, as well as platforms for the clustering of industries. In future, efforts would be focused on promoting the establishment of governmental protection mechanisms, including the Investment Protection Agreement, the Avoidance of Double Taxation Agreement and Bilateral Cooperation Zones Agreement. The newly established overseas economic and trade cooperation zones will uphold the principles of government-led, enterprise-centred and market operation. According to related news reports, industrial parks in China’s overseas economic and trade cooperation zones fall into four major categories, namely manufacturing and processing; resource utilisation; agricultural processing; and trading and logistics.

10 “The number of China’s overseas economic and trade cooperation zones hits 118, with 77 along the Belt and Road”, People.cn, http://world.people.com.cn/n/2014/1231/c157278-26304390.html. 11 Cooperation zones on the Silk Road Economic Belt are located in, inter alia, Kazakhstan, Kyrgyzstan, Uzbekistan, Russia, Belarus, Hungary, Romania and Serbia. There are also cooperation zones on the 21st-Century Maritime Silk Road. Industrial parks are established in Laos, Myanmar, Cambodia, Vietnam, Thailand, Malaysia and Indonesia in Southeast Asia; Pakistan, India and Sri Lanka in South Asia; as well as Egypt, Ethiopia, Zambia, Nigeria, Tanzania and Mozambique in Africa.

- 26 - These industrial parks are mostly built by enterprises of their own accord. Chinese enterprises will encounter higher risks overseas in the future and all sorts of cases are expected to emerge12.

53. China has established more than 70 overseas economic and trade cooperation zones in the Belt and Road countries. They are important platforms for Hong Kong enterprises and various professional service sectors to participate in the Belt and Road Initiative. While it is difficult for Hong Kong enterprises and professional service sectors to participate in projects concerned on their own, they may seek to have a presence in the industrial parks as members of the Mainland teams to play a complementary role. For example, making use of Hong Kong as a capital formation and financing platform can meet diversified capital requirements and lower investment risks; Hong Kong’s international legal and dispute resolution services can enable enterprises to gain a proper understanding of the laws and regulations that are relevant to their investments in the Belt and Road countries for the effective management of legal risks; Hong Kong can also serve as a neutral venue for dispute resolution to provide efficient and reliable resolution services for disputes involving Mainland parties and the Belt and Road countries; its various professional services, including operation management, accounting, legal, investment environment and risk assessment, can provide ancillary support as well as enhance efficiency. Suitable enterprises may engage in the infrastructure construction, management, industrial investment, etc. of various industrial parks in the

12 By taking a look at the Gwadar Port project in Pakistan , which is one of the flagship projects of Guangdong, as an example, we can better understand the concept concerned. According to news reports by Mainland media, the Pakistani government handed over the right of using an area totalling 2 281 hectares at Gwadar Port free trade area (FTA) to the China Overseas Port Holding Company Limited for a period of 43 years in November 2015. While it is understood that the mode of industry in the FTA is subject to in-depth study, the overall planning direction is to establish a free port akin to Hong Kong’s. It is proposed that a trading and logistics development zone and a manufacturing and processing zone be built for the purpose of trade shows, transit, trading, manufacturing of goods for daily use and small electrical appliances, processing of fishery products, processing of stone materials, manufacturing of transport machinery and equipment, processing of metals, etc. Port infrastructure also includes an airport, hospital(s), school(s), road(s), power plant(s), water treatment works, etc..

- 27 - form of proprietorship, joint venture or public-private partnership. Apart from industries such as trading, logistics, financial services, tourism and professional services which are generally regarded as local mainstream industries, the Belt and Road also offers valuable new opportunities for Hong Kong investors to develop non-mainstream industries like environmental protection, modern agriculture and mariculture overseas. The HKSAR Government may make use of the existing regional cooperation platforms to communicate and liaise with relevant Mainland ministries, Provinces and municipalities in a bid to enable local business sectors to participate in activities for exploring business opportunities under the Belt and Road Initiative.

(3) Tourism

54. Many Belt and Road countries and Mainland Provinces and municipalities hope to develop Belt and Road special themed tours. As an international tourism city, Hong Kong’s tourism infrastructure, product development, as well as hotel, tourism and related support services are of advanced international standards, and can contribute to the development of tourism and related industries under the Belt and Road Initiative. Geographically, Hong Kong is located at the intersection of Northeast Asia and Southeast Asia. Hong Kong, Macao and other parts of the Pearl River Delta are highly complementary to one another as far as tourism is concerned. Hence, there is great potential for cooperation in jointly developing “one-trip, multiple-stop” tours. The HKSAR Government is actively promoting cruise tourism to consolidate the status of Hong Kong as the cruise hub in Asia. Commissioned in mid-2013, the Kai Tak Cruise Terminal is of international standard and its two berths can accommodate the largest cruise vessels of the world at the same time. Hong Kong is located at the hub of the 21st-Century Maritime Silk Road. The Belt and Road Initiative brings about new opportunities for the international cruise market as well as for Hong Kong. The Guangdong Province is planning to

- 28 - build cruise terminals in Guangzhou and Shenzhen. Guangzhou, Shenzhen and Hong Kong can coordinate their efforts to seize the opportunities of the cruise market together and promote cooperation in Maritime Silk Road cruise tourism.

(4) Developing the Guangdong-Hong Kong-Macao Big Bay Area

55. Vision and Actions has mentioned the task of “deepening cooperation with Hong Kong, Macao and Taiwan, and helping to build the Guangdong-Hong Kong-Macao Big Bay Area”. The implementation plan of Guangdong also regards this as a key mission, stating that “we shall foster in-depth cooperation with Hong Kong and Macao to jointly develop the world-class Guangdong-Hong Kong-Macao Big Bay Area”. According to some analyses by the media13, the focus of the “world-class Guangdong-Hong Kong-Macao Big Bay Area” put forth by Guangdong is to develop the Big Bay Area into an international financial and trade centre as well as a hub of logistics, technology and innovation, cultural exchanges, etc. The three places can play to their own strengths to complement the strategy. Taking the development of a logistics hub as an example, Hong Kong can provide the entire Big Bay Area with various commercial services related to shipping and logistics, such as ship registration, management, financing, insurance, inspection as well as legal and arbitration services, etc. The HKSAR Government can closely liaise with its counterparts in Guangdong and Macao under the existing regional cooperation mechanisms to forge a consensus on issues such as their respective roles in jointly developing the Guangdong-Hong Kong-Macao Big Bay Area, planning and coordination as well as policy measures.

