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Maritime Silk Road: Hong Kong's Role in China-ASEAN Relation Development


Author: Joseph Wingwah Chan

PhD. History of Modern China, CCNU 
M.Sc. Information System, HKPolyU
B.Soc.Sc. Government & Public Admin., CUHK


The Increasing Significance of the "Belt and Road" to China 


"Belt and Road" is the short form referring to the Economic Belt along the Silk Road overland and the Maritime Silk Road of the 21st Century.  It is a transnational economic cooperation program proposed by President of China Xi Jinping during his visit to Kazakhstan and Indonesia in 2013. Premier Li Keqiang called for accelerating "Belt and Road" construction in his government work report in 2015.   Since then, the "B&R" has become China's important policy in the new Century for both her internal and external national development. Its directive is that China will proactively develope its economic partnership with countries along the "Belt and Road". Through industry cooperation program, factories and production chains would be installed in the countries concerned producing economic benefits shared between China and her counter-parts. Mutual investment and bilateral trade would increase to support the cooperation program of the manufacturing and building of infrastructures which at the same time stimulate further economic growth. To be exact, China has planned to work together with countries along the "Belt and Road" to generate mutual economic benefits to start with, then the development of a community of common interests and shared responsibilities, and ultimately a joint destiny of prosperity and peace along the modern silk roads. In December 2015 at Beijing, China grouped 56 countries to establish the Asian Infrastructure Investment Bank (AIIB) which was designed to finance the infrastructure projects under the "B&R" initiatives.   "Belt and Road" is now generally recognized as a global international project and the major engine of the global economic growth in the 21th Century.

In 2017, two years after the "Belt and Road" Initiative was launched, Chinese scholars added two important points to the significance of "B&R" to China. First of all, "Belt and Road" would not only bring about China the room of economic expansion, but also an opportunity of China to upgrade her economy. Since 2013, China has sought to upgrade her economy and industry levels, shift from a large number of low-end factories to a diversified medium and high-tech manufacturing and accelerate the expansion of financial, trading and logistics services. Also industry diversification would improve China's natural environment by avoiding pollution caused by the low-end industrial productions. In the meantime, in the process of industrial upgrading, China could move the excessive production capacity, capital and mature technologies out from the domestic market and re-invest them in foreign trade and overseas projects. Foreign trade and overseas investment would help promoting the use of RMB internationally or earning more foreign exchange. In addition, the gap between the rich and the poor provinces of China would be shortened. The "B&R" projects would bring about regional economic development in the west and southwest provinces of China. By the "B&R" programs, Chinese scholars believe China could overcome the "Middle Income Trap" which is commonly encountered by Less Developed Countries. If China could overcome this "Trap", she would leave the low-grade manufacturing and the category of "Less Developed Country". She would be moving towards the high-end productions and lastly ranked as a "High-Income Country".

Along with the establishment of economic, social, cultural and government relations between China and the "Belt and Road" countries, continued success of the program would greatly enhance China's international status and influence in the world. This "globalization" program surely has alerted United States on the expansion of the rising China. Geographically, the Silk Road overland is divided into three routes running across the Euro Asia Continent, covering most of the Asian and European nations. On the other hand, the "Maritime Silk Road" starts from the China coastal ports,passes through the South China Sea and leaves for Indian Ocean . At the Java Sea, it is divided into two sub-routes getting into the Indian Ocean and South Pacific Ocean respectively, covering the countries along the coast of South Asia, Arabia, Northeast Africa and Islands of the South Pacific. Clearly, the footprint of the "Belt and Road" covering such big part of the world alerted US that "B&R" was China's globalisation strategy. Political commentators in US and Japan warned that the purpose of the "Belt and Road" was to challenge the world leadership of the United States.  The situation, as exemplified in the famous "Thucydides Trap" in political science, refers to the inevitable challenge posed by a newly emerging power to the international political order that the existing power is bound to respond to.   Since the collapse of the Soviet Union in 1991, the United States has become the only superpower in the world.  In 2011 she detected and realized the modern China had become a new threat to her world leadership. In November, President Obama quickly announced his "Asia-Pacific Re-balancing Strategy" to contain China going global.   To contain China, the United States could do very little overland. She turned to contain China at sea, and in particular, to re-build the Pacific Island Chain of the Cold War time. In January 2017, Donald Trump took office as the 45th President of United States. He changed the main theme of the US foreign policy in past 60 years that US had been providing free global public services (such as the World Police in upholding Freedom and Democracy). Instead, he is advocating the "America First" and the "Trade Protectionism" which means US Foreign Policy is now straightly working for her national interest but not any other. Two months after Donald Trump moved into the White House, United States withdrew from the Trans-Pacific Partnership and the Paris Climate Accord.   All these actions aimed at cutting down the US overseas expenses on those work which were no longer directly related to the US national interest. However, by all means US has emphasized she is still the dominant political and military force in the world and must not be challenged. In October 2017, United States dispatched three carrier battle groups gathering in the Western Pacific and Eastern Indian Ocean to demonstrate Trump's new strategy of "Indo-Pacific" in replacement of Obama's "Asia-Pacific". Once again, United States has no hesitation to curtail the naval expansion of China in Asia-Pacific and Indian Ocean.

