Speech by Permanent Secretary for Financial Services and the Treasury (Financial Services) at CTWeek Hong Kong 2023 Conference (English only)
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Ladies and gentlemen,
Good afternoon. It's a tough act to talk to an audience in the first session after lunch. But this congregation of industry leaders and bright minds in the field of corporate treasury at the CTWeek Hong Kong 2023 Conference is no ordinary audience. And the topic of my speech is, I am sure, of sufficient interest to you to keep you engaged.
As the title of this session "GBA spotlight" suggests, I would like to share with you today how corporate treasurers in Hong Kong enjoy unmatched advantages in reaping the benefits unleashed by the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) development.
With a population of over 86 million and a GDP of over HK$13.1 trillion, the GBA is one of the most dynamic and fast-growing regions in the world. Its development is accorded the status of key strategic planning in our country's development blueprint, with innovation and commitment to reform and opening up at its core. During President Xi's recent tour of Guangdong, he has emphasised that the construction of the GBA is a top priority in the country's pursuit of high-quality growth.
As all of you know, the HKSAR (Hong Kong Special Administrative Region) Chief Executive has just led a large-scale delegation comprising government officials and Legislative Council Members to visit the GBA in the past four days. The concrete economic, commercial and social development potentials are vividly evident as viewed from the highlights of the visit.
For Hong Kong, the GBA indeed presents a bright outlook for generating new impetus for growth and creating fresh windows for diverse business sectors, including corporate treasury. On the one hand, more GBA enterprises are poised to "go global" under the country's strategy of opening up. On the other, overseas corporates are attracted by the innovative drive and complimentary production and servicing attributes of Hong Kong, Macao and the nine Mainland GBA cities for further multiplying and diversifying their businesses in the region. With Hong Kong being the most international city in the GBA with a broad-based leadership position in finance, corporate treasurers in Hong Kong are well placed to serve corporates conducting group businesses in and with the GBA through the management of capital, liquidity, as well as financial and treasury risks.
Underpinning such a promising trend, the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area confirms and supports Hong Kong's status as an international financial centre, a global offshore Renminbi (RMB) business hub, and an international asset and risk management centre. It also supports the development of Hong Kong into a green finance centre and a platform for investment and financing serving the GBA.
Mutual market access
To achieve the objectives of the Outline Development Plan, we and the financial regulators attach great importance to enhancing Hong Kong's competitiveness in financial services and strengthening mutual capital market access between the Mainland and Hong Kong.
The Stock Connect scheme, which allows Mainland investors to trade securities listed in Hong Kong and Hong Kong and global investors to invest in A-shares, has been functioning smoothly and actively despite global financial market uncertainties. Notably, the Shenzhen Stock Connect has been expanded, with more than 1 300 companies listed in Shenzhen included in the Northbound Stock Connect and more than 550 companies listed in Hong Kong included in the Southbound Stock Connect. International companies listed in Hong Kong can now also join the Stock Connect scheme. In January this year, we secured passage by the Legislative Council the bill to exempt the stamp duty payable for certain transactions by dual-counter market markers. The aim is to facilitate the introduction of a dual-counter market makers regime by the Hong Kong Exchanges and Clearing Limited (HKEX) to promote the liquidity and price efficiency of RMB-denominated stocks. The inclusion of exchange-traded funds (ETFs) under Stock Connect in July 2022 also offers more diverse asset allocation choices to Mainland and overseas corporates.
On risk management products, our efforts in enhancing the mutual capital market access schemes have yielded some handsome results. The HKEX launched the MSCI China A50 Connect Index futures contract in Hong Kong in October 2021, providing a new risk management tool for corporate treasurers' Mainland investments and reinforcing Hong Kong's role as an offshore risk management centre. In July 2022, it was announced that mutual access arrangements between the interest rate swap markets of the two places would be established. Known as the Swap Connect, it will, for the first time, introduce mutual access in the realm of financial derivatives products, bolstering the comprehensiveness of the product suite trading under the mutual market access schemes. The Northbound trading of Swap Connect will be launched as soon as possible upon completion of the necessary preparation, facilitating parties in need, including corporate treasurers, to hedge against the risk of interest rate fluctuations of RMB assets. More risk management products such as Mainland government bond futures are being considered in parallel.
These measures will provide corporate treasurers with a greater variety of investment products to manage their RMB liquidity and meet their hedging needs, while enriching international and Mainland corporates' portfolio.
Added to all these, the Cross-boundary Wealth Management Connect in the GBA was formally launched in September 2021. Not only has it opened up a broader market for the financial and relevant professional sectors, but it also reinforces Hong Kong's role as an important gateway for capital flowing into and out of the Mainland. As of end-March 2023, cross-boundary funds remittances totalled over RMB3 billion.
Green and sustainable finance
Green and sustainable development is a priority for governments around the world. This is certainly true for the GBA. The GBA will empower corporates to tap into green finance-related projects. Leveraging Hong Kong's strengths as an international financial centre and the gateway between the Mainland and the rest of the world, Hong Kong is well positioned to connect the flow of green and sustainable funds with the GBA and the world to invigorate green investments and ecological civilisation. With the GBA at the forefront of innovation and green transformation, Hong Kong hosts a unique and convenient platform for corporate treasurers to participate in the financing of cutting-edge green technologies.