13 See, for example, “Guangdong, Hong Kong and Macao to develop the Big Bay Area logistics hub”, 4 June 2015, Wen Wei Po, http://paper.wenweipo.com/2015/06/04/CH1506040013.htm; and “Guangdong advocates the establishment of the Guangdong-Hong Kong-Macao Big Bay Area to jointly develop a world-class financial centre”, 28 November 2015, http://news.takungpao.com.hk/hkol/topnews/2015-11/3245762.html.

- 29 - (5) Information and communication platform

56. As stated in the Policy Address, the HKSAR Government will step up research efforts and establish databases for the reference of the business sector. The TDC has already launched a Belt and Road Portal. Quite a number of experts and scholars consider that14 Hong Kong is well-positioned to become an information and communication platform for organisations such as universities, think tanks and enterprise associations in places along the Belt and Road to amass and share research results, help facilitate the provision of various professional training programmes, as well as exchange views on overseas investment environment and risk assessment and on investment cases, etc., with a view to enhancing people-to-people bond. Hong Kong has made some progress in this regard. For example, with a view to sharing further the trade and investment opportunities presented by the Belt and Road Initiative, more than 30 industrial and trade associations and enterprises of the Belt and Road countries set up the Silk Road Chamber of International Commerce in Hong Kong in December 2015 to facilitate the establishment of a business advisory and consultation mechanism and a think tank platform to offer policy advice to governments of various countries15. The Belt and Road Research Institute of Hong Kong was set up in Hong Kong in January 2016. At its initial stage, more than 20 top experts and scholars from various countries and regions joined the Institute as international advisors16. Other Belt and Road think tanks set up in Hong Kong included the Maritime Silk Road Society, which was

14 For example, in the Academia International Conference on “Hong Kong and the World under the Belt and Road Initiative” co-organised by the Hong Kong Institute of Asia-Pacific Studies and the Central Policy Unit, HKSAR Government on 17-18 December 2015, quite a number of local and overseas experts and scholars raised similar views. 15 “Establishment of the Silk Road Chamber of International Commerce Chief Executive: The Belt and Road has the greatest potential”, 11 December 2015, website of Ta Kung Pao, http://news.takungpao.com.hk/hkol/topnews/2015-12/3252258.html. 16 “Establishment of the Belt and Road Research Institute”, 30 January 2016, Wen Wei Po, http://paper.wenweipo.com/2016/01/30/AY1601300001.htm.

- 30 - established in September 2015. Local think tanks like Hong Kong Cultural Development Research Institute also actively participate in research work on the Belt and Road.

(6) International operation centre for the Belt and Road

57. Some experts and scholars are of the view that with its well-developed communications infrastructure, strong international connections, international alignment in terms of language and culture, as well as other supporting professional services, Hong Kong is well- positioned to become an international operation centre for relevant organisations and enterprises of the Belt and Road regions17. The clustering effect brought about by the operation of a critical mass of Belt and Road enterprises in Hong Kong, which can serve as a hub, will reduce transaction costs and enhance efficiency. Representatives of relevant organisations can conduct their business meetings and negotiations in Hong Kong to take full advantage of its ample supporting services. Moreover, a concentration of Belt and Road experts in Hong Kong will enable our city to create a pool of talent in world languages and develop professional language support services, such as multi-lingual translation and interpretation services.

(7) Creative and cultural industry platform for the Belt and Road

58. The crux of people-to-people bond is about people’s mutual understanding and respect of each other’s cultures. The most extensive areas involved in people-to-people bond lie in people’s awareness, understanding and exchanges in respect of history, language, religion and

17 For example, “Opportunities for Hong Kong in the development of the Belt and Road”, 22 August 2015, Economic Times, http://www.scio.gov.cn/ztk/wh/slxy/31215/Document/1445703/1445703.htm.

- 31 - custom18. Being a melting pot of eastern and western cultures, Hong Kong is an ideal platform for cultural exchanges among the Belt and Road countries, and may help lower the risk encountered in the course of development of the Belt and Road due to cultural differences. The Belt and Road Initiative will also bring about historic opportunities for cultural exchanges and cultural industries which, among others, will include enabling the Chinese culture to “go global”. It has been reported that the Ministry of Culture and the Ministry of Finance are formulating the “Silk Road Cultural Industry Strategic Plan”, with a view to nurturing the cultural industry into an economic pillar industry in regions along the Silk Road in China, covering areas such as performing arts and entertainment, arts and crafts, creative design, digital culture, as well as brand exhibitions19. Hong Kong can assist the enterprises concerned to arrange financing and connect local creative and cultural industries (including films, comics and animation, books and magazines, online games, etc.) to the international community. Furthermore, Hong Kong has many outstanding professionals in such fields as performing arts and creation, brand design, marketing and supply chain management, who offer great potential for collaboration with related enterprises in the Mainland and the Belt and Road countries as far as creative and cultural industries are concerned, to jointly open up the vast market of the creative and cultural industries of the Belt and Road.

(8) Platform for Chinese medicine to “go global”

59. Vice Minister of the National Health and Family Planning Commission cum Commissioner of the State Administration of Traditional

18 Hao Shiyuan, “Culture is a vital force for the building of the Belt and Road”, 26 November 2015, People.cn, http://opinion.people.com.cn/n/2015/1126/c1003-27856659.html. 19 “China is expediting the formulation of the ‘Silk Road Cultural Industry Strategic Plan’”, Xinhuannet, 5 September 2014, http://news.xinhuanet.com/fortune/2014-09/05/c_1112375018.htm.

- 32 - Chinese Medicine, Wang Guoqiang, has said, “Hong Kong and Macao should give full play to their roles as a gateway in promoting the development of Chinese medicine when following the Belt and Road strategy so that the four places across the Strait can work together to facilitate Chinese medicine to ‘go global’20.” The General Office of the State Council issued a notice on the issuance of a Chinese medicine health services development plan (2015-2020) on 7 May 2015. According to the plan, Chinese medicine has a part to play in the Belt and Road Initiative. The State Council will select sustainable projects and initiate exchanges and cooperation in the Chinese medicine field with countries along the Silk Road Economic Belt and 21st-Century Maritime Silk Road, with a view to enhancing the international influence of Chinese medicine health services.