To conclude, "the Belt and Road" has become more than just an economic policy of China in the 21st Century. It has extended into the important sphere of international politics and national security of China. Coincidentally, President Trump's "America First" strategy gave China a good time to promote the "B&R" as the world's public service that many nations are looking for. It is believed that the success of "B&R" would bring about significant changes in China, Asia or even the global development which has been dominated by Western countries over the past 200 years. The new global development model would be based on the belief of "Common Prosperity and Shared Responsibility". It would be driven by the integration of East and West cultures where the two superpowers US and China are going to take the lead, particularly in innovation and technology development.


The Super-Middleman Vacancy in "One Belt, One Road" 


"Belt and Road" for sure will play a major role in China's national development in the 21st Century. All government organizations, private enterprises in China are looking for their opportunities and planning all kinds of activities externally and internally aimed at promoting the "Belt and Road". For example, the western provinces are working with Central Asia's countries on projects of energy transportation, mineral development and high speed railway construction. At the same time, increasing volume of goods of China and Europe are traded and transported via this new economic belt. Yunnan, Guangxi and Sichuan on the southwestern border are seeking economic co-operations with countries in Indochina mainly in the agricultural food trade, water conservancy, hydro-electric power, and constructions of waterway, highway and railway. Provinces in Central and Northeastern China are major in manufacturing while the coastal cities are active in foreign trade exporting China products and importing goods from overseas.  Under the "Belt & Road" initiative traders, manufacturers or investors of China all have to go overseas.  No matter state-owned or private enterprises, they are encouraged to go abroad to find business opportunities or build social and cultural bonds. However, they will certainly encounter much higher risk in foreign countries than they are at home. These risks will vary from political, business, financial to terrorism. Even they would have prepared for the worst they still would have made a lot of mistakes, including miscommunication, misjudgment and misinterpretation of foreign culture and customs. Also they will be strongly contested and challenged by local powerful groups and other foreign competitors. The situation must be much complicated than in China. Therefore, China needs a reliable and highly capable "Super-Middleman" to work hand in hand with the Chinese enterprises in the foreign markets and build reliable bridges between China companies and the overseas parties. In this way, China would be able to maximize economic benefits, reduce losses, shorten the time to market, build friendship and cut down cases of dispute.

However, few cities in China are qualified to be the "Super-Middleman". It is because China cities were once in a closed or semi-closed state for a long time. Few of them have extensive experience in international business. It was only after Deng Xiaoping's confirmation of "China's Open-Up Policy" in 1992, the western countries relieved their sanctions against China and China took strong initiative to implement the "Open-Up and Bring-In" policy. The interactions and movements of people, money and goods between China and rest of the world have greatly increased since then. The domestic market barely counted as open not until China joined the World Trade Organization in 2001. Even today in China, there are still many restrictions in various social, cultural and economic sectors such as religion, media, telecommunications, finance and real estate. It is not possible for China to quickly open a city as a vanguard for the "Going-Out" policy and train her up as the "Super-Middleman" to carry out the duties effectively in the "Belt and Road". Also the cities that could be opened up surely are major cities in China. Choosing any one of them for taking up the post of "Super-Middleman" would likely trigger confusion in China's political and economic systems.


Hong Kong's Advantage as a Super-Middleman for the "B&R"


Hong Kong returned to China as a "Special Administrative Region" in 1997.  She is just at the right time for the post of "Super-Middleman" in the "Belt and Road". In many ways she has a very unique position in China. With a small area of about 2,800 square kilometers, Hong Kong is geographically located at the coast of Guangdong, the most prosperous province of China. She was a free port under the British administration for 155 years from 1842 to 1997. Even after the return to China in1997, Hong Kong has remained as a free port. As of today, she has had a total of 175 years of foreign exposure. Another city Macao returned to China in 1999 after 442 years of the Portuguese administration from 1557. Although Macau has a much longer history of foreign rule, she is too small and far from metropolitan, international trade, prominent financial and logistics services centre compared with Hong Kong. Under the political structure of "One Country, Two Systems" and because of her right size and flexibility, Hong Kong could adopt to economic and social changes much faster and better than any China city. She has a high degree of autonomy to formulate her own government policy for the "Belt and Road" initiative, including tasks designed for her own development and/or helping China enterprises to achieve results. As long as HK Government is maintaining a good communication with the Central Government and working under the national planning and co-ordination of the State Council, it would be feasible for Hong Kong to make her own decision at her own risk to take part actively in the "B&R". This is a golden opportunity of Hong Kong whom was given the advantage of "One Country, Two Systems" and allowed to play the role of "Super-Middleman" in the "Belt and Road".

