Welcoming 2025 with the Fruits of Innovation, Reform and Change

At the start of 2025, I would like to wish fellow citizens, members of the financial industry and working partners from various sectors in Hong Kong the best of health and great success in the year ahead.  Looking back at 2024, Hong Kong rode the wave of global economic recovery and succeeded in seizing the opportunities that came with it.  By leveraging its distinctive advantages of having strong support from the Motherland and close connection with the world, the city achieved a number of policy breakthroughs by way of innovation, reform and change.  Such achievements have further consolidated our status as an international financial centre, as evidenced by our rankings in the Global Financial Centres Index, sitting third in the world and first in Asia.  Over the past year, we strived to capture the emerging opportunities in the global market and went all out to implement key measures in such areas as sustainable finance, artificial intelligence (AI) application, asset and wealth management, and financial market reform and innovation.  All these efforts have borne fruit, exhibiting our resilience and vitality amidst global instability.  Looking into 2025, we will maintain an innovative mindset to pursue policy reform in order to strengthen Hong Kong’s competitive edges further and achieve higher-level development.

In 2024, Hong Kong made significant strides in the area of sustainable finance, underscoring its leading role in global green transformation.  In December, the Government announced the Roadmap on Sustainability Disclosure in Hong Kong, providing a well-defined pathway for the full adoption of the International Financial Reporting Standards - Sustainability Disclosure Standards (ISSB Standards) by publicly accountable entities in Hong Kong.  The roadmap not only demonstrates our steadfast commitment to fostering global green transformation, but also provides a transparent and clear guide for market participants, enabling Hong Kong to align with international standards in the realm of sustainable finance.  The Hong Kong Institute of Certified Public Accountants subsequently published the Hong Kong Financial Reporting Standards (HKFRS) Sustainability Disclosure Standards, which will come into effect on 1 August 2025 to provide a standardised framework for the disclosure of climate-related information by companies.  These initiatives have further enhanced Hong Kong’s leading position in the global green finance market, laying the foundation for building a comprehensive sustainable finance ecosystem in Hong Kong.

In addition to the development of disclosure standards, we have set our sights on building a more extensive sustainable finance ecosystem.  Hong Kong is committed to promoting sustainability assurance, data and technology application, and capacity building to support market participants’ smooth transition to the new disclosure requirements.  Not only have we strengthened cross-agency co-operation and promoted the adoption of high-quality assurance standards, we have also facilitated the application of green financial technology (fintech) and provided the market with free data tools and efficient technological solutions.  Moreover, the Government, in collaboration with the industry, has been providing training on the relevant skills and competencies to ensure that Hong Kong can continue to attract international investors and maintain its leading position in the development of sustainable finance.  These efforts have not only demonstrated Hong Kong’s determination in promoting green economy transformation and addressing climate change, but also set a new benchmark for the global financial market.

 
The rapid growth of AI has far-reaching implications on the global financial market, and Hong Kong has taken a major step forward in this area.  In October 2024, the Government issued the Policy Statement on Responsible Application of Artificial Intelligence in the Financial Market, setting out an open and prudent policy approach that urges financial institutions to strike a balance between innovation and risk management in their application of AI technologies.  We encourage financial institutions to formulate an AI governance strategy and adopt a risk-based approach to ensure that human oversight can effectively mitigate potential risks.  The Hong Kong University of Science and Technology also makes its AI model and computing resources available and offers advisory and technical support to financial institutions, with a view to further promoting the application of AI.  Our policy statement covers three key attributes of AI application, namely data-driven, double-edged, and dynamic.  The statement also stresses the need to address challenges relating to cybersecurity, data privacy, protection of intellectual property rights, etc. in the application of AI technologies.

Apart from formulating policies, we have actively fostered co-operation with international organisations and law enforcement agencies in addressing the potential risks arising from AI technologies, particularly those relating to cybersecurity and financial regulation.  We have joined forces with the industry to enhance public understanding of AI technologies, while also promoting the industry’s awareness of the opportunities and challenges such technologies bring.  The adoption of AI technologies has enhanced the efficiency of our financial market and, more than that, created favourable conditions for attracting more innovation and technology enterprises and investors to Hong Kong.  The adoption of generative AI in Hong Kong financial institutions was the highest (38%) among all markets and well above the global average (26%).  In the future, we will continue to pay close attention to the development in AI technologies, with a view to ensuring Hong Kong’s steady advancement amid technological transformation and consolidating our role as a global financial innovation centre.

