SFST's speech at Hong Kong Association Committee Lunch in London, UK (English only) (with photo)
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Merlin (Mr Merlin Swire, Chief Executive Officer, John Swire & Sons), Lord Johnson (Lord Dominic Johnson, Minister of State in the Department for Business and Trade), distinguished guests, ladies and gentlemen,
Good afternoon, and hello from Hong Kong. It is my great pleasure to join the luncheon today with the Hong Kong Association. Hong Kong and the UK have strong and long-standing ties. The primary objective for my visit to London this time is to foster closer collaboration with the UK in terms of financial services. Today, I wish to share with you the opportunities brought by Hong Kong to the UK, which can be summarised in five letters - "ABCDE".
For "A", it is about Asia. Although the global economic outlook is rather gloomy elsewhere, Asia has remained a global economic powerhouse. One of the key factors that makes Hong Kong a dynamic centre for successful businesses is our location. Located in the heart of Asia, within a four-hour flight from most major Asian cities and a five-hour flight from half the world's population, we are one of the most convenient hubs for doing business or travelling. Our proximity to the Mainland, in particular the Greater Bay Area, is a unique plus, enabling us to be the gateway to the Mainland. According to the latest forecast of the World Bank released in end-March 2023, growth in East Asia and the Pacific region is expected to accelerate to 5.1 per cent in 2023 from 3.5 per cent in 2022 as the reopening of the Mainland will help the economy rebound to a 5.1 per cent growth in 2023 from 3.0 per cent in 2022. As Asia continues to grow in terms of economic significance, many promising new enterprises will emerge, for example from the fields of education, healthcare, creative industries, financial services, green technology and so on. I noticed that relations between Europe and many Asian countries (in particular ASEAN (Association of Southeast Asian Nations)) were elevated to a "strategic partnership" starting in late 2020 and bilateral trade in goods increased by nearly 14 per cent in 2021. Hong Kong, as Asia's world city, is ready to connect the UK with the opportunities in the region.
Hong Kong is one of the deepest and broadest fundraising platforms in the region, and we see that many companies are now seeking capital in Hong Kong for growth. To capture new opportunities, we have introduced a series of reforms to modernise our listing regime to facilitate the listing of new economy companies and overseas issuers. Under the new regime since 2018, we have over 80 new economy firms listed, raising over HK$580 billion (which is equivalent to some 60 billion pounds) as at end-February this year. Furthermore, the Hong Kong Stock Exchange launched the listing regime for specialist technology companies in March this year. This regime has expanded the listing channel for issuers, facilitating specialist technology enterprises that have yet to meet the existing profit or revenue requirements of the Main Board to list and raise funds. In addition to expanding the local capital market, the new listing regime is conducive to helping technology companies from different places including Asia and the UK access international capital and expand their businesses, driving forward the development of innovative technology industries and the real economy.
For "B", I am delighted to highlight that Hong Kong has now fully returned to normalcy, and so we are business as usual. We have been and will continue to be a leading international financial centre, in particular that the National 14th Five-Year Plan has provided support to us in enhancing our status in this regard. Our financial services market has contributed about 21 per cent of our overall Gross Domestic Product.
Hong Kong's commitment to the rule of law and independent judicial power is key to the city's prosperity and stability as an international financial centre. You may wish to note that we have a total of 14 non-permanent judges in the Court of Final Appeal in Hong Kong, and 11 are eminent judges from the UK, Australia and Canada. The presence of these esteemed jurists from overseas as non-permanent judges of the Court of Final Appeal manifests the exercise of judicial power independently by the Judiciary in the Hong Kong Special Administrative Region (HKSAR) as protected by the Basic Law. It also helps maintain a high degree of confidence in the HKSAR's judicial system, and enables Hong Kong to maintain strong links with other common law jurisdictions. With the rule of law, a trusted common law system, and independent judicial power, plus the unique advantages offered and solidified by "one country, two systems", Hong Kong will continue to be a safe and secure place to live, work and invest.
Furthermore, we have rolled out the Hello Hong Kong campaign this February to welcome friends from around the world to come and experience the hospitality of the city for themselves. I hope that you all will come to Hong Kong very soon to gain a first-hand understanding of the vibrant city.
Turning to "C", it is connectivity. Our well-established financial infrastructure and regulations allow us to seamlessly connect with the markets of Mainland China, capturing opportunities from the internationalisation of the Renminbi (RMB). Hong Kong has the world's largest offshore pool of RMB funds and RMB foreign exchange and interest rate derivatives market. We provide a diversified range of RMB products and services with a leading position in RMB settlement, financing and asset management. Hong Kong's status as the world's offshore RMB business hub is continuously consolidated and enhanced. Currently, the RMB deposits (including outstanding certificates of deposit) in Hong Kong exceed RMB900 billion, providing liquidity support to global offshore RMB transactions and financial activities. According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), more than 70 per cent of global offshore RMB payments are processed in Hong Kong. We will continue to leverage our position as the largest offshore RMB centre by exploring new channels for cross-boundary RMB funds, developing offshore RMB products and tools, and facilitating the issuance of offshore RMB bonds in collaboration with industry and relevant Mainland authorities.
Over the past few years, a number of mutual capital market access schemes were launched, including Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Bond Connect, Wealth Management Connect, and the mutual recognition of funds between the Mainland and Hong Kong. These schemes are the historical milestones of the mutual access between the Hong Kong and Mainland capital markets. Continuous efforts are also being made to enhance these schemes. For example in September last year, the China Securities Regulatory Commission announced that it will take forward three measures for further expanding mutual access between the Mainland and Hong Kong financial markets, including (a) expanding the scope of eligible securities under Stock Connect by including securities of foreign companies that are primary listed in Hong Kong and more companies listed on the Shanghai and Shenzhen stock exchanges; (b) studying to set up an RMB securities trading counter under Southbound Trading of Stock Connect; and (c) supporting the issuance of Mainland government bond futures in Hong Kong. Not only will these measures enable Mainland and international investors to enrich their investment choices via Stock Connect, but they also offer offshore risk management tools for Hong Kong and overseas investors to participate in Mainland government bond investments, and deepen the development of Hong Kong's offshore RMB market.