60. According to Huang Zhenhui, Director of the China International Exchange Centre of Traditional Chinese Medicine, State Administration of Traditional Chinese Medicine, countries along the Belt and Road have the tradition of using Chinese medicine or traditional medicine, and therefore there is a certain degree of mass support. While there is a wide scope of prospect in launching extensive exchanges and cooperation between China and the Belt and Road countries in the Chinese medicine field, there are also many challenges ahead, which include the lack of uniform international standards and parameters for Chinese medicine/traditional medicine (including the standards of imported Chinese herbal materials, proprietary Chinese medicines and Chinese medicine decoction pieces) in the Belt and Road countries and infringements21. Since the development of Chinese medicine has a long history in Hong Kong, there is a well-defined legal and

20 “Working together to facilitate Chinese medicine to ‘go global’”, 11 April 2015, China Net of Traditional Chinese Medicine, http://www.cntcm.com.cn/2015-04/13/content_2139.htm. 21 “How can Chinese medicine capitalise on the Belt and Road?”, 15 May 2015, Xinhuanet; source: Economic Information Daily http://news.xinhuanet.com/fortune/2015-05/15/c_127803659.htm.

- 33 - institutional basis for Chinese medicine in respect of application, regulation, testing and certification, and intellectual property protection, etc. Enjoying a good international reputation in Chinese medicine and possessing a pool of talent, Hong Kong is an ideal platform for Chinese medicine to “go global”.

(9) Construction of “Aerial Silk Road”

61. There are views that22 Hong Kong should propose the construction of an “Aerial Silk Road” by capitalising on the edge of the Hong Kong International Airport as an important transportation hub in the Asia-Pacific region. Hong Kong should take advantage of the Belt and Road Initiative to proactively build a global hub airport network so as to augment its strengths and reinforce its position as an international aviation hub.

Conclusion

62. This paper cannot be exhaustive as to the rather intense discussions among different sectors of the community on the subject of the Belt and Road Initiative. To sum up, the Belt and Road Initiative will be one of our country’s priority tasks in perhaps the next three decades and beyond. In view of the support expressed in the Proposal for “elevating the positions and functions of Hong Kong and Macao in China’s economic development and opening up to other countries”, Hong Kong’s position and role in our country’s development will be increasingly important.

63. As Hong Kong is a highly international and open city, the HKSAR Government attaches great significance to the Belt and Road Initiative. As far as our social and economic activities are concerned, we

22 “It will be difficult for Hong Kong to get a piece of the pie under the Belt and Road Initiative if it rests on its laurels”, 8 January 2016, Hong Kong Economic Times.

- 34 - have maintained strong external ties. Many of our community bodies or non-government organisations are playing an active role both locally and internationally. These will allow Hong Kong to actively participate in work concerning people-to-people bond under the Belt and Road Initiative.

64. The 2016 Policy Address has provided a general framework for our efforts to support the Belt and Road Initiative, with particular emphasis on leveraging the advantages of both “one country” and “two systems” and facilitating the Belt and Road countries to understand Hong Kong’s vital role in the Initiative. Many details as to how we can support the Initiative have yet to be worked out. In this regard, there is a need for continued input from all sectors of the community as well as their ongoing support and participation.

Advice Sought

65. Members are invited to advise on how Hong Kong may participate in the Belt and Road Initiative by:

(1) deliberating on Hong Kong’s positioning, functions and role in participating in the Belt and Road Initiative as set forth in the Policy Address; and

(2) proposing further measures (including how we can build on existing strengths to give full play to our advantages) and specific actions to support the Belt and Road Initiative.

Secretariat to the Commission on Strategic Development March 2016

- 35 - Annex 1

Implementation Plans of Mainland Provinces, Regions and Municipalities in respect of the Belt and Road Initiative

(Translation)

(1) Positioning

By leveraging on their own comparative advantages, provinces, regions and municipalities have put forward ideas, in a targeted approach, on their positioning in taking forward the Belt and Road Initiative.

Fujian Expediting the development of a core area on the 21st- Century Maritime Silk Road with a view to establishing it as an important connective hub for the Maritime Silk Road, a front-end platform for trade and economic cooperation, a pilot zone for innovative systems and mechanisms, and an important link for cultural exchanges. Guangdong As a leading province in economic development, to perform as the engine in advancing the development of the Belt and Road Initiative, in particular the 21st-Century Maritime Silk Road. Jiangsu, Giving full play to their respective advantages in actively Zhejiang, taking forward the development of the 21st-Century Shandong, Maritime Silk Road. Shanghai, Hainan, etc. Xinjiang Capitalising on its advantages as a core area on the Silk Road Economic Belt to actively promote the development of the New Eurasian Land Bridge as well as the China- Central Asia-West Asia and China-Pakistan Economic Corridors1.

1 Under the “Belt and Road” initiative, the six economic corridors under planning are “China-Mongolia- Russia, New Eurasian Land Bridge, China-Central Asia-West Asia, China-Indochina Peninsula, China- Pakistan and Bangladesh-China-India-Myanmar”.

- 1 - Inner Focusing on the development of the China-Mongolia- Mongolia, Russia Economic Corridor; deepening interactions within Heilongjiang, China and international exchange and cooperation; and Jilin, Liaoning, promoting China’s opening up to the north. Shanxi, etc. Yunnan Capitalising on its geographical advantages linking South and Southeast Asia, to strive to develop itself into a pivot of China’s opening-up to South and Southeast Asia. Guangxi, To actively build a cooperation platform opening to South Guizhou, and Southeast Asia, and spearheading the development of Tibet, etc. the Bangladesh-China-India-Myanmar and China- Indochina Peninsula Economic Corridors. Beijing, To actively take forward the Belt and Road Initiative and Tianjin, Hebei promote organic integration with the Beijing-Tianjin- and provinces Hebei collaborative development and the Yangtze River and Economic Belt development. municipalities along the Yangtze River Economic Belt

(2) Key Missions

By leveraging their own characteristics and coordinating the local resources, provinces, regions and municipalities have put forward plans to shape a construction landscape and set out specifically their key missions, which focus mainly on “policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond”.

Xinjiang Centering on the development of a core area on the Silk Road Economic Belt, to shape a new landscape for opening-up on all fronts to be built upon three major channels of energy, transport and communications; underpinned by the three main bases of large-scale production, processing and reserve of oil and gas, large- scale coal, coal power and coal chemical industries, and large-scale wind power and solar photovoltaic systems;

- 2 - and with the emphasis on the five key pivots of transportation hub, trade and logistics, financial services, culture and science education as well as healthcare service. Shandong Promoting the connectivity of coastal cities and ports as well as developing industrial parks and projects along six major international economic cooperation corridors with the support of the 21st-Century Maritime Silk Road; accelerating the building of a spatial framework - “a route connecting six economic corridors, driven by two core areas, and supported by a multitude of projects”. Hunan Upholding the idea of integrating wider opening-up with regional coordinated development, with a view to providing a spatial framework - “five growth poles including Changsha Municipality + four key regional economic plates including Changsha, Zhuzhou and Xiangtan Municipalities + important trunk routes on a radial pattern” for full alignment with the Belt and Road. Qinghai Connecting “three corridors” (open access leading to Russia-Europe, Central Asia-West Asia and South Asia), building “three nodes” (Xining, Haidong and Ge’ermu) and establishing “six bases” for the export of the equipment manufacturing industry on the pivot of “a link” (serving as a bridge for cultural exchanges).

