In his 2009 policy address, Chief Executive Donald Tsang mentioned the need to vigorously develop six major industries as the "new engine" for economic growth. Among the six major industries, the cultural and creative industries amount to less than a 5 percent share of GDP in Hong Kong. In fact, there is still much room for the expansion of this industry.

Many industries have been hard hit under the international financial crisis, but the cultural and creative industry is doing exceptionally well. The cultural and creative industries on the mainland performed better than last year. In some areas there was even double-digit growth. The huge mainland market is very important for Hong Kong's creative and cultural industries. Take the film industry as an example, the mainland has gradually permitted Hong Kong companies to release films and operate cinemas. The chief executive specially mentioned the top 10 box-office films on the mainland last year were produced by Hong Kong.

In general, Hong Kong's cultural and creative industries are relatively small-scale companies. These companies usually could not obtain bank loans because of the lack of company assets. In most cases, cultural and creative industries have only intellectual properties and not tangible assets for collateral, and cannot produce stable and sustainable "cash flow" in the short term. They usually cannot get traditional bank loans. Especially, the cultural and creative industries' profit model is not clear. All these factors have hampered the financing of the cultural and creative industries to a certain extent. Sometimes, without enough capital, it is difficult for the cultural and creative industries to further develop their products and capture market share.

In order to help the cultural and creative industries, financial enterprises' participation is indispensable. We learn that is the main reason why the United States became a "cultural hegemony" alongside its powerful industrial system, which attracts talent and capital. Support from financial industries is important. The famous movie Titanic at the beginning of filming attracted $130 million in venture capital investment. The film made a record $18 billion in worldwide box office. In China, financial firms and institutions have also launched initiatives to support cultural and creative industries. In 2006, China Merchants Bank accepted the film copyright and the rights to box office receipts as collateral as a means of financing the film The Assembly. That was one good example of financing. This opened up the domestic banking sector, setting a precedent for unsecured loan processing. The Assembly made over 150 million yuan at the box office in two weeks.

Hong Kong's financial industry has always pursued the "bricks and mortar" culture. It cares about tangible assets most, while having little regard for "intangible" assets. Banks are very conservative in their lending. Hong Kong's financial services industry should actively explore intellectual property and intangible assets for the mortgage loan business. This will encourage cultural and creative industries to use intellectual properties in the way corporate bonds are used as financing tools. Such an undertaking would guide private investment into Hong Kong's cultural and creative industries.

The HKSAR should look into setting up financing support for the cultural and creative industries to help the industries to compete and capture market share as far as possible.

The author is chairman of the Hong Kong Public Governance Association and council member of the Central and Western District

(HK Edition 12/31/2009 page1)