Budget Speech by the Financial Secretary (6)
87. Amid the unstable external environment, Hong Kong's financial services industry maintained a robust performance, contributing 18 per cent of our GDP and employing over 250 000 people. The industry serves as a key driving force for our steady economic growth. Although the global financial market will remain volatile in the foreseeable future, I believe Hong Kong has the strengths to ride out the challenges arising from these changes and seize the opportunities to reinforce our status as an international financial centre.
88. After the outbreak of the global financial crisis in 2008, countries around the world have realised the importance of enhancing financial system stability. Hong Kong participates actively in the relevant discussions and endeavours to strengthen our crisis prevention and risk management capabilities in line with international standards. For instance, we have implemented a regulatory framework as prescribed under Basel III, taken forward a reform of the over-the-counter derivatives market, and set up an effective resolution regime for financial institutions.
Combating Money Laundering
89. Meanwhile, as a member of the Financial Action Task Force, Hong Kong has been actively involved in global actions against money laundering. The Financial Services and the Treasury Bureau is conducting consultations on legislative proposals to enhance the regulatory regime for combating money laundering and terrorist financing, with a view to introducing the relevant amendment bills into LegCo for scrutiny in the middle of this year.
Reforming the Regulatory Regime for Listed Entity Auditors
90. We are pressing ahead with the work of reforming the regulatory regime for listed entity auditors to make the oversight regime independent from the audit profession. The relevant amendment bill will strengthen the functions of the Financial Reporting Council (FRC), enabling the FRC to become an independent oversight body of listed entity auditors. We plan to introduce the relevant amendment bill into LegCo for scrutiny in the second quarter of this year.
91. Last year, for the second year in a row, Hong Kong ranked first globally in terms of funds raised through initial public offerings (IPO). The funds so raised amounted to US$25.1 billion. We have been among the world's top five in IPO fundraising since 2002. Such achievements do not come easily. To keep our listing platform competitive, we must do our utmost to uphold market quality.
92. The Securities and Futures Commission (SFC) and the Hong Kong Exchanges and Clearing Limited (HKEX) jointly conducted a consultation on proposed enhancements to the decision-making and governance structure for listing regulation last year. The consultation aimed to enable the listing regulatory structure and procedures to better respond to rapid developments in the market. A large number of submissions have been received. The SFC and the HKEX are considering and analysing the views carefully.
93. The Government has always been very concerned about market quality issues, such as high price volatility of Growth Enterprise Market (GEM) stocks. We always support the SFC's monitoring and law enforcement efforts in combating wrongdoings. For instance, with regard to GEM IPO placings, the SFC has recently issued a set of guidelines on the expected standards of conduct of intermediaries, and a joint statement with the HKEX regarding the roles of applicants and intermediaries. Also, we hope to further the development of our listing platform. The HKEX is studying ways to continuously enhance the competitiveness of the listing platform in Hong Kong. They include a review of the positioning of GEM and an assessment of the feasibility of introducing a new board. Once more concrete progress is made, public consultation on the relevant conceptual proposals will be launched to map out the direction for long-term development.
94. A sound regulatory regime is the cornerstone of our financial system. In the meantime, we need to examine ways to make good use of our strengths and grasp the opportunities to elevate the position and competitiveness of Hong Kong as an international financial centre.
Local Bond Market
95. Since the launch of the Government Bond Programme (GBP) in 2009, the Government has set a bond pricing benchmark for the market through systematic issuance of government bonds. This initiative has successfully attracted local and overseas investors and issuers to participate in Hong Kong's bond market. Retail bonds issued under the GBP have been well received by the public, encouraging further development of the local bond market. We also issue Islamic bonds (sukuk) with different structures under the GBP, thereby laying the foundation for the development of Hong Kong into an Islamic financial centre. The Silver Bond Pilot Scheme launched last year has further promoted the development of the relevant market. As scheduled, we will issue a second batch of Silver Bond in 2017-18. Appropriate issuance terms, including the issuance size and tenure, will be formulated in the light of market environment.