In 2016, Chairman of the National People's Congress Zhang Dejiang visited Hong Kong to attend the "Belt and Road Summit Forum." In the Forum, he stated clearly that in addition to the "One Country, Two Systems," HK should use the other four unique advantages in the "B&R" :(1) the geographical advantage; (2) the long history of open cooperation with foreign countries; (3) the high degree of professionalism in service industry; and (4) the heritage of the East and West cultures and traditions. Chairman Zhang also emphasized the Central Government would play an active role to support Hong Kong in four areas under the "B&R" initiative : provision of the integrated service platform for international traders, corporate finance and capital funding , international cultural exchanges, and cooperation with the Mainland in opening up business opportunities".   In other occasion, the HK Chief Executive C Y Leung pointed out:  "In the past hundred years Hong Kong was used to play the role of trade-connector and now should actively promote the "Belt and Road " by virtue of her own advantages of being super-connector".   However, after making a detailed analysis based on Chairman Zhang's comments, the role of Hong Kong should not only be a super-connector but intermediary trader.  The difference between connector and intermediary trader lies in the degree of engagement. In business deals, connector is more likely to a broker connecting parties of the business deal without involving in the business transaction thereafter. So a trade connector holds much less risk, less engagement and less initiative. While an intermediary trader is highly involved through-out the business process because he is also a stake holder sharing the profit and loss of the business transactions. However, by nature most intermediary traders would never be the major shareholders due to their business positions in the value chain or their comparatively weak financial status. Over the past 20 years, China and her enterprises had made tremendous progress. Today, it is very difficult for Hong Kong companies to make a share in China trade by simply playing the role of connector. In the highly competitive environment of the "Belt and Road", all parties must maintain good values in the value chain in order to join the business process and share the fruit of success.

In fact, Hong Kong has many advantages over the Mainland cities in playing the role of "Super-Middleman" in the "Belt & Road". Below is the elaboration on Chairman Zhang's comment. The first advantage is Hong Kong's geographic location. The 21st Century "Maritime Silk Road" starts from the coastal ports in southeastern China, passes through the South China Sea, gets into the Indian Ocean and the South Pacific. China would like to develop economic cooperation with countries along this sea route. Hong Kong is a deep-water port at the coast of the South China Sea and is not far away from Southeast Asian countries by air or by sea. In the last 100 years (1917 - 2017), Hong Kong and Southeast Asian countries had very frequent contacts, both commercial and non-commercial. The second advantage is HK has been a free port for many years no matter under the UK or PRC authority. Hong Kong people are used to free market and have a rich experience in open and competitive environment.  Also she has strong professional teams in financing, international trade and multi-cultural management. If Hong Kong enterprises could join force with the China partners who are especially good at high-tech engineering and innovative manufacturing, the chance of success in bidding the "B&R" projects would certainly be better than each of them go individually. This is specially the case after HK has been included in the national development plan of the Pearl River Delta since 2017. Thirdly, Hong Kong businessmen have long-term personal and business networks with ASEAN and Western European countries. Before the handover in 1997, Hong Kong was a member of the British Commonwealth. Many countries along the Maritime Silk Road are also members of British Commonwealth. These countries include Singapore, Malaysia, Brunei, Myanmar, Bangladesh, India, Sri Lanka, Maldives, Mauritius, Pakistan, South Africa, Australia, New Zealand and several island nations in the South Pacific. In addition there are many English-speaking countries on "Maritime Silk Road", such as Philippines, Indonesia and Arabian countries. These countries were once strongly influenced by American culture, education and so on. Therefore, Hong Kong has a great advantage in the use of English and knowledge of Western cultures in the "Maritime Silk Road". Fourthly, due to a number of historical reasons Hong Kong has become a city of Returned Overseas Chinese. It is estimated that about 300,000 Returned Overseas Chinese from different nations had settled down in Hong Kong in the 1980s.  Needless to say, the Returned Overseas Chinese is closely linked to the Chinese in overseas. This unique kinship would give Hong Kong a good position to build a platform for business cooperation between the China enterprises and the Chinese groups of different nations. Similar things could happen if the group of 95,000 South Asian residents in Hong Kong    would have linked up with India, Pakistan and Sri Lanka for the "Maritime Silk Road" initiatives. Fifthly Hong Kong has a good commercial brand in global trade. Hong Kong has long been exposed to both Chinese and English cultures. Like the British, Hong Kongers are serious in making legal contracts in business deals. At the same time, they are practicing the Chinese traditional teaching of "Work Hard and Be in Harmony". As a result, "Made in Hong Kong" represents quality product as well as good pre-sale and post-sales services. In fact, the "Name of Hong Kong" has already been a premium brand in the Southeast Asian market. The sixth advantage is Hong Kong enjoys a very high degree of social and economic freedom. Various kinds of freedom are firmly up-hold in the city such as freedom of speech and information dissemination, freedom of people movement, freedom of association, and freedom of capital flow. Also advanced telecommunications and well-developed media networks enable huge volume of information quickly disseminated to many places all over the world in the manner of 24 × 7.  Coupled with the high-tech banking and financial networks, it makes Hong Kong the best information and financial centre in Asia. All above six characteristics make Hong Kong an important metropolitan city and the best candidate for the "B&R Super-Middleman".


