LCQ19: Operation of Hong Kong Investment Corporation Limited
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Question:
The Chief Executive announced in the 2022 Policy Address the establishment of the Hong Kong Investment Corporation Limited (HKIC) to be responsible for managing $62 billion of investments. It has been reported that as at March this year, HKIC has invested in about 100 projects at different stages of development. There are views that while HKIC has been in operation for more than two years, there is a lack of transparency as it has yet to disclose detailed information on, among others, the progress of its investments and the remuneration levels of its various senior management staff. This has also aroused concern about whether HKIC can really do a good job in vetting its investments in cutting-edge industries, such as biotechnology, financial technology and big data. In this connection, will the Government inform this Council whether it knows:
(1) the total amount of investments currently managed by HKIC; the respective total expenditure (other than staff remuneration) and total income of HKIC in the past year;
(2) the establishment (including staff at all levels) approved by the Board of Directors of HKIC since its establishment; the total expenditure on the remuneration of its staff and the expenditure on the remuneration of its various senior management staff in the past year;
(3) the composition of the Investment Committee under the Board of Directors of HKIC, the investment experience of its members (e.g. the direct or indirect investment and merger and acquisition projects in which they have taken part, and the corresponding amounts of investments made in such projects), and the respective investment decision-making process of the Investment Committee;
(4) the number of days HKIC has operated since its establishment, the total number of investment projects vetted and screened, and the average number of hours required for vetting and screening an investment project;
(5) among the 100 or so investments made by HKIC, of the names of the enterprises in each investment, industries to which they belong, their nature (that is, whether they are direct or indirect investments), the percentage of shareholding, the projected rate of return on the investments, the investment period, and whether there is any exit mechanism;
(6) given that HKIC will organise the Roundtable for International Sovereign Wealth Funds and the Summit on Start-up Investment and Development in Hong Kong, of the respective estimated expenditure and objectives of these two events; and
(7) whether HKIC has formulated various performance indicators or quantifiable standards (including but not limited to the number of enterprises facilitated to be listed in Hong Kong, the number of new job opportunities, the share of the industries in the Gross Domestic Product, and the definition of reasonable medium-to-long-term financial returns, etc.), so as to achieve the objective of enhancing Hong Kong's long-term competitiveness and economic vitality?
Reply:
President,
In consultation with the Hong Kong Investment Corporation Limited (HKIC), the reply to the seven parts of the question is as follows:
In the 2022 Policy Address, the Chief Executive announced the establishment of the HKIC to manage a total of HK$62 billion under the Hong Kong Growth Portfolio, Greater Bay Area Investment Fund, Strategic Tech Fund, and Co-Investment Fund. The positioning of the HKIC is to capitalise the power of "Patient Capital" to channel market capital and leverage market resources, with a view to attracting technology enterprises to set up and continue their operations in Hong Kong, thereby accelerating the development of a vibrant strategic industry ecosystem, while seeking a reasonable financial return over the medium to long term.
Investment Work Progress and Due Diligence
Since its establishment, the HKIC has invested in more than 100 projects, including enterprises with cutting-edge technologies or in key industries. These projects are medium-to-long-term investments. Key themes include Hard & Core Technology, Biotechnology and New Energy & Green Technology, with the proportions being 56 per cent, 16 per cent and 11 per cent respectively based on the invested amount.
With the further implementation of the HKIC's investment, the relevant impact has become increasingly apparent, including (1) further activating the relevant innovation and technology (I&T) ecosystem in Hong Kong, attracting more cutting-edge technology enterprises to set up their operations in Hong Kong or expand their scientific research teams in Hong Kong, enabling Hong Kong-based start-ups to explore and expand into Asian and international markets, and facilitating more cross-sector and cross-industry exchanges between the technology and industry segments; and (2) leveraging market capital to support the development of local technology enterprises.
The HKIC actively collaborates with different investment institutions, jointly making investment with them, and promoting the continuous development and application of cutting-edge technologies in Hong Kong. As of March 2025, every Hong Kong dollar invested by the HKIC has attracted over four Hong Kong dollars from long-term capital in the market for investment. Each of the above projects has on average investment participation from two to three investment institutions.
The HKIC has clear requirements for investee companies to contribute to Hong Kong's development in a sustainable manner, such as requiring the companies to establish offices in Hong Kong, nurture and attract talents, establish research and development departments and/or corporate venture capital (corporate VC) departments in Hong Kong, and prioritise Hong Kong for their listing. Many investee companies have made good progress in attracting capital and talents as well as exploring new markets, which has accelerated their planning for business development with Hong Kong as the platform. Certain investee companies have submitted their listing applications to the Hong Kong Exchanges and Clearing Limited.
In order to maximise the contribution of each investment to Hong Kong and to fully leverage the channelling force of the HKIC's capital, the HKIC currently focuses on making direct and co-investments. Notwithstanding, having regard to the specific circumstances of each project (including geographical locations, investment themes, financing rounds, legal and compliance considerations), the HKIC will flexibly adopt different strategies, including but not limited to modes of investment such as equity, debt, or a combination of both, as well as different holding arrangements (including structure, holding period, and design of exit clauses).
The HKIC has a robust due diligence and risk assessment mechanism. Drawing reference from the approach adopted by other long-term capital and institutional investors in the market, in addition to its internal team, the HKIC will hire external experts and institutions to support its relevant work when necessary. The time required for reviewing and screening varies for each project having regard to the differences in the specific circumstances of the project. Moreover, all investment projects are reviewed and approved by the Board of Directors (Board) or the Investment Committee under the Board.
Organisational Structure and Governance and Operational Arrangements
The HKIC's organisational structure and operational arrangements (including budget) are reviewed and approved by the Board. Currently, the HKIC has four major departments, namely the Investment Department, Risk and Compliance Department, Legal Department and Corporate Affairs Department, with a total headcount of 53. With the full commencement of the HKIC's work, the organisational structure is expected to be further strengthened, particularly on post-investment monitoring and legal areas.
The HKIC reports to its Board on matters relating to its operations and investments. Apart from officials from the relevant government bureaux, the Board also comprises industry leaders from non-official backgrounds, including experts, academics and professionals with specialised technological backgrounds and extensive start-up experience. All investment projects are reviewed and approved by the Board or the Investment Committee under the Board. The Board will continue to review the governance and operational arrangements of the HKIC as and when appropriate, taking into account the direction of investment and the development needs of Hong Kong.
With a view to allowing the public to have a more comprehensive understanding of the HKIC's operation and business outcomes, the HKIC plans to publish its inaugural annual report in the second half of this year to present the progress of its operation and investment.
Events to Promote Investment
The HKIC is pressing ahead with the organisation of the 2025 Hong Kong Start-up Investment and Development Summit and the International Forum for Patient Capital (Forum). These two events will bring together key stakeholders from I&T field spanning government, industry, academic, research and investment sectors, providing them with a platform to exchange multi-dimensional views regarding topics on I&T, entrepreneurship and venture investment of Hong Kong, with a view to joining hands in building a vibrant ecosystem. In addition, the Forum will invite international "Patient Capital" investment organisations, including sovereign wealth funds, to attend, and encourage them to actively engage in Hong Kong's financial market and I&T ecosystem. The HKIC is taking forward the preparatory work and will announce the details of the events in due course.
Ends/Wednesday, April 16, 2025
Issued at HKT 15:44
Issued at HKT 15:44
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