Also last year, regulators in Mainland and Hong Kong issued a joint announcement on their approval for the specified Mainland and Hong Kong financial institutions to collaborate in establishing mutual access arrangements between the interest rate swap markets of the two places (Swap Connect). It will, for the first time, extend mutual access arrangements to the realm of financial derivatives products, providing a more comprehensive product suite for investors. The northbound trading of Swap Connect will be launched as soon as possible after completion of the necessary preparations. The Government and our regulators will continue to work with the relevant Mainland authorities with a view to further expanding the mutual market access programmes and enhancing the relevant arrangements in a gradual manner. We will also explore to provide more risk management products for investors outside of the Mainland, including to issue Mainland government bond futures in Hong Kong, thereby injecting new impetus into Hong Kong's capital market in a sustainable manner.
It is worth mentioning that the connectivity of the Hong Kong financial markets is well supported by the resilience and stability of our financial systems and markets. Recent turmoil in the international banking sector has brought minimal impact to Hong Kong's banking system, monetary stability and financial markets. Hong Kong's banking sector is resilient with strong capital and liquidity positions, while our Linked Exchange Rate System, which has been in operation since 1983 and is celebrating its 40th anniversary this year, continues to function well with the Hong Kong dollar market operating in a smooth and orderly manner.
For "D", surely you should know, it is about digitalisation. One of the key events I attended during my visit this time is the Innovate Finance Global Summit, the flagship event of the UK Fintech Week. I had a wonderful fireside chat with Mr Michael Hayman, who is a co-founder of Seven Hills, about virtual assets and Web3. I am glad to see that these are useful platforms for exchanges and co-operation with global leaders in financial services, in particular fintech innovations.
We indeed have a vibrant fintech ecosystem in Hong Kong, with over 800 fintech companies offering different kinds of innovative and convenient financial services for members of the public and the business sector. Many of them have gained a foothold in the Guangdong-Hong Kong-Macao Greater Bay Area and the regional markets. Our strength lies in our vibrant financial services and sophisticated information and communication technology infrastructure, and growth potential of the fintech sector also largely follows the strength of our financial services. Innovations in areas like e-payments, regtech, insurtech and wealthtech are keenly pursued by the sector. We are also a pioneer in virtual asset trading, and cross-border wholesale use of central bank digital currency.
Hong Kong is well-positioned to be a leading hub for Web3 in Asia and beyond. In October last year, we promulgated a Policy Statement on Development of Virtual Assets in Hong Kong, setting out the vision and policy direction of the Government. We, together with the financial regulators, are committed to establishing a facilitating environment, with timely and necessary guardrails to mitigate actual and potential risks put in place in accordance with international standards, so as to promote the sustainable and responsible development of the virtual assets sector in Hong Kong.
Developing the sector was indeed a strategic move, taking into account global development in the space. The operational crisis of virtual assets exchange happening late last year has clearly shown the importance of a comprehensive regulation for investor protection and the sustainable development of the industry. In fact, we have already taken preventive measures in the current and future regulatory frameworks to address the risks of any similar incidents, including requirements that a licensed virtual assets exchange must ensure proper asset custody, ensure financial soundness, and avoid conflicts of interest. In addition, a licensed virtual assets exchange is required to regularly submit to our regulator its audited accounts and financial statements and those of its wholly owned subsidiaries. Through this comprehensive regulatory regime we welcome quality UK virtual assets service providers' participation in the Hong Kong market, which helps promote effective and healthy market competition. Hong Kong is indeed a pioneer in implementing a comprehensive regulatory regime, which can increase investor confidence in virtual assets service providers regulated in Hong Kong.
Last but not least, we come to "E" - ESG (Environmental, Social and Governance). In Hong Kong, the Government announced Hong Kong's Climate Action Plan 2050 in October 2021 that targets to reduce Hong Kong's carbon emissions by 50 per cent before 2035 and achieve carbon neutrality before 2050. We will accelerate the development of Hong Kong into an international centre for green technology and finance and proceed in various directions, including green finance application and innovation for helping green projects obtain capital more conveniently and flexibly through financial innovations, training for talent, and enhancing the exchange and co-operation with the Guangdong-Hong Kong-Macao Greater Bay Area and international markets.
The Hong Kong Government has also been actively developing the green bond market. Since 2019, we have successfully issued government green bonds totalling around US$16 billion, which include HK$20 billion retail green bond and this is the largest retail green bond issuance around the world. And we also issued some HK$800 million tokenised green bond in February, which is the first of its kind issued by a government in the world.
To encourage the private sector to adopt green financing, we launched the Green and Sustainable Finance Grant Scheme in 2021 to provide a subsidy for eligible bond issuers and loan borrowers to cover their expenses on bond issuance and external review services. As at end-March this year, we have granted close to HK$170 million to over 220 green and sustainable debt instruments issued in Hong Kong, involving a total underlying debt issuance of over US$70 billion. UK companies are most welcome to make use of this scheme, and explore the opportunities offered by our green and sustainable finance markets.
Ladies and gentlemen, I hope today's luncheon will give you some more insights into what Hong Kong has to offer and inspire you to see more. As two of the most important global financial centres, we believe Hong Kong and London have plenty of opportunities to co-operate and thrive together.
Thank you very much.
Ends/Tuesday, April 18, 2023
Issued at HKT 23:50
Issued at HKT 23:50
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