Review of Hong Kong's Participation in the "Belt and Road"

Although Hong Kong has advantages in the "Belt and Road" program, not many of her activities or achievements related to "B&R" had been seen in the past two years.   In March 2015, when the Central Government's work report announced the "Belt and Road" strategy, Hong Kong responded promptly. Pro-government political figures and businessmen all spoke for the "Belt and Road" that it was a good opportunity of Hong Kong. A government delegation headed by Chief Executive C Y Leung set off quickly to Jakarta of Indonesia to open a trade office there. Upon return to HK, he introduced some simple programs in the Government to promote the "Belt and Road". Regina Yip, a senior LegCo and ExCo (Parliament in HK) Member together with a big group of local and China cultural and social leaders established the "Maritime Silk Road Association". In the commercial sector, Bank of China (HK) organized the first seminar on "Belt and Road" for top business executives. HK Trade Development Council launched the "One Belt, One Road - HK" website. And the Chinese Manufacturers' Association organized a business tour for her members to Central Asia. Apart from these activities of the top-level political and business organizations, most sectors including business companies, professional organizations, media, religious and cultural groups, education institutions and non-government organizations were not keen on discussing or implementing the "Belt and Road".

There were many reasons for the upcoming of this bi-polar social phenomenon. Firstly, there has been quite a serious "anti-China" sentiment in Hong Kong since 2003 when the SARS disease broken out in the city. This anti-government sentiment was accumulated and then accelerated from March 2012 when the hard-line candidate CY Leung won the Chief Executive election. Young people and frustrated citizens were provoked and misled by political groups to put their blames on Beijing Central Government, HK Government and people from the Mainland. Subsequently, the largest social unrest in HK history was broken out in 2015 to 2016, known as the "Occupy the Central Movement" and the "Mong Kok Riot". Since then, Hong Kong has entered into a stage of political turbulence and the Government has been dragged into trouble in policy formulation and implementation. For example, in Legislative Council the Government applied funding for "Belt and Road" projects, it was turned down by the opposition party. The proposed projects were criticized as it was a kind of "shoe shining for the Central Government". Such accusation further stirred up the anti-China sentiment and ill-feeling to the "B&R" initiative. The second obstacle in the implementation of the "Belt and Road" initiative was that many elites in Hong Kong were quite short-sighted and focused themselves on short-term commercial benefits. They were not interested in supporting infrastructure projects of "B&R" due to long pay-back period and they made no effort in non-profit making cultural exchanges. In education institutions and research centers, seldom students and professors studied developing countries such as ASEAN. Most of them had strong favoritism on Western, Japanese studies, and recently China development.

The turning point came in June 2017 when President Xi Jinping visited Hong Kong for the 20th anniversary of the HK Special Administrative Region (HKSAR). The day before his visit, the Chinese Ministry of Commerce and the HK Government signed the "CEPA Investment Agreement" and the "CEPA Economic and Technical Cooperation Agreement". These agreements are aiming at promotion of the cooperation between the Mainland and Hong Kong under the "B&R" initiative on the financial and non-service sectors.  On 1 July, President Xi Jinping delivered an important speech at the 20th anniversary party of Hong Kong SAR.  He addressed the problem of implementation of "One Country, Two Systems" and pointed out four important issues that Hong Kong must handle properly. Two of them were also related to "B&R".  Firstly, any thing endangered national security must be strictly forbidden and it includes but not limited to any activity aiming at "overthrow PRC" or "promoting Hong Kong independence". These activities for sure will undermine the "One Country, Two Systems ", divide Hong Kong people and cut down the prestige of the HK Government. At the same time these activities are detrimental to the implementation of the "One Belt and One Road." Secondly, President Xi warned and urged Hong Kong to gripe the opportunity to join the China team in the development of "Belt and Road" before it was too late.  What President Xi tried to do was to remove the two major obstacles that stopped Hong Kong as the "Super-Middleman in B&R". On the same day, the government representatives of Guangdong, Hong Kong and Macao and the Chinese National Development and Reform Commission jointly signed "Co-operation Agreement on the Greater Bay Area Construction Framework ". The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) refers to the urban agglomeration formed by Hong Kong, Macao plus nine China cities at the Pearl River Delta: Guangzhou, Foshan, Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan and Jiangmen. According to the framework agreement, the cooperation focuses mainly on seven aspects: (1) promote interconnection of infrastructure; (2) up-grade the level of market integration; (3) build an international center of science and technology innovation; (4) develop a synergistic system of modern industries; (5) construct a circle of quality living, business and entertainment; (6) foster new advantages in international cooperation; and (7) support the construction of major cooperation platforms. Overall the agreement is aiming at promoting regional cooperation among the cities in the Greater Bay Area and working as a team externally to support the "Belt and Road".  HK Chief Executive Carrie Lam pointed out at the signing ceremony that Hong Kong would provide financial, shipping and trade services to Guangdong, Hong Kong, Macau and "Greater Bay Area" in accordance with the 13th Five-Year National Plan.  Obviously, the Central Government understands the strength and weakness of each city in the "GBA" and has positioned Hong Kong as the "Super-Middleman" of the Global Supply Chain. The cooperation framework is that China's high-tech manufacturing is at the upstream of the Global Supply Chain, whereas the overseas markets, partners, customers and consumers are at the downstream. And HK performs as the intermediary trader to help distribution of the goods and capability of the upstream manufacturers to the overseas markets at the downstream.

