(21 December 2010, Mandarin Oriental Hyde Park, London)

(Ambassador Liu with Baroness Dunn)

Lord Wilson,

Baroness Dunn,

Ladies and Gentlemen,

It is a great pleasure for me to join the Hong Kong Association Membership Christmas lunch. May I begin with warm festive greetings to all of you: Merry Christmas and Happy New Year!

I thank Baroness Dunn for her kind invitation. She told me that attendance at the lunch today broke the record in the history of the Association. This is indeed flattering. And this not only shows your warm welcome to me personally, but is also a token of your keen interest in and strong support for China-UK relations.

Last Wednesday in this hotel, I addressed another Christmas lunch hosted by the China Association. Since I arrived in London, I have come into contact with quite a few organizations long committed to China-UK relations. The China Association I just mentioned has a history of 123 years. There is also the 48 Group, which is 56 years old. And I'm glad to learn that the Hong Kong Association will turn 50 next year. I take this opportunity to express my great appreciation to you for your long-standing efforts to promote strong economic ties between Hong Kong and the UK as well as China-UK relations.

Many years ago, I read from the Selected Works of Deng Xiaoping that Mr Deng had given a detailed explanation of his idea of "one country, two systems" to Baroness Dunn and other well-known figures of Hong Kong in June 1984. It has been 13 years since this idea was successfully put into practice. Hong Kong has remained stable and prosperous despite the Asian financial crisis, SARS and the recent international financial crisis. This success has been widely acclaimed in the world, more recently by the following three reports:

First, the 2010 Index of Economic Freedom jointly compiled by the Heritage Foundation and the Wall Street Journal crowned Hong Kong as the freest economy in the world for 16 years in a row. Hong Kong's trade and fiscal freedom score particularly high in this report.

Second, the World Competitiveness Yearbook 2010 released by the International Institute for Management Development ranked Hong Kong as the 2nd most competitive economy in the world, surpassing the United States for the first time (and second only to Singapore). According to this report, Hong Kong's competitiveness lies in its resilience to recession, efficiency in the conduct of government and business, and sound infrastructure.

Third, the October Edition of the IMF World Economic Outlook 2010 predicted 6% growth in Hong Kong this year and renewed confidence in consumption and investment.

We are fully confident about Hong Kong's economic future, as it has unique strength as an international financial, trade and shipping centre, and a free and competitive economy. More importantly, our confidence comes from Hong Kong's close economic ties with the Mainland. Sustained growth of the Mainland and deepening economic integration between Hong Kong and the Mainland has provided a strong foundation for Hong Kong's economic growth. This year the Mainland and Hong Kong signed the Supplementary Agreement VII to CEPA, (the Closer Economic Partnership Agreement between Hong Kong and the Mainland). So far CEPA has been expanded to cover 44 service sectors with 280 market liberalization and facilitation measures. The tourism industry of Hong Kong has greatly benefited from Hong Kong's status as a very prosperous destination for individual tourists from the Mainland. The Framework Agreement on Hong Kong-Guangdong Cooperation was also signed this year to facilitate all-round cooperation.

As Mr Deng Xiaoping pointed out, "Apart from economic prosperity, a stable Hong Kong also requires a stable political system." Hong Kong took a major step in its political development this year, with the adoption of methods for selecting the Chief Executive and forming the Legislative Council in 2012 by both the Hong Kong SAR Legislative Council and the National People's Congress. This demonstrates that Hong Kong is fully capable of addressing its constitutional development by seeking common ground while putting aside differences through an inclusive and rational process. History has told us once and again that political stability is crucial for harmony among the people. Hong Kong's political system has grown more mature and stable in the past decade. This has put Hong Kong in a better position to seize the opportunities for development, nurture new growth points and build sustained prosperity and stability.

