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Impact of 11th Five-Year Plan on Hong Kong Companies

The 11th Five-Year Plan adopted on 11 October 2005 will be submitted to the National People's Congress to be held next March for approval. The proposal put forward six priorities: bringing about a change in the mode of economic growth; readjusting and optimising the industrial structure; addressing the three agricultural issues; promoting the sound development of urbanisation; bringing about coordinated regional development; and intensifying the building of a harmonious society.

It is understood that the 11th Five-Year Plan is very different from previous five-year plans and marks an important phase of transformation in the Chinese economy. In the process of transformation, domestic and foreign enterprises will find opportunities as well as challenges. As economic ties between Hong Kong and the mainland become increasing close, the 11th Five-Year Plan is expected to have far-reaching impacts on Hong Kong's economy and enterprises. The plan covers a wide range of issues. The following are issues with a close bearing on Hong Kong:

1. Change in Mode of Economic Growth

The Chinese economy has seen rapid growth for more than 20 years, but it has also paid a heavy price. The main manifestations are serious environmental pollution and heavy consumption of resources. The impact of economic growth on the environment has wasted 7% of the GDP generated, and the amount of resources consumed per unit GDP in China is higher than the world average. Environmental pollution and shortage of resources have become serious problems holding back China's sustainable development.

The plan clearly points out that it is imperative to change the mode of economic growth, make resource conservation a basic national policy, build a resource-efficient and environmentally friendly society, promote economic development in harmony with population, resources and the environment, and achieve sustainable development. In this connection, the government is bound to introduce new industry standards; impose stricter environmental and energy consumption standards; develop and promote energy-saving, substitution and recycling technologies; and implement a system for the mandatory elimination of high-consumption, high-pollution and technologically backward techniques and products.

Hong Kong is the largest source of foreign investment in the mainland. Investment mainly goes to the real estate, garment, toy, electronic, watch and clock and other manufacturing sectors. During the 11th Five-Year Plan period, Hong Kong enterprises should avoid investing in high-pollution and high-consumption projects while companies with investment in this type of projects should undergo transformation or make use of new technologies to lower energy consumption and reduce pollution. Compared with their mainland counterparts, Hong Kong companies have a head start in green production techniques. Enterprises with a good grasp of advanced environmental protection, energy conservation and recycling technologies should be able to find great opportunities on the mainland.

2. Optimisation of Industrial Structure

The plan points out that developing advanced manufacturing industries, raising the proportion of service industries and strengthening the building of basic industries are important tasks for industrial restructuring. It is imperative to draw up and perfect policies and measures for promoting the development of service industries; vigorously develop such modern service sectors as finance, insurance, logistics, information and legal services; develop industries with strong potential demand such as culture, tourism and community services; transform and upgrade traditional service industries through the application of modern management methods and information technology; and raise the proportion and standard of service industries. It is also necessary to promote trade in services, continue to open up service markets and take over relocated international modern service industries in an orderly manner.

The plan can be seen as good news for Hong Kong's service industries. Logistics, real estate, legal service and banking are strong and well-developed sectors in Hong Kong. The signing of CEPA has lowered the threshold for 18 service sectors, giving Hong Kong's service industries an?advantage over their foreign counterparts. The rapid growth of the service sectors in the mainland during the 11th Five-Year Plan is bound to bring infinite opportunities to Hong Kong service providers.

3. Promotion of Healthy Development of Urbanisation

The proposal pointed out that the Pearl River Delta, Yangtze River Delta and Bohai Rim area should continue to perform their functions in stimulating the economic development of their hinterlands. It is also necessary to continue to bring into play the roles of special economic zones and the Shanghai Pudong New Area, and promote the development and opening up of the Tianjin Binhai New Area and other regions with fairly good conditions in order to fuel regional economic development.

4. Maintenance of Long-Term Prosperity and Stability in Hong Kong and Macau

According to the proposal, it is necessary to strengthen and promote exchanges and cooperation with Hong Kong and Macau in trade and economy, science, education, culture, health, sports and other fields; continue to implement CEPA agreements with Hong Kong and Macau; and strengthen cooperation with Hong Kong and Macau in infrastructure construction, industrial development, resource utilisation and environmental protection. Hong Kong should be supported in its efforts to develop such service industries as finance, shipping, tourism and information in order to maintain its status as an international financial, trade and shipping centre.

As an important window and bridge for the mainland, Hong Kong has made important contributions to China's economic and social development over the years. Hong Kong enterprises have also been able to find tremendous room for development in the process. The mainland has become Hong Kong's largest trading partner while Hong Kong is the biggest investor on the mainland. Hong Kong's role as a bridge has diminished following the opening of the mainland in recent years. However, Hong Kong remains an international financial, trading and shipping centre and its advantages in the service sectors remain strong. The central authorities also hope to further strengthen cooperation and exchanges with Hong Kong and achieve complementarity and common prosperity during the 11th Five-Year Plan period.

Content provided by Hong Kong Trade Development Council
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