(3) Major Projects

Infrastructure construction: initial completion of connection corridors in priority areas with substantial progress made for major projects

Fujian Pushing ahead with the construction of the Southeast International Shipping Centre in Xiamen for further improvement of the port facilities. Chongqing, Taking forward the development of rail service between Sichuan, China and Europe in an orderly manner. The first phase of Xinjiang, the development project for the China-Kazakhstan Inner logistics cooperation base in Jiangsu (Lianyungang) has Mongolia, been in stable operation while the works of the second

- 3 - Henan, Hubei, phase are being accelerated. Zhejiang, etc. Jiangsu Expediting the project for developing the Lianyungang Shanghai Cooperation Organisation Logistics Park. Guangdong Launching the Gwadar Port project in Pakistan.

Liaoning Actively offer efficient and convenient sea outlets in collaboration with Inner Mongolia. Sichuan Expediting the development of a national-level international aviation hub in Chengdu in a bid to build an efficient and convenient Asia-Europe aviation and logistics corridor. Henan Endeavouring to strengthen the Zhengzhou comprehensive experimental zone for air-based economy. Shaanxi Making every effort at the provincial level to develop the “Xi’an international transit hub port” and incorporate the “Xi’an Port” into the international trade and transportation system. Guangxi, Taking forward the development of the China-ASEAN Yunnan Information Exchange Centre.

Industrial investments: acceleration of production capacity cooperation and active promotion of the building of cross-border e-commerce infrastructure

Liaoning Promoting with priority the ten core equipment and construction standards, including those for advanced rail transport equipment and new materials manufacturing, to “go global”. Hubei, Gansu, Accelerating the pace to “go global” in respect of the etc. leading enterprises of the industry in the province; actively initiating the international cooperation on production capacity; and setting up overseas production and processing bases.

- 4 - Xinjiang Actively promoting the integration of the cotton textile industry in Tajikistan and the commencement of the photovoltaic project in Pakistan in 2015. Jiangxi Taking forward the cooperation with Italy in manufacturing light and small civil helicopters through industrial innovation and upgrading. Anhui The Conch Group has invested in 11 cement projects in Southeast Asian countries such as Indonesia and Myanmar with the amount of investment exceeding US$4 billion. Beijing Encouraging relevant enterprises to accelerate the launch of overseas projects with substantial investments through such means as new set-up, capital increase, and mergers and acquisitions. Zhejiang Expediting the development of the China (Hangzhou) cross-border e-commerce comprehensive pilot zone and actively promoting the national cross-border e-commerce pilot projects in places such as Ningbo and Jinhua. Guangxi The cross-border e-commerce integrated service platform in Nanning has been completed and put into operation. The China-ASEAN (Nanning) e-commerce warehouse has been largely completed.

Economic and trade cooperation: steady progress made in cross-border economic cooperation zones and accelerated progress in the development of a network of Belt and Road free trade zones

Guangdong, Making use of exhibition platforms such as the Canton Sichuan, Fair, China Hi-tech Fair, Western China International Fair Shaanxi, and China-Mongolia Expo to expand economic and trade Ningxia, cooperation with countries along the Belt and Road. Qinghai, Xinjiang, Inner Mongolia, etc. Fujian Organising the first 21st-Century Maritime Silk Road Expo to realise the full coverage of major countries and regions along the Belt and Road.

- 5 - Yunnan Pushing ahead with the development of Hekou and Mohan cross-border economic cooperation zones and Laos Saysettha Comprehensive Development Zone. Shaanxi Strengthening foreign economic and trade cooperation, and having confirmed the development of the China- Russia Silk Road Hi-Tech Industrial Park in Xixian New Area. Anhui The first comprehensive bonded zone has been officially put into operation. Zhejiang Five economic and trade cooperation parks have been established outside China, and three promotion forums on the Sino-Belarus Industrial Park have been co-organised with the Republic of Belarus. Heilongjiang Motivating relevant Mainland enterprises to establish overseas economic and trade cooperation zones in Russia. Shandong, Jilin Capitalising on the opportunity presented by the signing of the free trade agreement between China and Korea to promote projects such as the establishment of China-Korea industrial cooperation demonstration zone.

Energy resource cooperation: development work under a series of key energy resource cooperation projects launched

Jiangsu Actively taking forward priority energy planning projects such as the Thar Coal Field Industrial Park for the China- Pakistan Economic Corridor. Jilin Carrying out the first phase of construction works for Changjitu Group’s reserve centre for importing strategic energy from Russia. Liaoning Launching overseas resource development projects such as mining, smelting and processing of nickel ore in Indonesia and copper ore in Kazakhstan. Tianjin Actively exploring resource development of the Belt and Road countries in the light of local conditions; pushing ahead with the development of energy and mining projects

- 6 - such as iron ore selection in Mongolia and acquisition of oil and gas in Kazakhstan, and agriculture and forestry biomass resource projects such as agriculture cooperation industrial zones in Indonesia and manufacturing bases in Africa; establishing overseas production bases for bulk commodities; and enhancing the capacity of in situ resource processing and conversion.

Financial cooperation: initial establishment of the investment and financing service systems under the Belt and Road Initiative and acceleration of cross- border use of Renminbi (RMB)

Guangdong Taking forward the development of cross-border RMB trade projects in countries such as the Philippines, Thailand and Indonesia. Jiangsu Pushing ahead with innovative cross-border RMB business in Kunshan Pilot Zone and Suzhou Industrial Park. Shanghai Extending the functions such as quotation, transaction and clearing of the financial market trading system in Shanghai to countries and regions along the Belt and Road. Chongqing Organising a series of overseas investment promotion activities; setting up overseas mergers and acquisitions funds as well as overseas mining rights trading centres; and promoting cross-border investment, financing and exchange facilitation. Jilin Projects of the Northeast Asia regional financial centre have accrued an investment of 21 billion yuan. Heilongjiang Early and pilot implementation of measures such as the use of Ruble banknotes in pilot areas, and the pilot reform for development and opening-up of foreign exchange administration in border areas.