Closely followed President Xi's visit to Hong Kong, the new HK Chief Executive Carrie Lam took consecutive trips to four main China cities (Beijing, Shanghai, Tianjin and Shenzhen), three ASEAN countries (Singapore, Thailand, Myanmar) and UK (the best trading partner of HK in Europe) within 3 months with the purpose of promoting Hong Kong's rapid deployment on the "Belt and Road". During her visit to Beijing, she discussed with the Director of China National Development and Reform Commission He Lifeng on Hong Kong's participation in "Belt and Road" and signed the cooperation agreement between the Mainland and Hong Kong. She also held meeting with the President of Asian Infrastructure Investment Bank Jin Liqun to understand how Hong Kong could make contribution to the "AIIB" projects and benefit from them. Upon return from Beijing, she attended the 2nd "One Belt and Road Summit" organized by the Hong Kong Government on September 11.  In the Summit, She declared Hong Kong had just reached an agreement with the Central Government which would give Hong Kong a full play as an important hub in the "Belt and Road".  BBC of UK made comments on the series of activities conducted by Carrie Lam, "The initiative to participate in the "Belt and Road" has just become one of the flagship economic policies of the new Chief Executive of HKSAR."   At the same time, important changes took place in the organizational structure of the HK Government in order to effectively implement Government's new policy on "B&R". On 2 August, the Secretary for Commerce and Economic Development and the Secretary for Constitutional and Mainland Affairs held a joint press conference. The two Secretaries clarified that the C & E Development Bureau would take care the policy of the "Belt and Road" , while the Constitutional Affairs Bureau would be responsible for the development of the Greater Bay Area. There will be various contacts in the future work of the two Bureaus and their common ground will be the development of both "B&R" and GBA. The existing advisory board under the Trade and Industry Department will be expanded to form a new advisory platform to cope with the "B&R" and GBA Initiatives. The "B&R" Unit originally under the Office of Chief Executive will be integrated with the C & E Development Bureau to become a formal administrative unit.

Regarding the cooperation between the Government and the private sector, Secretary for Commerce and Economic Development Edward Yau disclosed his plan to set up the HK Chamber of Commerce for the "Belt and Road". He also vowed to work closely with business sector in provision of various kinds of financial support and professional services, such as capital funding, syndicated loans, venture capital, patents and intellectual property protection, legal advisory and acounting.    Positive response was soon received from the business community. At the "2nd One Belt and One Road Summit" of Sep 2017 which was jointly organized by the HK Government and the Trade Development Council, participants clearly showed their strong support to the "Belt and Road".   Within three months after the Summit, there were a total of 11 forums and seminars on the "Belt and Road" organized by different business and academic institutions.   On 20 September, The Hong Kong Polytechnic University established her "One Belt One Road" Research Center   disregarding the anti-China sentiment in the tertiary education sector. Obviously, the community of Hong Kong rapidly and actively responded to the appeal of President Xi.  However, this consensus actually did not come simply because of President Xi' appeal. In the past two years, the rise of China to be the world power was clearly shown. Moreover, it seems US has been trapped in political troubles internally since Donald Trump was elected as the new President in last December. There have been changes in the power politics between US and China, particularly in Asia Pacific. As an international metropolitan, Hong Kong was fully informed on these world changes and the significance of "B&R" to China and Hong Kong has been gradually realized.

It is encouraging to see the positive response of the Hong Kong community and the Government to the "B&R" initiative. However, Hong Kong should make the following immediate adjustments in her policy in order to gripe the opportunity more effectively. First of all, Hong Kong should set her priority of work on "Maritime Silk Road" rather than any project of "Belt and Road". The advantages of Hong Kong in "Maritime Silk Road" are obvious as listed in Section 3.  Secondly, Hong Kong's cooperation with the Mainland should not restrict to the cities in the Greater Bay Area. Many economic analysts in Hong Kong overlooked the possible contribution of the 300,000 Returned Overseas Chinese in Hong Kong to the "Belt & Road". These Chinese groups are more than happy to act as intermediaries among Hong Kong, the cities of Returned Overseas Chinese in China and the Chinese residents in Southeast Asia. For example, the Returned Indonesian Chinese in Hong Kong could act as intermediaries between the Chinese Indonesian of Indonesia and the people in Fujian, Guangdong and Hakka cities. This is a population advantage of Hong Kong in promoting the "Maritime Silk Road".  On the other hand, the co-operation between Hong Kong and the cities in the "GBA" is driven by the synergy of manufacturing operations. So both of them are strong applications of Hong Kong's advantages in "B&R", and they should go hand in hand and be complementary to each other. The third technical adjustment is investment in tertiary education and human resources development. The establishment of the "Belt and Road" Research Center of the HK Polytechnic University is a correct move. It is the obligation of all government financed universities to support the Government, business entities and the community as a whole in implementing the "Belt and Road" Initiative. There is a huge volume of research work needed to be done to support all levels of the Government and the society in different areas of socio-political, economic, business and cultural aspects in meeting challenges of the "Belt and Road". These challenges not only come from the Hong Kong's internal complications but also co-operations with the Central Government, the China enterprises and overseas partners. Other "teaching oriented" universities and vocational training colleges should also speed up the training of professionals in international trade, accounting, legal services and translation. Fast growing demand of high-level manpower by the "B&R" is surely coming. Hong Kong's higher education institutions must be mobilized to take part in the "B&R", given that in China many universities and colleges have already been greatly involved.