The asset and wealth management industry was another highlight of Hong Kong’s financial development in 2024.  Against the backdrop of global capital seeking diversified allocation, Hong Kong’s asset management business continued to grow, faring remarkably well.  As at the end of the first half of 2024, Hong Kong’s private equity capital under management exceeded US$233.9 billion, ranking second in Asia, making the city the largest hedge fund and cross-boundary wealth management centre in the region.  According to market estimates, there are more than 2 700 single-family offices operating in Hong Kong, over half of which have assets over US$50 million.  The limited partnership fund (LPF) regime, established in Hong Kong four years ago, reached a milestone last year, with the total number of LPFs registered exceeding 1 000.  These achievements have reflected not only international investors’ confidence in the Hong Kong market, but also our leading position in the realm of asset management.  To reinforce our edge in this area, we propose to enhance the existing tax concessions for the asset and wealth management industry.  The proposed enhancements include broadening the definition of “fund” to include pension funds and endowment funds and hence making them exempt from tax, and expanding the range of qualifying investments to include emission derivatives, insurance‑linked securities, loans and private credit investments, virtual assets and so on to draw in more international capital.

Meanwhile, the New Capital Investment Entrant Scheme has achieved notable results since its launch, with over 750 applications received, potentially bringing in more than HK$22 billion of investments.  To attract more high-net-worth individuals to invest and pursue development in Hong Kong, we will further enhance the scheme by allowing investments to be made through an eligible private company wholly owned by an applicant, thereby creating synergies between the scheme and the establishment of family offices in Hong Kong.  Furthermore, we propose to enhance the taxation arrangements for the carried interest issued by private equity funds, remove the hurdle rate requirement, and streamline administrative procedures, thus providing greater flexibility for fund managers and attracting more private equity funds to establish a presence in Hong Kong.  These initiatives have further strengthened Hong Kong’s position as a global asset and wealth management hub, injecting new impetus for growth into Hong Kong’s financial market.

The reform and innovation in the financial market was another highlight of the Government’s work in 2024.  The markets operated under the Hong Kong Exchanges and Clearing Limited hit a number of new highs last year.  In particular, the cash equities market recorded a daily turnover of HK$620 billion on 8 October 2024, which was testament to its vitality and appeal.  Hong Kong ranked among the world’s top four initial public offering (IPO) markets.  The amount of funds raised through IPOs, including the largest IPO since 2021, rose sharply from a year earlier, further reinforcing Hong Kong’s leading position in the global IPO market.  On market structure reform, we successfully implemented the Severe Weather Trading arrangements to ensure normal operation of the markets under extreme weather conditions and further enhance market efficiency.  Meanwhile, to contribute to the internationalisation of Renminbi (RMB), we continued to work with relevant Mainland regulators, actively exploring arrangements to promote the expansion of the mutual access mechanism and enhance the investment function of offshore RMB, such as the inclusion of real estate investment trusts under Stock Connect, the inclusion of RMB stock trading counters under Southbound Stock Connect, and the introduction of block trading under the mutual access regime.

On fintech, there are currently over 1 100 fintech companies in Hong Kong, up some 15% over the previous year.  We will continue to promote the application of technologies in such areas as central bank digital currency, mobile payment, digital banking and virtual asset trading, as well as the healthy, responsible and sustainable development of stablecoins and the Web3 ecosystem in Hong Kong.  With the implementation of the licensing regime for virtual asset trading platforms, Hong Kong has made steady progress in the regulation of virtual assets.  Seven trading platforms have so far been licensed, providing a robust and secure trading environment for market participants.  We have also introduced the Stablecoins Bill into the Legislative Council, with the objective of establishing a regulatory regime that suits local circumstances and aligns with international standards and practices.

Looking ahead to 2025, Hong Kong will continue to further enhance the competitiveness of its financial market with focused efforts on reform and innovation.  We will deepen co-operation with the Mainland and international markets, and capitalise on the opportunities arising from the global economic recovery and green transformation to bring Hong Kong’s economy to new heights.  The Government will apply innovative thinking to pursue policy reform, optimise market operations and strengthen infrastructure development to ensure that Hong Kong stay in front in the rapidly changing global economic environment.  We will also work with the industry to promote the healthy development of fintech, virtual assets and the Web3 ecosystem, with a view to providing new impetus for Hong Kong’s future economic growth.  At the same time, we will channel our efforts into attracting family offices and private wealth allocation and refine relevant policies, consolidating Hong Kong’s strategic position as a global capital hub.

2024 is a year of innovation, reform and change.  The achievements Hong Kong made in various areas would not have been possible without the support of our country, the leadership of the Chief Executive and the efforts of the industry.  I would like to express my heartfelt gratitude to all of you for your trust and co-operation over the past year, and I look forward to working with you again in 2025 towards a better future.

2 January 2025