The 13 years since Hong Kong's return to China have also been a period of fast growth for China-UK relations. The two countries set up a comprehensive strategic partnership. Both countries see each other as partners, not rivals. Political mutual trust has been strengthened with regular exchange of visits at the top level and through important mechanisms such as the Economic and Financial Dialogue, the Strategic Dialogue and the Joint Economic and Trade Commission. Prime Minister Cameron led the largest delegation ever to visit China last month and reached extensive agreement with Chinese leaders on strengthening mutual trust and cooperation in all fields.

Cooperation between the two countries is booming at all levels and in a wide range of areas. The bilateral trade in goods was merely 5.8 billion US dollars in 1997. This year it will top 50 billion US dollars, an increase of more than 8 times. Leaders of the two countries have just set the target of doubling bilateral trade in the next 5 years. We have also seen robust investment both ways. The UK is the second largest EU investor in China and China ranks second in London in terms of investors. Almost 120 thousand Chinese students are studying in the UK and over 3 thousand British students went to China to study. This year Chinese tourists visiting the UK will exceed 200 thousand. The Shanghai World Expo was also a major highlight of China-UK cooperation this year. The UK Pavilion attracted more than 8 million visitors. The two countries have also had close cooperation in the international arena to safeguard world peace and regional stability and to facilitate global economic recovery.

While we are pleased with the progress in China-UK relations, we are fully aware of the challenges. One of them is how to bridge the gap of understanding about China in this country and increase mutual trust. I would encourage people in the UK to look at China from a comprehensive and historical perspective: While admiring an ancient China with all its cultural splendor, one should not refrain from embracing a modern China full of vigor and vitality; While applauding the economic success in China, one should not ignore the political and social progress; While fostering the business partnership with China, one should respect China's economic and political systems. In this way, people will understand better why China's systems serve the country best and are conducive to its development and stability.

The 13 years since Hong Kong's return to China have also witnessed close business and cultural ties between Hong Kong and the UK. Hong Kong now is the UK's 11th largest trading partner. And the UK ranks 9th among trading partners of Hong Kong. Hong Kong remains an important bridge for China-UK trade. It is estimated that nearly one fifth of China-UK trade goes through Hong Kong. I am confident that as China-UK partnership continues to grow, Hong Kong will maintain its close relationship with the UK and play an even bigger role as a positive force for China-UK relations.

Ladies and Gentlemen,

Hong Kong has entered a new stage of development. The Pearl of the East will display ever greater glamour. I do hope that members of the Hong Kong Association will work creatively to contribute more to Hong Kong's prosperity and stability and to the steady growth of China-UK relations.

Thank you.

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(Ambassador Liu Answers Questions)

On 21st December, Ambassador Liu Xiaoming and Madam Hu Pinghua were invited to the Hong Kong Association Membership Christmas Lunch. More than 200 guests from various sectors were present, including the Honorary President of Hong Kong Association and former Governor of Hong Kong Lord Wilson, Chairman of the Hong Kong Association Baroness Dunn, Vice Chairman Sir Henry Keswick, Chief Executive of UKTI Sir Andrew Cahn, Chairman Mark Hendrick of the All-Party Parliamentary China Group, CBBC Chairman Sir David Brewer, former Foreign Secretary Lord Howe and members of the diplomatic corps in London. Ambassador Liu delivered the above keynote speech and the audience asked the following questions: What is next for China after the successes of the Beijing Olympics and the Shanghai World Expo? What are the main differences between China and the US? What are the prospects of China-US relations? What does China think of the G2? Does China see the G20 as a major global governance mechanism? How does China see the UK’s role in the world? How can the UK and China cooperate internationally? Ambassador Liu answered each of these questions.

The Hong Kong Association was established in 1961, and its members are representatives of the British business community, government, parliament, and the press who have close links with Hong Kong, and representatives of major Hong Kong companies operating in the UK. The Hong Kong Association has long been committed to promoting Hong Kong-UK trade and relations between Hong Kong and the UK as well as China-UK relations.

(Ambassador Liu and Madam Hu with Hong Kong Association Committee Members)