Cooperation between China and ASEAN in "Maritime Silk Road"

To be a good intermediary in the "Belt and Road", it is necessary for Hong Kong to understand the importance of those countries along the "Belt and Road" from China's perspective and their current relations with China. President Xi Jinping raised the idea of "21st Century Maritime Silk Road" during his State-Visit to Indonesia in 2013. In recent years, Indonesia has been regarded as the leading nation of ASEAN, with the Secretariat of the Association located in Jakarta. The visit of President Xi and his talk on the "B&R" in Jakarta certainly had showed the importance of ASEAN and Indonesia in the "Belt and Road".

In fact, the cooperation between China and ASEAN on "Maritime Silk Road" is mutually beneficial and in the Chinese terms it is "a win-win relation". Firstly, Southeast Asia is geographically located at the sea passage between South China Sea and the Indian Ocean. It is the first stop of the ancient and modern "Maritime Silk Road" and a transit point to India Sub-Continent, the Middle East, Africa and Europe. Back to the Tang Dynasty of China 2000 years ago, some Chinese merchants arrived in Nanyang (name of Southeast Asia in ancient China) for trade. In the 19th Century, many parts of Southeast Asia were colonized by Western countries. After World War II, Southeast Asia countries gained their independence one after another and ultimately a total of 10 countries were established. In 1967, five countries namely Philippines, Indonesia, Malaysia, Thailand and Singapore formed the Association of Southeast Asian Countries (ASEAN). Later Brunei, Vietnam, Lao, Myanmar and Cambodia joined the ASEAN. As mentioned earlier, many countries in the "Maritime Silk Road" are either British Commonwealth members or English-speaking countries. It means English is the official language or the language of major media in these countries. Every day, information of ASEAN countries is transmitted in English to many parts of the world including countries along the Maritime Silk Road. If the "One Belt and One Road" cooperation with ASEAN succeed, it would widely spread to other countries along the Maritime Silk Road. The ancient "Maritime Silk Road" would have been re-born in the 21st Century and bring about great benefits to China and ASEAN. Moreover, some ASEAN countries are located at the "Belt of Silk Road", which means the ASEAN would enjoy benefits from both the "Belt" and "Road" programs.

Secondly, ASEAN herself is very fertile for agriculture and rich in marine food. It is one of the world's famous farmland and fishery resources. However, due to lack of modern management, capital investment, advanced production technology and skilled labor, ASEAN is classified as economically backward. The total area of 10 countries is about 4.5 million square kilometers, with an estimated population of 640 million in 2016. GDP of the region in 2016 was about US$ 2.58 trillion. However, their stages of economic development vary greatly. The richest two, Singapore and Brunei have been classified as Developed Countries with GDP per capita of $ 53,224 and $ 27,759. The other eight are Developing Countries. The poorest two are Cambodia and Myanmar with per capita GDP of only US $ 1,140 and US $ 1,269 respectively.  Based on the stage of economic development, the World Bank divides countries into three levels. The first level is the economically developed nations or called High Income Countries; the second is the Middle-Income Countries; and the third is the Low-Income Countries which are also called Developing countries. The BRICS (Brazil, Russia, India, China and South Africa) had achieved quick economic growth in the recent 10 years and were considered as the top few in the second level. Among the BRICS, China has the best economic development after much improvement in infrastructure. China is further seeking for economic transformation into high-end production and striking to get into the High-Income category.  So China and ASEAN have a strong complementary relation economically.  The Asian Financial Crisis in 1997 severely hit many countries in Southeast Asia. With the financial assistance from China, their economic situations were finally stabilized in 2004. After 10 years of recovery, their economic objectives have turned to land development, infrastructure construction, re-build of manufacturing capability and development of more effective and efficient fishing, agricultural and food industries. The road-map they want to take is similar to the one that China has just completed. As China endeavors to upgrade her industry, she is willing to export the mature technology and equipment to ASEAN at a friendly price to help them re-establish and improve the manufacturing plants. Therefore, it is mutually beneficial and complementary between China and ASEAN in the process of economic restructuring. China would also like to share her valuable experience in infrastructure construction. In the last two years, Indonesia and Thailand signed agreements with China in building the speed train systems in their countries.   It is expected that China will deliver the System as scheduled. After the transnational advanced transport systems (China-Malaysia, China-Thailand, and China- Vietnam) between China and ASEAN have been built, there would be great increase in trade and cultural exchanges under the principle of comparative advantages. In 2010, China and ASEAN established the free trade zone and since then the bilateral trade has risen sharply between the two sides. ASEAN surpassed Japan to become China's third largest trading partner in 2013  while China has continued to be ASEAN's first largest trading country since 2009.