- 7 - Cultural cooperation: further enhancement of exchange platforms and continuous achievements in promoting cooperation and exchanges

Gansu Attracting local and foreign visitors to the “Golden Section” of the Silk Road Economic Belt through exhibition platforms such as the Silk Road (Dunhuang) International Culture Expo. Shandong Expediting the construction of an experience centre at the Confucius Institute Headquarters and pushing ahead with the establishment of Confucius Institutes at the higher education institutions of the countries along the Belt and Road. Fujian Organising the Silk Road International Film Festival and building a Maritime Silk Road Cultural Exchange Exhibition Centre. Hunan Enhancing the development of external cultural intermediaries and overseas marketing channels by taking advantage of such platforms as Hunan Television and China South Publishing and Media Group, as well as the influence of Hunan culture internationally.

Ecological environment: good progress in key regional cooperation in respect of ecology and the gradual emergence of consensus on forging a green Silk Road

Xinjiang Establishing an ecosystem field observation and research network covering Central Asia and working on the implementation of “Joint Investigation and Research on Ecological Environment Protection and Resource Management under Climate Change Scenarios in Central Asia”, a major international technology cooperation programme. Yunnan Promoting wetland protection and capacity building in the Greater Mekong Subregion.

- 8 - Guizhou Eco Forum Global Annual Conference 2015 has been successfully staged in Guiyang, with representatives from over 50 countries engaged in forward-looking and practical discussions on major global and regional ecological issues.

Maritime cooperation: progress made in developing a regime to safeguard ocean-going shipping and continuously expanding collaborative areas for maritime industries

Fujian The China-ASEAN Marine Product Exchange has come into operation; the renovation of the integrated fisheries base in Jinmaan, Indonesia is progressing steadily; and construction of the China-ASEAN Maritime Cooperation Centre has been launched. Guangdong Developing collaborative offshore fishing projects with countries including Malaysia, Thailand and Sri Lanka. Shandong Expediting the development of East Asian platforms for maritime cooperation and pushing ahead with the establishment of overseas integrated fisheries bases in Indonesia, Sri Lanka, etc. Jiangsu Launching the development of collaborative offshore fishing projects with Malaysia.

(4) Formulating Organisation Measures and Mobilising Concerted Efforts

Strengthening policy support

Shanghai, etc. Developing an integrated information and promotion platform as well as an overseas liaison platform to enable enterprises to “go global”. With enhanced services in areas such as provision of information, project management, risk prevention and control as well as language experts, these platforms serve as door openers for enterprises to invest overseas.

- 9 - Jiangxi, etc. Developing targeted implementation plans for enterprises to participate in international collaborations and optimise their foreign investments, and introducing a package of safeguard measures to support their participation in such collaborations. Xinjiang Formulated assessment methods to identify leading enterprises of export bases, and strengthening support for the export of local products. Hubei, etc. Strengthening coordination among government departments in providing one-stop vetting and approval service to enterprises which seek approval, record filing and foreign exchange approval for their overseas investment projects.

Enhancing financial services

Fujian, Jiangsu, Preparing for the establishment of local Belt and Road Jiangxi, etc. funds, Maritime Silk Road industries investment funds as well as industries investment funds for promoting international production capacity cooperation and enabling equipment manufacturing enterprises to “go global”. Guangxi Formulated plans for establishing and operating a local Silk Road fund to provide key international collaborative projects with assistance including subsidies, loans with discounted interest rates and equity investments, giving play to the guiding and leverage effects of financial capital. Some Establishing credit insurance and blanket insurance provinces, platforms for enterprises engaging in international regions and cooperation, and providing premium assistance for municipalities enterprises “going global”. All provinces, Actively encouraging collaboration between the banking regions and and business sectors to provide enterprises “going global” municipalities with financing guarantees.

- 10 - Xinjiang, Engaging financial institutions such as the China Zhejiang, etc. Development Bank and the China Export and Credit Insurance Corporation to jointly organise business matching events, with a view to providing enterprises “going global” with diversified and individualised financial solutions that are tailored to their needs.

Enhancing publicity

All provinces, • Proposing to step up publicity in a multi-channel, regions and multi-pronged and multi-faceted approach for municipalities participation in the development of the Belt and Road, thus creating a favourable atmosphere to encourage enterprises to “go global”. • Strengthening exchanges and communication among Mainland provinces as well as with countries along the Belt and Road, particularly through cultural activities such as forums and academic exchanges, so as to enhance mutual understanding, foster closer cooperation, bring about mutual benefits and achieve a win-win situation.

Source: This paper was compiled on the basis of “Progressing in a Coordinated and Orderly Manner: Initial Achievements of Local Implementation Plans on the Belt and Road Initiative” published on the web page of the Department of Policy Studies of the National Development and Reform Commission on 20 November 2015.

- 11 - Annex 2

Implementation Plan of Guangdong Province for Participation in the Silk Road Economic Belt and 21st-Century Maritime Silk Road

(Translation)

Source: Foreign Investment Management Division

Date of Issue: 31 December 2015

Advancing the development of the Silk Road Economic Belt and 21st-Century Maritime Silk Road (hereinafter referred to as the “Belt and Road”) is a major initiative put forth by the Chinese Government. Guangdong enjoys unique advantages in the Belt and Road Initiative, in particular the 21st-Century Maritime Silk Road. As early as the pre-Qin period, the Lingnan area had already had trade exchanges with countries bordering the South China Sea. As one of the earliest places where the Maritime Silk Road originated, Guangdong is the only province in China that has never stopped its sea trade over the past 2000 years or so. Moreover, it has all along maintained close economic and trade ties with countries along the Maritime Silk Road, playing a significant role in serving as the window for exchanges between Chinese civilisation and world civilisation. Since the reform and opening up of our country, trade between Guangdong and countries and regions along the Maritime Silk Road such as the ASEAN countries, South Asian countries and South Pacific countries has developed by leaps and bounds, and hence Guangdong has gradually become one of the Mainland provinces having the largest scale of economic and trade cooperation with the ASEAN countries, South Asian countries and South Pacific countries. Participating in the Belt and Road Initiative, in particular the 21st-Century Maritime Silk Road, is an important initiative of Guangdong in the new period to fully implement the arrangement mapped out by the Central Government to create new advantages by opening up the country. This plan is drawn up in the light of the national arrangement and the actual situations of Guangdong Province.