96. At the Group of Twenty (G20) Summit held in Hangzhou last year, the G20 recognised that green finance is critical to addressing climate change and fostering sustainable development. The summit advocated the implementation of the voluntary options, including the provision of clear strategic policy signals and frameworks, to promote green financial business. Hong Kong possesses the right conditions for developing green finance. To tap into the potential of the green finance market, the Mass Transit Railway Corporation Limited took the lead in raising capital through the issuance of green bonds last October. We will step up our efforts to promote our competitive capital market and encourage the sector to explore opportunities brought by green finance.
97. Today, around 70 per cent of the world's Renminbi (RMB) payment transactions are processed via Hong Kong. As revealed by the Bank for International Settlements' survey findings published last September, Hong Kong continued to rank top globally in terms of the volume of RMB foreign exchange transactions. These are testimonies to Hong Kong's status as the global offshore RMB business hub. With the wider use of RMB in the international arena, we will continue to explore with the Mainland authorities ways to open up more channels for two-way cross-border RMB fund flows.
98. We will implement a number of measures as below to develop Hong Kong into Asia's asset and wealth management centre.
99. To facilitate Hong Kong's development into a full-fledged fund service centre, we propose to extend the profits tax exemption to onshore privately-offered open-ended fund companies. The proposal will help attract more funds to domicile in Hong Kong and build up Hong Kong's fund manufacturing capabilities. The Financial Services and the Treasury Bureau will shortly consult the industry on the legislative proposals.
100. Our advantage in "leveraging the Mainland while engaging the world at large" has created ample opportunities for our financial sector. The launch of the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect are of groundbreaking significance to mutual capital market access between Hong Kong and the Mainland. The implementation of the Mainland-Hong Kong Mutual Recognition of Funds Arrangement since 2015 also has brought about a wider range of products for the fund business and fuller mutual access between financial markets in both places.
101. Other than the Mainland market, Hong Kong, as an international financial centre, has always sought to build connections with financial markets around the world. Apart from facilitating two-way capital flows between Hong Kong and these markets, this will enable Hong Kong to demonstrate its role as a hub for capital flows between the Mainland and global markets. Last year, the SFC signed a Memorandum of Understanding on mutual recognition of funds with the Swiss Financial Market Supervisory Authority, which allows eligible public funds in Hong Kong to gain direct access to the investing public in the Swiss market through a streamlined vetting process. The SFC is actively negotiating similar arrangements with other jurisdictions and we hope that more agreements can be concluded.
102. The bond market is a key component of the capital market. Apart from issuing different types of bonds to boost our bond market, the Government is studying with the relevant Mainland authorities ways to further facilitate the participation of investors of both places in the bond market, with a view to improving the connectivity between market infrastructures.
Tackling Malpractices of Financial Intermediaries for Money Lending
103. The Government has implemented various measures since last year to tackle malpractices by financial intermediaries for money lending. These include imposing additional licensing conditions on all money lender licences in accordance with the Money Lenders Ordinance for better protection of borrowers. The additional licensing conditions came into effect on 1 December 2016. We are taking actions to seriously follow up on the implementation and effectiveness of the additional licensing conditions, as well as to enhance public education to raise people's awareness of debt management.
Mandatory Provident Fund Scheme
104. Our future objective is to explore the development of eMPF, a centralised electronic platform, to enhance the administrative efficiency of the MPF Scheme, thereby providing room for fee reduction. As such, I have asked the Financial Services and the Treasury Bureau to set up a working group, members of which include representatives of both the Mandatory Provident Fund Schemes Authority and the industry, to explore viable solutions with reference to overseas experiences, with a view to devising an electronic MPF management platform which will enhance administrative efficiency and directly benefit scheme members.
Public Annuity Scheme
105. In this year's Policy Address, the Chief Executive announced that the Government will study the feasibility of a public annuity scheme and explore whether we can have life annuity plans to be run by the public sector, so as to help the elderly turn their assets into a stable monthly retirement income to reduce uncertainty. The Hong Kong Mortgage Corporation Limited has commenced the design and feasibility study of the proposal, and will furnish a report to its Board of Directors for consideration as soon as possible.
106. The international community has proposed a number of new initiatives to enhance tax transparency and combat cross-border tax evasion. Regarding the package of measures put forward by the Organisation for Economic Co-operation and Development to tackle "base erosion and profit shifting" (BEPS), Hong Kong has joined the inclusive framework set up by the international community for implementing the BEPS package.