Thirdly, the friendly relations between China and ASEAN countries are extremely important to geopolitics of China and Southeast Asia. The successful implementation of "Belt and Road" in ASEAN would bring about a long-term and stable political mutual trust between China and ASEAN. Except for Vietnam, China had quite a long peaceful relation with Southeast Asia (Nanyang) in the old days and they were close trading neighbors. In 18th Century, Western powers invaded Asia and they turned Southeast Asia into their colonies. Despite of the colonial administrations, the relation between the people in the two places remained peaceful and trading was still very active. However, after the World War II, came the Cold War between the Soviet Union and United States.  In the context of the Cold War, ASEAN Countries and China were under two opposite camps, the Capitalist States and the Communist nations. The famous "Domino Theory" was used to describe the possible expansion of communism swept through the Indochina if not immediately blocked. During the Cold War, Southeast Asian countries were hostile to China and there were quite a number of severe anti-Chinese campaigns in the region. By the late 1970s, the open split of the Communist Camp was clearly shown by two wars at the China-Soviet and China-Vietnam borders. In view of the military expansion of the Soviet Union and Vietnam in the Southeast Asia, United States and China joined hands against the Soviet Union. The Soviet Union expansion in Asia was curtailed and later the Communist Camp in Europe including Soviet Union collapsed.  As a result of the collapse of Soviet Union in1991, United States and her European Alliance were working hard to re-shape the Europe political structure and expand the European Union by in-take of the ex-Soviet members. At the same time in Asia, the rise of China took place after 20 years of "The Reform and Open-up" Policy, which was later interpreted by US as the increasing competition and threat. In 2011, the United States announced her "Asia-Pacific Rebalancing Strategy" which meant US would re-deploy strong political and military forces to balance the increasing influence of China in Asia Pacific. Confrontation between China and United States in getting the control of South China Sea brought about "The South China Sea Dispute" in 2017, when both USA and China hold massive naval exercises. United States and Japan have been trying hard to line up the ASEAN countries with them in confronting China. Furthermore, the DPP government in Taiwan has also promoted the "South Bound Policy" in an attempt to expand trade and compete with the Mainland China in the Southeast Asia market. Under this geopolitical environment, " Maritime Silk Road" is important to China and ASEAN in building the political mutual trust and economic ties as it was in the old days. 


Hong Kong - The "Super Middleman" in the China-ASEAN Relation


In order to catch up the speed train of the "Belt and Road", Hong Kong should give priority to the ASEAN countries of the "Maritime Silk Road" and spend little on others. This conclusion is simply drawn from the analysis on the advantages of Hong Kong and the characteristics of China-ASEAN relations. The key to the success of "Maritime Silk Road"  lies in the implementation of the "Five Linkages ( 五通 Wu Tong) " : 政策沟通 (Policy Coordination)、设施联通 (Facilities Connectivity)、贸易畅通 (Unimpeded Trade)、资金融通 (Financial Integration)、民心相通 (People-to-People Bond).

It is clear that Hong Kong could only be an assistant in the first two Linkages - "Policy Coordination" and "Facilities Connectivity ".  "Policy Coordination" normally takes place at the national government level, not at local government. Hong Kong is a special administrative region and which constitutional status is in-between a national government and a local authority. So she could position herself well in the Central Government's plan for ASEAN. Hong Kong has participated in 18 international organizations under the name of "Hong Kong, China" and has independent membership and voting right in international organizations such as WTO (World Trade Organization), APEC (Asia Pacific Economic and Trade Meeting), WCO (World Customs Organization) and so on. ln appropiate  occasions, Hong Kong could have some sayings in the Policy Coordination. For example, Hong Kong Government and the 10 ASEAN countries signed a "Free Trade Agreement and Investment Agreement" in Manila last year. ASEAN will reduce tariffs on imported goods from Hong Kong by 2018 and relax restrictions on investment and immigration requirement so as to lower the investment threshold for Hong Kong residents to engage in local businesses. Cambodia, Indonesia and Malaysia have pledged to reduce their tariffs (jewelry, watches, clothes, toys) by about 65% -85% in 10 years. Hong Kong companies' capital share caps have risen to 50% and some are wholly-owned.

 "Facilities Connectivity" means connecting infrastructures of different countries along the "Belt and Road" and using common standards for their public utilities if possible. This would maximize the mutual economic benefits of all parties concerned. It covers areas of public utilities, energy supply, telecommunication, highway, high-speed railway, airport, sea-port, large urban work and etc. So they are big projects involving heavy capital investment and affecting very much the livelihood of the local people. In such cases they carry major political considerations in Southeast Asian countries and are not easy to be opened to foreign investors. Since infrastructure investments are highly political, Hong Kong could do very little on this directly. However, she could provide a wide range of professional services to assist China's enterprises in bidding these projects. And around those infrastructure projects of railway, airport, sea-port, there are urban works such as hotel, shopping mall, warehouse residential estate, entertainment facilities and etc. which Hong Kong is good at. On the other hand, China's enterprises are leading in production chains, such as industrial parks, large farms, fisheries, wholesale markets, medium-sized ship building, and renewable energy. In view of this situation, Hong Kong and the Chinese enterprises could invest jointly to maximize their business opportunities and minimize the risks.