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1. Guiding Ideology

It is to establish Guangdong as a strategic hub, an economic and trade cooperation centre and an important engine for exchanges and cooperation with countries along the Belt and Road on the basis of policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond by joining hands with Hong Kong, Macao, Taiwan and neighbouring provinces in promoting cooperation with these countries in a pragmatic manner for the purpose of achieving mutual benefits.

2. Key Missions

(1) Promoting essential infrastructure connectivity. We shall make the best use of the geographical advantages of Guangdong to enhance international cooperation concerning ports, airports, highways, express rail links and information with a view to developing Guangdong into an international maritime hub and international aviation gateway opening to countries along the Belt and Road, and constructing an integrated transport corridor which provides efficient and convenient air, sea and land transport connections both internally and externally. We shall enhance the development of our ports such as Guangzhou port, Shenzhen port, Zhuhai port, Zhanjiang port and Shantou port. Integrating the demand for economic, trade and port cooperation among the Belt and Road countries, we shall organise port city development cooperation forums in collaboration with major Mainland port cities and the port cities of countries along the Belt and Road to establish a mechanism for port and logistics cooperation along the Belt and Road. We shall actively participate in the development of port industrial parks in the Belt and Road countries. We shall foster in-depth cooperation with Hong Kong and Macao to jointly develop the world-class Guangdong-Hong Kong-Macao Big Bay Area. We shall increase the number of international air routes and flights from Guangzhou and Shenzhen to Southeast Asian countries to open up air service to major cities of the Belt and Road countries. We shall construct the Shilong and Datian international railway freight logistics centres in Dongguan and Guangzhou respectively to provide unimpeded land routes connecting the

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Belt and Road countries. We shall strengthen cooperation with the Belt and Road countries in the development of information technology infrastructure.

(2) Strengthening foreign trade cooperation. We shall further reinforce the good foundation for economic and trade cooperation with the Belt and Road countries, and establish a number of imported commodity trading centres serving not only Guangdong Province but also the whole nation so as to expand the scope of import of distinctive products from the Belt and Road countries. We shall set up exhibition and sales centres in the Belt and Road countries for promoting distinctive commodities such as building materials and hotel supplies from Guangdong. We shall set up economic and trade representative offices, establish trade associations and organise trade fairs in the Belt and Road countries. We shall enhance communication and cooperation with our business associations, trade associations, and economic and trade representative offices in these countries. We shall organise the 21st-Century Maritime Silk Road International Forum cum International Expo and make use of platforms such as the Canton Fair and China Hi-Tech Fair to promote economic and trade cooperation. We shall establish the China (Guangdong) Pilot Free Trade Zone to promote trade cooperation with the Belt and Road countries.

(3) Accelerating investment cooperation. We shall support enterprises to invest in the Belt and Road countries with a view to initiating in-depth cooperation in areas such as modern agriculture, advanced manufacturing industry, modern service industry and multinational operations. We shall endeavour to guide enterprises which are going global to take forward the localisation strategy, observe local laws and regulations, respect local customs and sentiments, and enhance their awareness of corporate social responsibility in such areas as environmental protection and charity, in a bid to create more local employment opportunities and promote economic development in the countries and regions concerned, thereby achieving mutual benefits.

(4) Spearheading cooperation in the marine field. We shall actively promote cooperation with the Belt and Road countries in areas such as

- 3 - marine fishery, prevention and mitigation of disasters, and ecological conservation; organise fishery technology exchanges and training; and put in place cooperation mechanisms for prevention and control of marine pollution. We shall encourage Guangdong enterprises to go to the Belt and Road countries and initiate cooperation in areas such as marine cage culture, land-based fish farming and production of improved breeding stocks. We shall launch collaborative studies on the protection of marine ecosystem near the coastal areas.

(5) Promoting cooperation in the field of energy. We shall make use of our capital and technology advantages to support joint electric power and solar photovoltaic projects; work together with the Belt and Road countries in areas of energy trade, resources development, and energy saving and environmental protection. We shall strengthen cooperation with the Belt and Road countries in respect of climate change.

(6) Expanding cooperation on the financial front. We shall encourage competent financial institutions qualified as corporations in Guangdong to “go global” to make investments in the Belt and Road countries and attract financial institutions from these countries to set up branches in Guangdong, with a view to supporting the establishment of liaison and coordination mechanisms to facilitate business collaboration between the financial institutions of both sides. We shall support Guangdong enterprises which make investments in the Belt and Road countries to collaborate with local financial institutions for joint development. We shall set up the Guangdong Silk Road Fund to support projects under the Belt and Road Initiative.

(7) Deepening tourism cooperation. We shall actively seek to conclude overall agreements such as framework agreements on tourism cooperation and memorandums for tourism cooperation with the Belt and Road countries so as to deepen international cooperation in respect of tourism industry planning and opening up of resources, sectoral regulation, public services, etc. We shall promote Guangdong sightseeing tours to the Belt and Road countries and support Guangdong enterprises to initiate cooperation with the Belt and Road countries on

- 4 - tourism investment to develop hotels, tourist attractions and tourism infrastructure. We shall cooperate with Chinese trade associations and large travel enterprises in the Belt and Road countries to set up overseas tourism cooperation and promotion centres for Guangdong in these countries. We shall develop international cruise homeports in Guangzhou and Shenzhen, and kick-start the development of cruise tourism in municipalities such as Zhuhai, Shantou and Zhanjiang. We shall work out a host of cross-border Silk Road themed tours.

(8) Fostering close cultural exchanges and cooperation. We shall strengthen exchanges and cooperation with the Belt and Road countries in areas including culture, technology, education, healthcare and sports with a view to enhancing understanding and friendship, thereby establishing a social foundation with mutual trust, integration, inclusiveness and openness. We shall work with the Belt and Road countries to excavate and protect historical and cultural heritage of the Maritime Silk Road. We shall actively promote education cooperation and academic and research exchanges as well as support young people to participate in exchange activities. We shall facilitate cooperation in areas including sharing of information on public health, establishment of an early warning system, prevention and treatment of infectious diseases, and response to unexpected disasters. We shall promote visits between government sports departments and community sports organisations/associations, and organise sports exchange activities.