For example, in a ground-breaking move, a total of RMB10 billion of offshore RMB municipal government bonds were issued by the Shenzhen Municipal Government in 2021 and 2022 in Hong Kong, including green bonds.
Also, the Hong Kong Stock Exchange signed a memorandum of understanding with the Guangzhou-based China Emissions Exchange in March 2022 to explore co-operation opportunities in carbon finance, including jointly exploring the development of a voluntary carbon emission reduction programme in the GBA, with the aim of supporting the country's efforts to peak carbon emissions and reach carbon neutrality; and working together to share research and experience on carbon market financing and global carbon market standards. Carbon finance would surely open new doors for corporate treasurers to support global efforts toward a green transition.
Digital economy and fintech
The GBA is fast becoming an innovation hub with a firm anchor for the development of the digital economy. For Hong Kong, we issued a policy statement on virtual assets in October last year, which demonstrates our resolve to provide a facilitating environment for the sustainable and responsible development of the virtual assets sector in Hong Kong. We have also amended the Anti-Money Laundering and Counter-Terrorist Financing Ordinance to introduce a licensing regime for virtual asset service providers with strong investor protection elements. The regime will commence operation in June this year.
With technology playing an ever more important role in treasury management, the Hong Kong Monetary Authority (HKMA) and the People's Bank of China have established an agreement to "link up" the fintech regulatory facilities in the Mainland and Hong Kong. This will allow eligible financial institutions and technology firms to conduct pilot trials of cross-boundary fintech initiatives, concurrently in Mainland GBA cities and in Hong Kong, expediting the development of cross-boundary fintech products, including new treasury tools.
To nurture local fintech talents, we will launch an internship scheme for post-secondary students, under which financial support will be provided to participating students in Hong Kong and the GBA to facilitate them in acquiring practical work experience in fintech enterprises early on. If you are interested in offering placement opportunities, please let us know.
Hong Kong's advantages for corporate treasury centres
As the organisation of this CTWeek conference shows, Hong Kong is rebounding strongly. Over the past few months, we have hosted a large variety of world-class events, such as the Global Financial Leaders' Investment Summit, the Asian Financial Forum, Art Basel, Hong Kong Web3 Festival, Wealth for Good in Hong Kong Summit, to name but a few.
Closer to the CT front, Hong Kong's well-developed capital market enables corporations to access funding at lower costs. Our efficient regulatory framework, wide network of finance and treasury resources, and broad set of banking capabilities all facilitate corporations to manage their treasury activities via one integrated corporate treasury centre operation. Setting up corporate treasury centres in Hong Kong empowers corporations to use Hong Kong as a hub for onshore and offshore funds and leverage Hong Kong's cash pooling infrastructure to build an interconnected global cash management structure for global businesses. Our proximity to the Mainland and depth of RMB currency-related solutions are also offering unparalleled values to corporations setting up corporate treasury centres in Hong Kong.
Tax concessions
On a more personal note, I led the team in the Financial Services and the Treasury Bureau in amending the Inland Revenue Ordinance in 2016 to provide a conducive environment for the operations of corporate treasury centres in Hong Kong. The amendment allows interest deductions under profits tax for corporate treasury centres and reducing the profits tax for profits derived from foreign transactions involved in specified treasury activities by half. In 2018, we further amended the Ordinance to extend the half-rate concessions to profits derived from domestic transactions.
Following the establishment of the tax regime for corporate treasury centres, we have reached out to corporations through events and meetings to promote Hong Kong as the hub for corporate treasury centres. As of March this year, some 110 corporations have indicated that they are actively planning or have already set up their corporate treasury centres operations in Hong Kong. Concrete examples of corporate treasury centres in sectors such as transport, energy and retail can be found in the report "Corporate Treasury Centres in Hong Kong - New Opportunities and Case Studies" published by the HKMA in November last year.
Attracting enterprises and talents
To strengthen the ecosystem for our next stage development, the Government has set up the Office for Attracting Strategic Enterprises to welcome enterprises that are of strategic value to our economy. We have also launched a brand-new Top Talent Pass Scheme to entice high-income professionals and graduates from the world's top 100 universities, by granting them a two-year unconditional stay in Hong Kong. The response has been overwhelming, with more than 20 000 applications received after the launch in December last year.
Concluding remarks
Ladies and gentlemen, not only does the GBA present enormous opportunities for Hong Kong, but it is also a game changer for corporate treasurers. Combined with our fundamental advantages as an international financial centre, Hong Kong is the ideal cosmopolitan city for corporate treasury activities. Taking this opportunity, I would like to acknowledge the remarkable contribution of corporate treasurers to our commercial and financial development. The contribution of corporate treasury activities in enhancing Hong Kong's global competitiveness and strengthening Hong Kong's position as a major platform for Mainland enterprises to go global and for multinational corporations to manage liquidity in the region is immense. More corporate treasury centres establishing in Hong Kong will substantially support the development of our headquarters economy, facilitating corporations to raise funds and manage financial resources and risks through Hong Kong.
Thanks to the CorporateTreasurer for organising this conference. I wish you all a rewarding afternoon. Thank you.
Ends/Tuesday, April 25, 2023
Issued at HKT 19:40
Issued at HKT 19:40
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