Building the Momentum: Relaunching the China-Mexico Relationship

Speaker: Mr. Thomas Wong

Cónsul General Alicia, Héctor, German, amigos mios, gracias por la organización del seminario de hoy. Es un gran placer para mi estar aquí hablando con todos ustedes. Distinguished Guests, Ladies and Gentlemen, good afternoon.

I am most delighted and honored to be here. I would like to thank my very good friends, Consul General Alicia and Consul Hector, for giving us a unique insight into the booming relationship between Mexico, China and Hong Kong and the main sectors for business opportunities. I am also grateful to the Consulate General of Mexico, ProMexico and MexCham for inviting me to share a bit about how Hong Kong can play a role in fostering the friendship and cooperation between China and Mexico. The Hong Kong General Chamber of Commerce has provided us enormous support in organizing this event and I am especially thankful to Shirley Yuen, the CEO of the Chamber.

Open economy, easy access to the Latin American markets, tax incentives and high labor productivity are just some of the lucrative opportunities Mexico offers to Chinese investors. Thanks to the sound institutional framework and stable economic foundations built up by generations of Mexicans over centuries, they were able to survive the storm – the financial crisis. The Mexican economy has shown strong signs of recovery and growth. The Mexican Government has worked very hard to upgrade the infrastructure, modernize the tax system and reform the labor laws. It is high time Chinese businessmen, like me, start looking into the Mexican market again.

Mexican President Peña Nieto characterized the budding relationship as an ‘integral strategic relationship’ that would strengthen the mutual commercial relationship. A snapshot of the statistics of bilateral trade would amaze us. The annual growth of Mexico’s exports to China was nearly 40% in the past five years, which were mainly driven by mineral ores, vehicles, electronic equipments, copper and fuels. Anyway, China is now Mexico’s second largest trading partner. More importantly for us, Mexico’s exports to Hong Kong are on the rise, at an annual rate of about 20%, in the few recent years.

Hong Kong is now playing an important role in facilitating the mutual friendship between Mexico and China. I would like to share my thoughts based on the traditional Chinese wisdom: being opportune with favorable factors – right time, right place and right people (天時地利人和) (siendo oportuno).

Why would I say it is the right time for the Chinese and Mexicans to explore each other’s markets? Earlier this month, our Chinese President, Xi Jinping, visited Mexico City, meeting with the Mexican President, Enrique Pena Nieto, where agreements to develop ties were signed. The joint declaration and agreements cover cooperation in energy, new-industry trade, infrastructure construction, mining, trade, education, banking and entrepreneurial exchanges. According to the agreements, the Mexican Secretary of the Economy will form a special China unit to facilitate bilateral commercial cooperation. Mexico will host the 9th China, Latin America and the Caribbean Business Summit in 2015. A working team between Mexico and China is going to be established to develop a new-industry trade cooperation, unleashing new opportunities in certain underexplored industry sectors. Mexican pork will be allowed to enter China’s gigantic market of more than 1 billion consumers and the Tequila Pact gives the Chinese access to one of Mexico’s most emblematic distilled beverages.

When talking about the China-Mexico relationship, Hong Kong cannot be ignored.  I am sure we all remember the historical moment when the Mexican President Enrique Pena Nieto visited Hong Kong for two days in April in the first leg of his Asian tour. He held a meeting with the Chief Executive, CY Leung, and met with local business leaders and investors. Do you know who was the one working behind this historic visit? It is Consul General Alicia, who had been working tirelessly (day and night for at least a month) making this to happen. She is an Ambassador truly to preach not the doctrines of ignoble ease but the doctrine of the strenuous life, the life of toil and effort for her country, Mexico.