(9) Enhancing the exchange mechanism for foreign affairs. We shall strengthen cooperation with sister cities; enhance the exchange and cooperation mechanism between Guangdong and the Belt and Road countries; strengthen non-governmental exchanges with the Belt and Road countries; and establish a multi-tier communication and consultation mechanism. We shall strengthen communication and liaison with the Belt and Road countries and coordinate and promote cooperation for mutual benefits through consulates general of these countries in Guangzhou. We shall establish a mechanism for exchange and liaison with counterparts of the Belt and Road countries; facilitate the exchange of economic information; actively organise business and trade cooperation activities; and carry out charitable work in areas including

- 5 - education and healthcare, poverty alleviation, and ecology and environmental protection.

3. Safeguard Mechanism

We shall set up a leading group to take forward the work of Guangdong Province in the Belt and Road Initiative. The group will be chaired by a principal official of the provincial government, and an office is to be established under the leading group in the Development and Reform Commission of Guangdong Province. Relevant departments of Guangdong Province will be encouraged to establish mechanisms for liaison with their counterparts in the Belt and Road countries to initiate information exchange and organise joint activities. We shall actively conduct basic research and explore innovative institutional mechanisms. We shall step up our publicity efforts, deploy innovative publicity measures, and actively advocate the concept of mutual benefits, with a view to fostering a consensus on cooperation.

Source: Website of the Development and Reform Commission of Guangdong Province, http://gdzbtb.gov.cn/zwgk/zcfg/gfxwj/201512/t20151231_34410 7.html

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III. Belt and Road Initiative 38. At the end of March 2015, our country issued a document entitled “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”, outlining the development ideas and blueprint of the Belt and Road Initiative. The proposed “five areas of connectivity” – policy co- ordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond – will foster the concurrent development of the Belt and Road countries and strengthen co-operation on the political, economic and cultural fronts. 39. As a highly open economy with extensive and strong external connections, Hong Kong uniquely demonstrates the characteristics of “two systems” among our country’s many cities. The HKSAR Government will play an active role to facilitate the implementation of the Belt and Road Initiative. 40. Hong Kong has strong complementarity with the Belt and Road countries, and great potential to create synergy with them. Our most internationally competitive pillar industries, namely financial services, trade and logistics, high-end services and tourism, and even our emerging industries, can all complement the national strategies to “go global” and “attract foreign i nve st ment ”. 41. Apart from the priority industries which belong to tertiary production, Hong Kong enterprises also own or administer many primary and secondary business operations in areas such as agriculture, forestry, fishing, mining, as well as light and heavy industries in the Mainland and overseas. With solid experience and enormous capabilities, including quality management teams, these enterprises are ready to engage in joint ventures with countries along the routes.

12 Platform for Capital Formation and Financing 42. Hong Kong can provide various countries with the capital required for infrastructure construction. We have a diversity of financing channels in place, including equity listing, syndicated loans, private equity funds, ordinary bonds, dim sum bonds and Islamic bonds (sukuk). 43. On infrastructure investment and financing, the Asian Infrastructure Investment Bank (AIIB) is an integral part of the Belt and Road Initiative. In addition to its initial capital, the AIIB will need to obtain project financing such as loan syndication or bond issuance. Hong Kong is actively participating in the preparatory work for establishing the AIIB. We have indicated to the Central Government our intention to join the AIIB, and provide mediation and arbitration services in Hong Kong. 44. Stronger economic and trade ties between the Mainland and the Belt and Road countries will render the RMB more widely accepted. Given the enormous demand for RMB- denominated trade and investment, the Belt and Road regions will be in need of a full-fledged international centre for offshore RMB business to cater for their RMB settlement, financing and fund management needs. Blessed with well-developed RMB payment and settlement infrastructure, Hong Kong has been providing reliable and efficient services for various RMB inflow and outflow transactions in the Mainland and offshore markets. Moreover, Hong Kong’s vibrant offshore RMB foreign exchange market offers an array of financial products. It serves as an ideal platform for RMB capital and risk management for Mainland and international enterprises and financial institutions. 45. To complement the Belt and Road Initiative, Hong Kong will continue to promote the offshore RMB business. We will further upgrade and bring into full play our functions and services as a global hub for offshore RMB business. For example, we will strengthen market infrastructure and financial platforms, enhance RMB business links with countries along the routes, and promote RMB business between Hong Kong banks and

13 international financial institutions and enterprises. We will step up efforts to stage roadshows abroad to encourage overseas financial institutions and enterprises to conduct transactions on our RMB financial platform. 46. As a centre for international asset management, risk management and multinational corporate treasury services, Hong Kong is well-positioned to capture the wealth of the Belt and Road and meet the demand for risk management services. The implementation of the Mainland-Hong Kong Mutual Recognition of Funds in July 2015 has further promoted the mutual access of the Hong Kong and the Mainland capital markets, enabling both places to enhance competitiveness and influence in the international asset management arena. Hong Kong boasts a number of large-scale major insurance companies and international reinsurance companies, talented professional teams, well-developed laws and regulations, as well as rich experience and knowledge of insuring major infrastructure (e.g. airports and express rail links). We can therefore provide professional insurance and reinsurance services for major Belt and Road infrastructure. Furthermore, as more and more Mainland enterprises seek to “go global” under the Belt and Road Initiative, Hong Kong will continue to encourage Mainland enterprises to establish captive insurance companies in Hong Kong, make insurance arrangements and enhance risk management for their overseas businesses expanded under the Belt and Road Initiative. 47. Driven by the Belt and Road Initiative, Mainland enterprises will expand their overseas business, and there will be a greater demand for business services to lower corporate financial costs and enhance treasury risk management. Hong Kong is an ideal location to set up corporate treasury centres. To further attract multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong, the Government proposes, under specified conditions, interest deductions under profits tax for corporate treasury centres, and profits tax reduction by half for specified treasury activities. For this purpose, a bill was tabled in this Council last month.

14 48. We also strive to set up a platform conducive to the development of Islamic finance. Our efforts include enhancing the related market infrastructure, providing manpower training, and promoting the development of Islamic financial products and co-operation with other Islamic financial markets.

Trade and Logistics Platform 49. Hong Kong has developed an extensive network of business connections, and is the most important Meetings, Incentive Travels, Conventions and Exhibitions (MICE) centre, sourcing centre and business matching centre in Asia. As such, Hong Kong may help governments and enterprises identify business partners, and serve as a major platform to promote trade and logistics under the Belt and Road Initiative. 50. The Belt and Road Initiative will expedite co-operation in the fields of highways, railways and maritime transport, and build a secure and efficient economic and logistics corridor connecting core cities and ports along the Belt and Road. At the same time, it attaches importance to infrastructure standards and safety to meet the requirements for sustainability and environmental protection. Hong Kong may provide support services such as project feasibility studies and risk assessment, research and development, financing and management. 51. Of the 60 or so Belt and Road countries, Hong Kong has signed Air Services Agreements or international Air Services Transit Agreements with 40 countries. The Government will continue such efforts and seek to discuss Air Services Agreements with other aviation partners along the routes. This will reinforce Hong Kong’s position as an international aviation hub.

