12th March 2023 – (Hong Kong) Secretary for Financial Services and the Treasury, Christopher Hui wrote an opinion piece for CGTN today on Hong Kong’s essential role in China’s financial development.
During the first session of the 14th National People’s Congress, the government work report highlighted the importance of implementing “One Country, Two Systems” and “patriots administering Hong Kong” principles. The HKSAR government will support Hong Kong’s role as an offshore financial centre, as well as enhancing economic development, improving livelihood, and maintaining long-term prosperity and stability. Here are the major ways that Hong Kong will help in China’s financial development.
Integration into National Development
Hong Kong will promote its integration into national development to contribute to China’s financial sector’s high-standard opening-up. The HKSAR government will take advantage of national strategies such as the 14th Five-Year Plan and the outline development plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA). It aims to seize the opportunities brought by national strategies, promoting Hong Kong’s integration into the national development.
Pool of Offshore Capital
Hong Kong can act as a financing platform for mainland enterprises. Sufficient Private Equity (PE) funds can provide deeper support to enterprises in their early stages of development and when experiencing rapid growth. Additionally, a listing platform with ample liquidity can help raise offshore capital for mainland enterprises and enhance their governance.
Hong Kong Exchanges and Clearing Limited (HKEX) will introduce a new main board listing mechanism for Specialist Technology Companies, facilitating their listing and fundraising in Hong Kong. The HKEX will also help biotechnology companies’ pre-profit/pre-revenue listing, accentuating Hong Kong’s capacity to provide a flexible and favorable legal and regulatory environment for innovative forms of bond issuance. The government will enhance Hong Kong’s bond market’s overall competitiveness and manage the cash flow needs of major infrastructure projects, facilitating early completion for the good of the economy and the lives of local residents.
Boosting Two-way Investment
Hong Kong is a leading asset management centre in Asia, with assets under management amounting to $4.5 trillion in 2021. Around two-thirds of the funding was offshore capital sourced mainly from international investors and institutional investors. The HKSAR government has enhanced the competitiveness of its asset management industry, such as allowing the diversification of fund structures, establishing a re-domiciliation mechanism, providing a more facilitating tax environment for the fund industry, promoting the development of the real estate investment trust market, and providing subsidies.
The increase in assets under management will help attract more capital for investment in mainland enterprises and assets, thereby contributing to the inflow of international capital and facilitating offshore asset allocation by investors from the mainland.
Facilitating RMB Internationalisation
Hong Kong has been playing an essential role in strengthening offshore RMB business and facilitating the internationalization of RMB. Hong Kong is the world’s largest offshore RMB hub. The mechanism for mutual access between the financial markets in Hong Kong and the mainland has been running smoothly, with a surge in turnover recorded in recent years. Hong Kong can assist the mainland in opening up the financial market in an orderly manner and attracting offshore capital for investment in offshore RMB assets.
The HKSAR government is promoting the issuance and trading of RMB-denominated securities in the city. The HKEX will introduce a dual-counter market maker (DCMM) regime in the first half of this year to promote the liquidity of RMB-denominated stocks and price efficiency, as well as to tie in with the setting up of RMB trading counters by local issuers. The legislative council passed a bill exempting stamp duty payable for certain transactions by DCMMs.