Financial sector key to HKSAR's integration into national development
Updated 17:34, 16-Mar-2023
Christopher Hui
Financial sector key to HKSAR's integration into national development

Financial sector key to HKSAR's integration into national development.mp3


Editor's note: Decision Makers is a global platform for decision makers to share their insights on events shaping today's world. Christopher Hui is the Secretary for Financial Services and the Treasury of Hong Kong Special Administrative Region. The article reflects the author's views and not necessarily those of CGTN.

During the first session of the 14th National People's Congress, which commenced in Beijing on March 5, the government work report said that we should resolutely implement the principle of "One Country, Two Systems," "patriots administering Hong Kong" and a high degree of autonomy in the Hong Kong Special Administrative Region (HKSAR). It also mentioned that the central government supports Hong Kong in enhancing economic development, improving livelihood and maintaining long-term prosperity and stability.

The HKSAR government will faithfully implement the principle of "One Country, Two Systems," in seizing the opportunities brought about by national strategies, including the 14th Five-Year Plan and the outline development plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), in order to promote Hong Kong's integration into national development and contributing to the high-standard opening-up of China's financial sector.

The HKSAR government will support Hong Kong's function as a hub of investment and financing, offshore RMB business, as well as green and sustainable finance, and as a connector with the international community. The city also integrates into the national development, while creating strong impetus for growth in the financial sector.

Pooling offshore capital

Hong Kong's return to normalcy on all fronts and the full resumption of normal travel between Hong Kong and the Chinese mainland will welcome many international investors back to the Hong Kong market. For 2022 as a whole, Hong Kong achieved favorable rankings among global financial centers, which shows the city has remained a leading financing hub in the world.

Hong Kong can serve as a financing platform for the mainland enterprises. Sufficient Private Equity (PE) funds can render deeper support to enterprises at their early stage of development and when they are experiencing rapid growth. A listing platform with ample liquidity will help raise offshore capital for the mainland enterprises and enhance their governance.

By facilitating the listing of pre-profit/pre-revenue biotechnology companies in Hong Kong, the Hong Kong Exchanges and Clearing Limited (HKEX) will introduce a new main board listing mechanism in March this year for Specialist Technology Companies, which include companies from the five specialist technology industries, to facilitate their listing and fundraising in Hong Kong. 

The government will enhance the overall competitiveness of Hong Kong's bond market. We will set up an infrastructure bond scheme to better manage the cashflow needs of major infrastructure projects and facilitate the early completion of projects for the good of the economy and the lives of local residents. In mid-February, the HKSAR government issued tokenised green bonds, the first of its kind issued by a government globally, under the government green bond programme (GGBP). This has accentuated Hong Kong's capacity in providing a flexible and favorable legal and regulatory environment for innovative forms of bond issuance. 

Boosting two-way investment

Hong Kong is a leading asset management center in Asia. In recent years, the HKSAR government has enhanced the competitiveness of its asset management industry, such as allowing the diversification of fund structures, establishing a re-domiciliation mechanism, providing a more facilitating tax environment for the fund industry, promoting the development of the real estate investment trust market and providing subsidies.  

In 2021, the assets under management in Hong Kong amounted to $4.5 trillion. Around two-thirds of the funding was offshore capital sourced mainly from international investors and institutional investors. In addition, Hong Kong has set up a dedicated team to provide one-stop service to family offices. The increase in assets under management will help attract more capital for investment in the mainland enterprises and assets, thereby contributing to the inflow of international capital and facilitating offshore asset allocation by investors from the mainland.

Facilitating the internationalization of RMB

As the world's largest offshore RMB hub, Hong Kong has been playing an important role in strengthening offshore RMB business and facilitating the internationalization of RMB.

The mechanism for mutual access between the financial markets in Hong Kong and the mainland has been running smoothly, with a surge in turnover recorded in recent years. Experience from the Stock Connect program and Bond Connect program has shown that where risks are controllable, Hong Kong can assist the mainland in opening up the financial market in an orderly manner and attracting offshore capital for investment in offshore RMB assets.  

Participants attend a ceremony held by Hong Kong Exchanges and Clearing Limited to launch the
Participants attend a ceremony held by Hong Kong Exchanges and Clearing Limited to launch the "northbound" mainland-Hong Kong bond connect in Hong Kong, south China, July 3, 2017. /Xinhua

Participants attend a ceremony held by Hong Kong Exchanges and Clearing Limited to launch the "northbound" mainland-Hong Kong bond connect in Hong Kong, south China, July 3, 2017. /Xinhua

The HKSAR government is promoting the issuance and trading of RMB-denominated securities in the city. A bill was passed by the Legislative Council in January this year to exempt the stamp duty payable for certain transactions by dual-counter market makers (DCMMs). The HKEX will introduce a DCMM regime in the first half of this year to promote the liquidity of RMB-denominated stocks and price efficiency, as well as to tie in with the setting up of RMB trading counters by local issuers.

Hong Kong has long been an offshore RMB bond issuance center. In recent years, the Shenzhen municipal people's government and people's government of Hainan Province have issued bonds in Hong Kong, providing impetus to our offshore RMB bond market. The HKSAR government will support local governments from the mainland at various levels in issuing offshore RMB bonds in Hong Kong, with a view to contributing to national development and RMB internationalization.  

Promoting green finance

To tie in with our country's steady advancement towards the "dual carbon" goal (which is to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060), Hong Kong is promoting green bonds, green loans, as well as green investment and financing. The Green and Sustainable Finance Grant Scheme was launched to encourage more green and sustainable bond issuers and borrowers, including the mainland institutions, to make use of Hong Kong's fundraising platform and professional services.

Since May 2019, Hong Kong has issued nearly $16 billion worth of green bonds. We will expand the scope of the GGBP to cover sustainable finance projects in the future. We will formulate a framework aligned with international standards for sustainability-related financial disclosure and climate-related disclosure by listed companies, with a view to facilitating the disclosure of environmental and climate-related risks by listed companies.  

Proactively connecting with the international community

Hong Kong's core advantages over other international financial centers lie in the motherland's backing and its efficient market, which enable Hong Kong to play the role of a "super-connector" between international and the mainland investors. Leveraging the advantages of "One Country, Two Systems" and its market scale, Hong Kong can facilitate vertical and lateral multifaceted collaboration between our country and other economies such as countries in ASEAN and the Middle East.

In February, the Chief Executive of HKSAR John Lee, led a local delegation to visit the Middle East, a testament to the HKSAR's participation in the Belt and Road Initiative and it's the spirit of the speech delivered by President Xi Jinping in the China-Arab States Summit held last December, i.e. to foster cooperation for mutual benefits.

The HKSAR government will leverage the advantages of "One Country, Two Systems" to achieve the development targets set out in the 14th Five-Year Plan for better integration into national development.

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