107. We are also actively seeking to expand our network of Comprehensive Avoidance of Double Taxation Agreements (CDTAs) with other jurisdictions, and 37 CDTAs have been signed so far. We will continue our efforts to expand the network so as to foster a more business and investment-friendly environment for Hong Kong.
108. The tourism industry, which makes up five per cent of GDP and employs about 270 000 people, has been driving the growth of other related industries including retail, hotel and catering industries, and contributing significantly to Hong Kong's economy. Over the past decade, the number of visitor arrivals has more than doubled from 25 million in 2006 to over 56 million in 2016, making Hong Kong one of the most popular cities in the world in terms of visitor arrivals.
109. The past year was a period of consolidation for the tourism industry. We adjusted our tourism development strategy to emphasise diversification and attracting high-yield overnight visitors. Our objective is to pursue a balanced, healthy and long-term development of the tourism industry. Although total visitor arrivals last year recorded a decline of 4.5 per cent owing to a drop in the number of Mainland visitors, we have seen a rebound of visitor arrivals in recent months. The number of non-Mainland visitors, in particular those from Southeast Asia, has registered growth for several consecutive quarters. Moreover, the number of overnight visitor arrivals for Meetings, Incentive Travels, Conventions and Exhibitions (MICE) also grew by 9.9 per cent in the past year. As regards cruise tourism, the number of ship calls at the Kai Tak Cruise Terminal last year was close to 100, an increase of around 70 per cent as compared with 2015. The number of ship calls is estimated to further rise to about 200 this year. The cruise passenger throughput at the Kai Tak Cruise Terminal last year also reached about 420 000, representing an increase of around 60 per cent as compared with 2015.
110. While the situation in the tourism industry has become more stable, the outlook for the coming year remains challenging. Taking into account the hardship faced by the related trades and industries, I will introduce three short-term measures to waive licence fees amounting to $137 million–
(a) waive the licence fees for 1 800 travel agents for one year;
(b) waive the licence fees for over 2 000 hotels and guesthouses for one year; and
(c) waive the licence fees for restaurants and hawkers and fees for restricted food permits for one year, benefiting 27 000 restaurants and operators.
Enhancing Hong Kong's Tourism Appeal
111. It was reiterated in this year's Policy Address that the Government would continue to attract more high-yield overnight visitors. In line with this policy direction, we will support the tourism industry by allocating an additional sum of $243 million in 2017-18 for the following five areas of work–
(a) supporting light shows, home-grown mega events and continuation of efforts to attract more small-and-medium-sized MICE events to Hong Kong;
(b) promoting further the diversification of tourism products by inviting the Hong Kong Tourism Board (HKTB) to provide funding support to activity organisers and the tourism sector for the launch of tourism projects with local characteristics and green tourism products respectively, with a view to encouraging the development of a greater variety of tourism products to attract more visitors to Hong Kong;
(c) stepping up our efforts to attract more high-spending visitors by implementing a scheme targeting transit passengers and overnight visitors in Hong Kong through the HKTB. We will work with local airlines, tourist attractions, hotels and the tourism sector to provide promotional offers to transit passengers or overnight visitors. Besides, the Government will provide funding support for the trade to promote cruise tourism. Such efforts include continuing to promote "fly-cruise" tours and collaborating with cruise lines to develop more source markets and products for cruise tourism;
(d) enhancing Hong Kong's appeal as a tourist destination. Through the HKTB, we will continue our publicity in the Mainland to promote the quality and honest image of Hong Kong's tourism and strengthen our efforts to publicise in overseas markets the mega events to be held in Hong Kong this year, so as to attract more Mainland and overseas visitors to Hong Kong; and
(e) providing funding support for the training of members of the tourism industry through the Travel Industry Council of Hong Kong to enhance service quality of the industry, and continue to implement the matching fund for promoting tourist attractions as well as waive local traders' participation fees for overseas promotional fairs.
(To be continued.)
Ends/Wednesday, February 22, 2017
Issued at HKT 12:12
Issued at HKT 12:12
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