Trading Environment 52. At the government-to-government level, Hong Kong will, by fully leveraging our advantages under “one country, two systems” and a high degree of autonomy, strengthen economic

15 and trade ties with our major trading partners along the Belt and Road, promote visits by senior officials and conclude Free Trade Agreements (FTAs) as well as Investment Promotion and Protection Agreements with these countries. 53. In 2014, half of Hong Kong’s 20 major trading partners were Asian countries and regions, of which five are members of the Association of Southeast Asian Nations (ASEAN). Among the countries along the routes, Hong Kong has established an ETO in Singapore. The three Hong Kong ETOs in Europe, on the other hand, are responsible for liaison with 32 European countries. The Government has decided to set up ETOs in countries along the routes. A new ETO will be set up in Indonesia this year and another in Korea as soon as possible. 54. Our negotiations with the 10 member states of ASEAN on an FTA are progressing smoothly and the FTA is expected to be concluded this year. The Government seeks to protect the investments of Hong Kong businessmen in ASEAN countries through the FTA. Other key issues include reduction of tariffs and liberalisation of trade in services. Moreover, we will continue to explore the possibility of joining the FTAs signed, or to be signed, by our country with its trading partners, including the Belt and Road countries. 55. In addition, Hong Kong will expand its networks of investment protection agreements, comprehensive avoidance of double taxation agreements and agreements on double taxation relief arrangements for shipping income, with a view to protecting and facilitating business co-operation between Hong Kong and the Belt and Road countries. For this purpose, we will seek to negotiate as soon as possible with those countries which have yet to sign these agreements. 56. The Government will step up research efforts and establish databases for the reference of the business sector. The Trade Development Council (TDC) launched a Belt and Road Portal last month, and the Government is also considering building a platform for Hong Kong’s construction-related

16 professional sector to participate in the infrastructure projects relating to the Belt and Road.

Platform for Professional and Infrastructure Services 57. There is a strong demand from regions along the Belt and Road for professional and infrastructure services. Hong Kong enjoys advantages in various areas including accounting, legal, investment environment and risk assessment, environmental consulting, construction and project management. Among these, Hong Kong meets advanced international standards in the operation and management of infrastructure, such as railways, airport, port, electricity supply and gas supply. Local professions also have experience in exporting such services. We may provide consultancy services for regions along the Belt and Road and participate in the operation and management of their projects. Hong Kong enterprises may, having regard to their own strengths, make sole or joint investment in suitable projects, or participate in the construction of industrial parks. 58. Moreover, Hong Kong has a sound legal system and adopts the common law regime which is very familiar to the international business community. In establishing economic and trade ties with the Belt and Road countries and helping competitive enterprises “go global”, we may provide professional international legal and dispute resolution services for our country, and assist in developing a sound risk management system for overseas business. 59. Our professional services can fully demonstrate their strengths during the implementation of the Belt and Road Initiative. The Government will allocate $200 million to support the professional services sector in enhancing exchanges and co- operation with the Belt and Road countries and other regions outside Hong Kong (including Mainland China), and promote related publicity activities.

17 Strengthening People-to-people Bond 60. Among the “five areas of connectivity”, the HKSAR Government will first of all initiate work to foster “people-to- people bond” with the Belt and Road countries. We will join quasi-governmental organisations and various community bodies in Hong Kong to connect with the people of these places. As a highly international city with the widespread use of English, Hong Kong can provide a platform for educational, cultural and youth exchanges. 61. Hong Kong is home to world-class universities which use English as the medium of instruction. This has attracted students from all around the world. Currently, many students from the Belt and Road countries study in Hong Kong. Since the 2012/13 academic year, the Government has offered dedicated scholarships in the nine government-funded institutions. The scope of scholarships will be expanded to cover the whole Belt and Road region. The Government will promote Hong Kong’s tertiary education in the Belt and Road countries to recruit students for undergraduate courses in Hong Kong. This will encourage the interaction of Hong Kong people with those of the Belt and Road countries. 62. To attract more students from the Belt and Road countries to study in Hong Kong, the Government will increase the number of offers under the Targeted Scholarship Scheme, currently 10 per year, by about 100 in phases, and inject $1 billion into the scholarship fund for this purpose. The Government will also encourage schools to include content about the Belt and Road countries in relevant subjects and student activities. At the same time, a priority theme will be introduced under the Quality Education Fund to encourage students to learn more about the Belt and Road Initiative and have more exchanges with the relevant regions, during which they may introduce the contributions that Hong Kong can make. 63. On the cultural front, Hong Kong offers the freedom and an environment conducive to artistic creation and cultural diversity. Coupled with our efficient immigration control

18 policies, we can attract artists, art groups and cultural organisations from all over the world to perform, exhibit works or participate in seminars and forums in Hong Kong. Over the past years, Hong Kong has had cultural exchanges at different levels with some Belt and Road countries. Hence, we can play an active role in cultural exchanges under the Belt and Road Initiative. 64. On youth, various exchange programmes under the Home Affairs Bureau, such as the International Youth Exchange Programme and the Summer Exchange Programme organised in collaboration with the Commission on Youth, provide opportunities for two-way exchanges between young people from Hong Kong and other places. These programmes enable young people to broaden their horizons, enrich their life experience and learn how to think from multiple perspectives. To tie in with the Belt and Road Initiative, the Government will explore the feasibility of expanding these programmes to cover more Belt and Road countries. 65. Many community organisations in Hong Kong, such as trade associations, youth bodies, social organisations and non- governmental organisations (NGOs) are energetic and flexible in their operation. They organise many high-quality activities every year, and will be able to align with the Belt and Road Initiative by establishing and enhancing their connection and co-operation with counterparts in the Belt and Road countries.

Belt and Road Office 66. The HKSAR Government will set up a steering committee for the Belt and Road. I will chair the committee, which will be responsible for formulating strategies and policies for Hong Kong’s participation in the Belt and Road Initiative. A Belt and Road Office will also be established to take forward related studies, and co-ordinate work between government departments and other organisations, such as the TDC and the HKTB. It will also liaise with the central ministries, provincial and municipal authorities, as well as various sectors, professional bodies and community organisations in Hong Kong.

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