CNBC Transcript: Nicholas Yang, Secretary for Innovation and Technology, Hong Kong Sar

Following is the transcript of a CNBC interview with Nicholas Yang, Secretary for Innovation and Technology, of Hong Kong Sar. The interview was broadcast on CNBC on 27 April 2017 at 08:40AM SG/HK Time, during CNBC's "Hong Kong versus Singapore" theme week.

All references must be sourced to a "CNBC Interview".

Interviewed by Bernie Lo, Anchor, CNBC, and Chery Kang, Correspondent, CNBC.

Bernie Lo: When people criticize us in Hong Kong for not being innovative enough, you know for, you know, having lots of money surpluses in the budget. Throwing money, paying lip service and throwing money at this and that and trying to foster a spirit of innovation, but not really being able to create an environment where it sticks or lasts or builds on itself. What do you, how do you reply? And I'm sure you're asked this question in various forms many, many, many times.

Nicholas: Yeah, I think it's important to realize that innovation is a continuous process. The fact that you are number one today doesn't guarantee you'll stay number one, five to 10 years from now. And in many ways, Hong Kong is quite innovative. But you know, what we need to do is revamp our ecosystem a little bit. And this is what the chief executive, current chief executive wanted to do, back in 2012. Unfortunately as you mentioned, politics came in, and then it was filibustered for about three-and-a-half years, before this bureau was finally set up about 16 months ago. So during the past 16 months, what we have focused on is trying to, really try to revamp our ecosystem you know, upgrade it so that our people, our Hong Kong people can better connect to innovation and technology. Better understand innovation and technology. Give you an example, you know, money is one thing. We put in about 18 billion Hong Kong dollars to help our R&D, to make it more translational. We also put out some money to help our SMEs to upgrade. Okay, we also try to create so-called new spaces, which would be conducive to advanced manufacturing and also data technology. Which as you know, the future of money is data. And so and so…but the most important thing here is that we are attracting some of the top world organizations into Hong Kong. MIT came here, set up its first innovation node here. Karolinska institutet came here. And also I wanted to tell you a lot of people have not paid attention to University Chicago, which is also quietly setting up here in Hong Kong. Alibaba is also, you know, putting some resources here to help.

Bernie: Because university of Chicago actually first set up in singapore, but then decided to relocate to Hong Kong. And a lot of people actually, a lot missed that. We've got an incoming administration. And you know, because of the required, because of what they need to do to engage with the local audience and interface with local audience, most of the issues and most of the press coverage tends to be on livelihood issues. You know, housing, jobs, minimum wage, things like that. Innovation tends to be quite down on the coverage list for the media. So it's kind of an uphill battle for you, isn't it? 08:50:48

Nicholas: It is, in a sense, you may say that we don't actually pitch ourselves quite effectively, in terms of innovation and technology. We have, we do have a very relatively high standard audience here in Hong Kong, for example, MTR, if it's late by 10 minutes, it will hit the headlines. You know, I mean you know, look at that where else in the world would you look for that kind of audience? But the expectations are high, at the same time, we need to sort of really beef our advocacy and that's what we trying to do. We're trying to change the culture and mindset of Hong Kong. Hong Kong people are very shrewd, very smart, very much for quick profit. And we need to somehow reorient them toward- you've got to invest for longer term profit. You've got to think about you know, so-called what innovation can, and technology can do in terms of social improvements. And this is something that the current administration is trying to do. It's not just economic growth. It's also social improvement. And then some of the policy resources are directed toward improving social conversions.

Bernie: Nicholas, please say hi to Chery, out at the science park where it's raining right now, but hopefully lightening up. There you go.

Nicholas: Hi Chery.

Chery Kang: Hello, thanks for joining us. Thank you Bernie. Will funding schools, will funding start-ups, will that, is your office looking for something Hong Kong-specific? Because I say that, because, yes, all governments probably universally, talk about funding start-ups. But maybe are we too complacent when it comes to innovation or the need for it. Because we are very comfortable with property, or financial companies?

Nicholas: Ya, precisely. And what we need to do is to remind the younger generation. I think they need to realize that today's so-called top net worth companies are actually innovation and technology companies, are not property companies. I understand in Hong Kong, that people we do have a so-called relatively full employment you know condition. And also at the same time, the property market is booming. But you know, looking down the road, we've got to transition ourselves. And Hong Kong went through that before, in '67 when we had the riot. Looks like Hong Kong didn't have any future, but by '77 we were one of the four dragons. Okay. And then in the 80s, you probably recall that the whole manufacturing sector of Hong Kong moved over to Pearl River Delta. Now our GDP went from 30 percent manufacturing to one percent today. Yet we transition into a service economy. I think Hong Kong need to do that again. And this is something we need.

Bernie: How are we doing and what are we going to look like in 10 years? I mean, what are we, we need to get beyond this you know, this habit of throwing money into infrastructure and building things and putting roofs on buildings and calling that innovation and saying that's a new look of Hong Kong. And that's your job is to get beyond the hardware.

Nicholas: Ya, i think infrastructure comes in two things. One is hardware, like you said, building high speed rail building, building so-called this advanced manufacturing centre, and all that. But there's a lot of software behind it which people don't realize, okay. And then once, a lot of hardware, you know the success of let's say MTR today, it's not just hardware. It's a lot of software behind it, okay. I think one of the thing it's easy to say, oh just throw money and then things will come. But Singapore throws a lot of money too. But at the same time it's what's behind it. Just like Hong Kong, there's a lot of software. Some of the stuff, what we try to do, say we try to develop robotics and artificial intelligence. What we are trying to do is, we're trying to free some of human resources up so they can do higher value added jobs because we're literally at full employment now.

Bernie: Yeah, I wouldn't worry too much about the robotics. The Japanese have been doing it for over 20 years. And they only have a guy named Asimo, just shakes the hand of people that visit Japan so far. I would write too much about that. Thank you, Secretary. Thank you so much for joining Chery and me here. Appreciate it very, very much. We'll meet again very, very soon. Nicholas yang from Hong Kong government.