HK HONES ITS FINANCIAL EDGE

Chief Executive John Lee unveiled bold plans in his 2024 Policy Address for consolidating and enhancing Hong Kong’s status as an international financial centre.

Upon highlighting the fact that Hong Kong is an international financial centre, ranking third globally and first in investment environment, he stated that the Government will continue with reforms to reinforce and enhance the city’s status.

The Chief Executive explained that Hong Kong is an attractive location for investors for gold storage, spurring relevant activities such as gold trading, settlement, and delivery.  

As such, his administration will capitalise on Hong Kong’s strengths as an international financial centre to build the city into an international gold trading centre.

The Chief Executive provided details of the objective of building an international gold trading market given the city ranks among the world’s largest import and export markets for gold by volume.

“The Government will promote the development of world-class gold storage facilities, facilitating the storage and delivery of spot gold by users and investors in Hong Kong, and driving demand for related services such as collateral and loan businesses, opening up new growth areas of the financial sector.”

He added that the Financial Services & the Treasury Bureau (FSTB) will set up a working group to take forward the establishment of an international gold trading centre.

“This will include, among other things, strengthening the trading mechanism and regulatory framework, promoting application of cutting-edge financial technology, and actively exploring with the Mainland authorities on the inclusion of gold-related products in the mutual market access programme.”

Mr Lee also outlined his plan to deepen market access and enriching offshore renminbi business.

“We will continue to enhance the mutual market access regime and reinforce our status as the world’s largest offshore renminbi business hub, contributing to the internationalisation of RMB. Key measures include continuously improving our infrastructure and upgrading the Central Moneymarkets Unit to facilitate the settlement of various assets in different currencies by international investors.

“We will also develop the fixed income market infrastructure by, for instance, setting up a central clearing system for RMB-denominated bond repurchase (repo) transactions, making RMB sovereign bonds issued in Hong Kong a more popular choice of collateral in offshore markets. We will look to enhance the Cross-boundary Wealth Management Connect Scheme as well.”

The Chief Executive indicated that the Government will strive to make better use of the currency swap agreement between the Hong Kong Special Administrative Region with our country to enhance offshore RMB liquidity.

In doing so, it will provide more RMB-denominated investment products.

Part of that plan calls for the Hong Kong Exchanges & Clearing (HKEX) to encourage more listed companies to have shares listed in the RMB stock trading counter. 

Apart from increasing the issuance of RMB bonds and supporting issuance of more green and sustainable offshore RMB bonds in Hong Kong, it will also seek support from the Ministry of Finance for boosting the size and frequency of issuing RMB sovereign bonds, and launching offshore RMB sovereign bond futures as soon as possible, in Hong Kong.

Additionally, the Government will actively liaise with Mainland authorities to expand the Bond Connect (Southbound Trading) as appropriate, including expanding the scope of eligible Mainland investors to non-bank financial institutions, and enriching liquidity management tools that facilitate offshore investors’ investment in onshore bonds by actively exploring and introducing various bond repo and collateral products and arrangements using onshore RMB bonds.

Mr Lee shared the Government’s plans to enhance Hong Kong’s status as an international risk management centre and an international asset and wealth management centre.

“Hong Kong has the highest concentration of insurance companies and the highest insurance density in Asia. To further strengthen Hong Kong’s position as a global risk management centre, the Insurance Authority will initiate a review next year. 

“We will examine capital requirements for infrastructure investment, to enriching insurance companies’ asset allocation for risk diversification and driving investment in infrastructure such as the Northern Metropolis. We will also continue to invite Mainland and overseas enterprises, including large state-owned enterprises in the Mainland, to establish captive insurers in Hong Kong.”

He added that there are 2,700 single-family offices in Hong Kong, and the industry has predicted that Hong Kong will become the world’s largest cross-boundary wealth management centre by 2028.  

“We will make every effort to attract more global capital to be managed in Hong Kong, including facilitating the opening of new distribution channels for private equity funds through HKEX’s listing.”

On top of that, he stressed that the Government will collaborate with sovereign wealth funds in regions along the Belt & Road.

“We will strive to collaborate with large-scale sovereign wealth funds in regions such as the Middle East, in financing the setting up of funds to invest in assets in the Mainland and other regions.”

Mr Lee also explained the measures to enhance the New Capital Investment Entrant Scheme, effective today. This means that investment in residential properties is allowed provided that the transaction price of the residential property concerned is no less than $50 million, with the amount of real estate investment to be counted towards the total capital investment capped at $10 million.

Additionally, by expanding the scope of tax concessions, the Government will consult the industry on the proposal to add qualifying transactions eligible for tax concessions for funds and single-family offices.

The Government is committed to proactively expanding markets and deepening overseas networks, Mr Lee said, as he conveyed its strategy to accomplish such a goal.

“We will continue to actively expand and deepen our overseas networks, including forging financial co-operation with the Middle East and the region of the Association of South East Asian Nations, organising more international financial mega events, and exploring further collaboration with Islamic markets in the area of finance.”

Mr Lee expounded on how the Government will accomplish its aim of further enhancing the securities market.

Relevant measures include opening up new sources of capital overseas, striving for more listing of enterprises in Hong Kong, optimising vetting of listing applications and boosting market efficiency.

He also noted the Government’s proposal for providing convenient cross-boundary financial services arrangement.

“To promote financial inclusion, we will facilitate members of the public in making cross-boundary transactions and payments. 

“The Hong Kong Monetary Authority and the People’s Bank of China are pushing forward the linkage of fast payment systems in the two places, ie the Faster Payment System in Hong Kong and the Internet Banking Payment System in the Mainland, to facilitate real-time, cross-boundary small-value payments by residents on both sides; and they will implement the arrangement enabling issuance of bank cards by Mainland branches of Hong Kong-incorporated banks in the Mainland.”

Mr Lee revealed that his Policy Address embraces measure to enhance Hong Kong’s green finance ecosystem, due to the fact that the city is a leading sustainable finance hub in Asia.

“The international carbon market (Core Climate) launched by the HKEX is the world’s only carbon market to offer Hong Kong dollar and RMB settlement for trading of international voluntary carbon credits.

“The Hong Kong Monetary Authority will roll out the Sustainable Finance Action Agenda. In addition, the FSTB will launch a roadmap on the full adoption of the International Financial Reporting Standards – Sustainability Disclosure Standards this year, leading Hong Kong to be among the first jurisdictions to align its local requirements with the standards of the International Sustainability Standards Board.”

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