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Following is a question by the Hon Bernard Chan and a reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (December 8):

Question:

It has been reported that the People's Bank of China will implement on 1 December this year the Provisional Measures for Management of Transfer, Sales and Payment of Foreign Exchange of Personal Assets, which allow persons in the Mainland emigrating overseas or moving to Hong Kong or Macau to realize their lawful assets in the Mainland which they owned before obtaining their migrant status, to purchase foreign currencies and to remit them out of the Mainland. In this connection, will the Government inform this Council:

(a) whether it has assessed the impact of the Measures on Hong Kong, particularly on the investment immigrant scheme which has been launched recently;

(b) of the corresponding measures it will take to enable Hong Kong to benefit from such Measures; and

(c) whether it will liaise with the relevant departments in the Mainland to understand these Measures in order to conduct a detailed review of the related existing policy of Hong Kong?

Reply:

Madam President,

The People's Bank of China announced in November 2004 the Provisional Measures for Management of Transfer, Sales and Payment of Foreign Exchange Relating to Personal Assets (the Provisional Measures) which was launched on 1 December 2004. We understand that the Provisional Measures are intended to facilitate and regulate the outward transfer of the following two types of personal assets:

(i) transfer of emigrant's assets: Mainland residents who have emigrated to foreign countries, Hong Kong Special Administrative Region (HKSAR) or Macao Special Administrative Region (MSAR) may apply for realising the assets they lawfully owned before obtaining emigrant status, and for the purchase and remittance of foreign exchange; and

(ii) transfer of inherited assets: foreign nationals and residents of HKSAR or MSAR may apply for realising their assets inherited lawfully in the Mainland, and for the purchase and remittance of foreign exchange.

Under the Provisional Measures, an applicant who is a Mainland resident emigrated to a foreign country is required to submit proof of the cancellation of his household registration issued by the public security authorities and proof of overseas residency when submitting an application. As regards applicants who have settled in Hong Kong or Macau, he is required to submit proof of the cancellation of his household registration, his SAR Identity Card and Home Visit Permit or SAR Passport when submitting an application. In other words, the Provisional Measures are only applicable to Mainland residents who have migrated to other places (including Hong Kong). Other Mainland residents cannot apply for transfer of their lawful assets to Hong Kong for investment under the Provisional Measures.

We expect that the implementation of the Provisional Measures would have little impact on Hong Kong's economy. These new measures are intended to facilitate and regulate the outward transfer of assets by Mainland residents who have successfully emigrated to foreign countries, Hong Kong or Macao. The implementation of the Provisional Measures does not imply that Mainland residents can apply to reside in Hong Kong under the Capital Investment Entrant Scheme (CIES), nor would it result in an increase in the number of Mainland immigrants entering into Hong Kong.

On the other hand, as the Provisional Measures would enable Mainland residents who have obtained foreign nationality or have emigrated abroad to transfer their personal assets overseas through legal channel, this may enable more people falling under this category to join the CIES. Nevertheless, further observation is required concerning whether the number of CIES applications would be indirectly increased by the introduction of the Provisional Measures.

Currently, most of the Mainland immigrants settled in Hong Kong came here for family reunion. They can apply to transfer their assets to Hong Kong under the Provisional Measures. As regards Mainland residents who have migrated to other places, it is possible that they may transfer part of their assets to their place of domicile and subsequently to Hong Kong. Nevertheless, we do not have statistics on and are unable to estimate how many assets these people own in the Mainland. But we believe that the amount of these assets should not be overwhelming. Furthermore, we have no means to estimate how many assets Hong Kong people have inherited in the Mainland, but we believe the amount should not be very significant.

Base on the above analysis, our preliminary assessment is that the impact of the implementation of the Provisional Measures on Hong Kong would be positive, but should not be too significant.

Hong Kong is one of the freest and most open economies in the world. There is no restriction on capital flowing in and out. We welcome anyone to transfer their assets to Hong Kong through lawful means and to make investments, which would contribute to Hong Kong's economic development.

Upon the Mainland's gradual opening up of the capital account and development in foreign exchange management, the Government will continue to communicate actively with relevant agencies of the Central People's Government and encourage Mainland capital to use Hong Kong as a platform for investment. As a renowned international financial centre, Hong Kong possesses well-established financial infrastructure, advance facilities, world-class regulatory regime, mature financial markets, abundant supply of financial professionals, and long-standing economic co-operation with the Mainland. I trust that these strengths will continue to attract capital from foreign places and the Mainland. We will continue to strengthen and enhance Hong Kong's advantages as an international financial centre, with a view to attracting international and Mainland investors to use Hong Kong as a platform for global investment.

Thank you, Madam President.

Ends/Wednesday, December 8, 2004

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