Hong Kong's financial services and logistics sectors will benefit from new opportunities brought by increased cooperation between Hong Kong, Taiwan and the mainland, thanks to the cross-Straits "three direct links", according to K C Kwok, Hong Kong's government economist.

The "three direct links" refer to mail service, trade, and shipping and flights between the mainland and Taiwan.

Kwok said that the well-developed financial-service sector, which accounted for 16 percent of Hong Kong's GPD growth in 2006, will be Hong Kong's advantage in serving the increasing cross-Straits ties .

Currently, more than 60 Taiwanese companies are listed on the Hong Kong Stock Exchange, while 17 Taiwanese banks are operating in Hong Kong.

More than 340 Taiwanese companies have established offices in Hong Kong.

"There may be a negative impact on some industries," Kwok explained at a recent forum. "For example, the number of flights through Hong Kong may decrease, but the number of mainland visitors to Taiwan through Hong Kong may increase at the same time."

Beijing and Taiwan are in negotiations to work out a deal for direct cross-Strait flights, and more mainland tourists are expected to visit Taiwan. But some market watchers believe that will hurt Hong Kong's position as a gateway for Taiwan travelers to the mainland.

But Kwok said whether the "three direct links" will negatively affect Hong Kong's economy depends on the details of the policies made by the governments.

"The peaceful and cooperative relationship between the mainland and Taiwan is an important factor for the stable economic growth of the whole region," Kwok said. "The impact will not only be limited to particular industries, it will bring new roles to Hong Kong, the mainland and Taiwan."

Meanwhile, the economic relationship between the mainland and Taiwan will depend on the mainland's development.

Kwok said it will be less dependent on light industries and will be changed by the growing significance of the financial sector after the financial reform.

Kwok said Hong Kong should be ready to adapt to these changes brought by both globalization and the cross-Straits "three direct links".

Stephen Lam, secretary of constitutional and mainland affairs, said at the same forum that Hong Kong's position as a financial hub will be strengthened as more Taiwanese companies investing on the mainland are expected to list in Hong Kong.

(HK Edition 06/03/2008 page2)