Regarding the other two Linkages - "Financial Integration" and "Unimpeded Trade", Hong Kong do have good advantages. Firstly, implementation of "Maritime Silk Road" is expected to bring about many financing projects. Hong Kong is a successful international financial center with various kinds of financing platforms. She could serve as a major center issuing bonds for Southeast Asia projects, allowing more Sino-ASEAN joint ventures to be stock-listed in the Hong Kong Stock Exchange Market, and raising capital from international banks and funds. Inter-connect of Shenzhen-Shanghai-Hong Kong Stock Exchange Markets would further increase size of financing and leverages financial advantages to meet different needs of multinational projects. Related financial activities could also strengthen the use of RMB for international trade settlement, payment and other hard currency functions. The internationalization of the RMB would further consolidate Hong Kong's position as the off-shore RMB Center. Working closely with "Financial Integration" is the "Unimpeded Trade".  Hong Kong has been a well-known trading center. Currently there are about 150,000 import and export trading companies in Hong Kong who have been long time responsible for moving goods and products between China and overseas markets. She is now the world's fifth busiest container port and the world's third largest airports by international passenger traffic. The land transport system will soon greatly improve after the Hong Kong-Zhuhai-Macao Bridge and the HK Speed Train Station would have been completed by the end of this year. They will effectively and efficiently connect Hong Kong by land to many cities in China, particularly those in the southwestern part of China which are next to the ASEAN Countries in Indochina. Besides, Hong Kong also has a large number of professionals in finance, accounting and legal, providing quality services in project management, legal arbitration, international investment and commodity market intermediaries. These important commercial services could effectively help Chinese enterprises to successfully develop markets in Southeast Asia. Hong Kong Government should also provide tax concessions, up-grade the living environment and improve the international education facilities in order to attract expatriates working in the city. This could encourage ASEAN and China enterprises to set up their headquarters of "Maritime Silk Road" in Hong Kong and turn Hong Kong virtually the Capital of "Maritime Silk Road."

The last Linkage is the "People-to-People Bond". It includes activities of the cultural exchanges, education, personnel training, tourist, religious exchanges, technology exchanges and etc. Their purposes are to establish mutual understandings, joint development and friendship between China and  the trading countries. This "Linkage" is a unique characteristics of ancient China's foreign trade. Hong Kong is an international city with inter-culture of East and West. She has been used to promote People-to-People Bond with her trading partners for many years. In addition, Hong Kong's population has a special structure regarding to this "Linkage". Among the 7.3 million people, there are about 300,000 Returned Overseas Chinese and 95,000 South Asian descendent settled have down and integrated with the Hong Kong community. Besides, there are 320,000 Indonesian, Filipino and Thai domestic helpers working for and living with the Chinese families. All of these minority groups could play a significant role in promoting the "People-to-People Bond". It is estimated among the 300,000 Returned Overseas Chinese in Hong Kong, 200,000 were from Indonesia and the rest from Thailand, Myanmar and Malaysia. Most of the Returned Overseas Chinese were born in Nanyang ( Southeast Asia) countries and were once lived there for about 20 years when they learned the local languages, cultures and social manners of Nanyang. Now they still have friends and relatives in Southeast Asia. On the other hand, they once went back to China in the 1950s and 1960s and spent about another 20 years there. With relations at both ends, they could be good intermediaries to open-up communication, invite cooperation, create markets for SMEs and provide marketing services to either end. These intermediaries may not work for large-scale industries but could help to create a positive atmosphere of cooperation. With mutual economic benefits as the main axis, companies from HK, China, ASEAN and the Overseas Chinese Group could be brought together to become a community of promoters and builders of the "Maritime Silk Road". This would surely add momentum to the the Three-Party economic cooperation and cultural exchanges between ASEAN, China and Hong Kong.




The "Belt and Road" is a great strategy of China in the 21st Century. Its success would not only affect China, but also bring about a significant global economic growth, and perhaps a new world order. To speed up the promotion and implementation of the "Belt and Road", the Central Government, local governments, private enterprises and non-government organizations of China have all joined hands in internal and external programs. They all have set their own positions and discharged their corresponding duties proactively. Before President Xi Jinping's visit in July 2017, it seemed Hong Kong knew too little about the significance of the great strategy and hence poorly performed on "B&R". In view of President Xi's appeal in Hong Kong and the recent changes of the power politics between US and China, Hong Kong started to understand the importance of the "Belt and Road" to China and Hong Kong. In the light of the overall situation, China needs Hong Kong to play the role of intermediary who is responsible to build business ventures, establish social connections and provide professional services in the execution of "B&R".  And Hong Kong has the most flexibility and good external experience to be the "Supper-Middleman in the Belt and Road."  It seemed understanding has been reached between the Central Government and Hong Kong that Hong Kong would play the role of "super intermediary" in the China team. With her unique characteristics, Hong Kong could start her role in a more easy and effective way. The most important of all, Hong Kong should focus on the "Maritime Silk Road" and start with ASEAN countries because of her relation advantage in this zone. After some success in the ASEAN, she should go along this sea route from Strait of Malacca to India Sub-continent, the Middle East and East Africa seaports, and /or diversified into the South Pacific. It is expected that under the guidance of the Central Government, Hong Kong would work closely with cities of Greater Bay Area and the Returned Overseas Chinese provinces in China (Qiaoxiang) smoothly. The success of the "Belt and Road" would bring about the great national rejuvenation of China in the 21st Century.  And it is a golden opportunity of Hong Kong that she is not affordable to miss!