bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Jake Van Der Kamp

'Unlike domestic manufacturing products, which usually use raw materials, the income earned by our professionals who provide services for companies elsewhere is a 100 per cent net gain for Hong Kong.'

Leung Chun-ying

Exco convenor

WELL, YES AND NO, but in Mr Leung's context of Hong Kong professionals setting up shop in the mainland, probably no.

Mr Leung's complaint is that our government does too little to help our professionals take advantage of the services concessions available to them in the mainland under the Closer Economic Partnership Arrangement.

He says there are still big obstacles because of frequent changes to requirements and because different professions must deal with different ministries. He wants government to do more to ease the way.

He also estimates that 10 per cent of Hong Kong's 60,000 qualified professionals work in the mainland at some stage and bring HK$6 billion income a year to Hong Kong.

Let's get the numbers straight first. Government statistics show 240,000 professionals and 680,000 assistant professionals employed in Hong Kong, a good deal more than Mr Leung's estimate.

The figures also classify 220,000 of Hong Kong's population as mobile residents, Hong Kong permanent ID card holders who spend less than half their time here. Some of them are students and retired people but most are people who work in the mainland.

Thus, we probably have more than Mr Leung's estimate of 6,000 Hong Kong professionals working in the mainland at some stage.

But   do they bring us HK$6 billion in net gain every year?

Let us take his example of domestic export manufacturers first. It is true that their contribution to the economy is not the total value of domestic exports but the net value.

We first have to deduct what they required in raw material and component imports to make their exported goods and this figure is undoubtedly substantial.

Still, the resultant net export figure  is  a solid contribution to the economy,  in terms of income to the company and employment created in Hong Kong.

Much the same is true of our service industries. Again we have to deduct imports of services from exports of services to get a figure for net contribution to the economy.

In the case of services, however, there is not as clear a link between imports and exports as there is in manufactured goods. The reason for this is that these service exports mostly do not require service imports.

Our tourism industry, for instance, does not rely on Hong Kong residents touring abroad (service import) in order to attract tourists to Hong Kong (service export).

Thus, if our service exports are not quite Mr Leung's '100 per cent net gain for Hong Kong', they are probably not far off that figure and they are certainly huge, running at HK$535 billion a year at present, or 36 per cent of gross domestic product.

But the point is that we are talking here, in both goods and service industries, of exports generated here by people who work here and are paid here in Hong Kong dollars.

Now put one of our lawyers in an office in Shanghai instead of Hong Kong. He will employ Shanghai staff and pay them in yuan from income generated from Shanghai clients billed in yuan, or perhaps US dollars, but certainly not Hong Kong dollars. How much of this can be treated as Hong Kong income?

You may say the profits will be repatriated to Hong Kong and they may. Then again they may not.

But what we have here is purely a foreign investment by a Hong Kong entity. We do not have people employed in Hong Kong, we do not have office space occupied in Hong Kong and we do not have office supplies and services provided by Hong Kong companies. In short, our economy does not get much.

And what we do get is mostly what we do not need.

We get foreign-earned income of which we already  have such a surfeit that we shovel it all back out again as more foreign investment. It may be nice to get but it doesn't create jobs here, nor office demand, nor support industries.

In short, there is a big distinction to be made between investment in service industries in Hong Kong  that serve the mainland from Hong Kong, and investment in service industries in the mainland that serve the mainland from the mainland.

Cepa concessions still mean something in goods exports because they allow us to sell more Hong Kong-made goods to the mainland.

But the service concessions are different. They deal more with investing in the mainland than selling to the mainland and thus give the Hong Kong economy much less direct benefit.

What it means for the Cepa service concessions that Mr Leung wants our government to promote harder is that you can take two zeroes off his '100 per cent net gain' and try once more.

A figure of 1 per cent could be closer to the truth.



Cepa service concessions not so beneficial as some may believe