One year ago, Hong Kong and Mexico signed an agreement for the avoidance of double taxation and the prevention of income tax evasion. Tax paid in Hong Kong will be allowed as credit against tax payable in Mexico. Profits from international shipping transport earned by Hong Kong residents that arise in Mexico will no longer be taxed in Mexico under the agreement. The deal will definitely strengthen the investment, traffic and talent flows between Hong Kong and Mexico. A similar tax treaty was signed even earlier in 2005 between Mexico and the People’s Republic of China. With the high-level visits, bilateral agreements and treaties, the present moment is the right time for Hong Kong businessmen to enter the Mexican market and for the Mexican businessmen to step into the Chinese market through Hong Kong.

As I mentioned earlier, Hong Kong plays a strategic role in the Sino-Mexican relationship. Hong Kong is the right place and serves as a gateway to the Mainland Chinese market. Hong Kong offers easy access to Mainland Chinese business opportunities. The Pearl River Delta region is immediately to the north of Hong Kong and business people commute regularly and easily between the two.  Shanghai and Beijing are no more than three hours flight away from our metropolis. Mexican businesses set up in Hong Kong can benefit from the free flow of information, independent judiciary and the rule of law. There are no foreign ownership restrictions. More than these, Hong Kong has a simple and low tax system. Profits tax is capped at 16.5% in Hong Kong and only profits generated in Hong Kong are subject to taxation. No offshore income, capital gains, dividends, estate or sales are taxed. CEPA, a China-Hong Kong free trade agreement, allows Hong Kong companies, which might be established by Mexicans in future, preferential access to the Chinese market. All goods qualified as Hong Kong origin may be exported to China tariff free. Those involved in the service sectors also enjoy a greater market access and establish wholly foreign owned enterprises more easily through Hong Kong. That’s why, as I observe, more and more Mexican companies doing business in China set up offices in Hong Kong and use Hong Kong as a springboard to Mainland China – the world’s biggest market. Hong Kong is really the right place for the closer relationship between China and Mexico.

The favorable factor that boosts the mutual friendship is the right people. The Consulate General of Mexico in Hong Kong, for over 47 years, together with the Embassy of Mexico in Beijing and the consulates in Shanghai and Guangzhou, have been very instrumental in bringing Mexico, Hong Kong and China closer to each other, offering necessary help to businesses in these places. Especially, my good friend, Consul General Alicia, is very active in Hong Kong, having many projects on hand to promote Mexico to Hong Kong businessmen. Her wit, grace, candor and unerring ability have certainly encouraged the best impulses of people who know her, including me. The strong team of ProMexico, having presence in Hong Kong, Shanghai and Beijing, is very supportive to Mexican businessmen who wish to do business in and with China through Hong Kong, as well as Chinese entrepreneurs hoping to expand in Mexico. MexCham also has done a lot in supporting and representing the interests of the Mexican business sector in trade and investment projects between Mexico, China and Hong Kong.

Hong Kong is a maturing economy. Our city has a proud record of innovating and adapting. In a mere two decades, it transformed itself from a manufacturing powerhouse for textiles, electronics and toys into a world-class financial centre, all the while using proximity to mainland China to its every advantage. Innovation and creativity will abound, although at a low level and not as much as homegrown as would be expected. To our advantage, we have a government that is largely hands-off when it comes to business, a sturdy legal framework, strong connections to international financial markets and state-of-the-art infrastructure. Our strengths are not cause to ignore problems. Nor is having pulled through regional and global economic crises cause to rest on our laurels. We have to always be searching for ways to shore up and build on our competitive advantages. Mexico is certainly one of the ways!

With the three favorable factors, right place, right time and right people, I feel confident that the Sino-Mexican relations will continue to grow and present more business opportunities for Chinese and Mexican enterprises, including the Hong Kong businesses.

Let me conclude my speech in a few words of Spanish. Por supuesto sabemos el rol que debemos jugar en este momento de la historia. A través de nuestro Latin Desk, continuaremos haciendo lo que nos apasiona, y esa es nuestra contribución para apoyar a empresarios de México a hacer negocios con China y Hong Kong, y viceversa.