What should the Financial Services and the Treasury Bureau do to contribute to our country and Hong Kong? Create wealth, improve efficiency and tap into future opportunities

With the commencement of the new term of the Hong Kong Special Administrative Region Government, we will, under the leadership of the Chief Executive, adopt a result-oriented approach to implement with all-out efforts the “four proposals” put forward by President Xi while bearing firmly in mind the “four musts” raised by him. Moreover, we will focus on propelling Hong Kong forward by promoting economic development and improving people’s livelihood. In this connection, when the Financial Services and the Treasury Bureau (FSTB) strategically assess the international situation and the positioning of Hong Kong to formulate specific work plans and indicators, we need to think about this core question: What should the FSTB do to contribute to our country and Hong Kong? My answer is: Scaling new heights for Hong Kong – 1) Create Wealth for Hong Kong; 2) Improve efficiency for the society; and 3) Tap into future opportunities.

Assessing the situation and identifying the right positioning
For some time in the past, the COVID-19 pandemic and geopolitical factors have triggered “economic tectonic movements” among countries and economies around the world, pushing the world towards deglobalisation, fragmentation and protectionism, as evidenced by those propositions and measures (e.g. localisation of supply chains, restriction on technology investments and imposition of unilateral sanctions) that have led to reduced global exchanges and connections. As there are a plethora of issues (e.g. the pandemic fight, global warming and development of digital economy) that require the joint efforts of the international community to resolve through negotiations, deglobalisation offers no help at all but only creates more uncertainties and challenges. In view of this, our country, being a responsible great power, has been insisting on working with its global partners to create an international environment conducive to development while opposing decoupling and supply cuts that benefit no one but harm the interests of all. Our country also advocates the development of an open world economy as well as the establishment of a more equitable and reasonable global governance system and institutional framework so that the world will not regress to a state of confrontation.

In the face of the profound changes in the international arena, Hong Kong should identify the right positioning and, bearing in mind the “four musts” raised by President Xi, leverage the unique advantages under “One Country, Two Systems” to support our country in building more “bridges and windows” worldwide and help promote global joint efforts in establishing an inclusive, balanced and co-ordinated development pattern that is conducive to win-win co-operation and common prosperity. In particular, it is of utmost importance that Hong Kong should consolidate and enhance its status as an international financial centre, help establish a closer link between our country and the world by facilitating integration of Mainland and foreign capital, promote economic growth and technological innovation, and use our financial power to build a sustainable future together with all parties. In short, our financial market should in the future continue to play the role of “defender” and “facilitator” of globalisation, build connections to link our national economy with other economies in the world, and help investors seeking growth and development participate in our national economic development and share the robust profits brought by our country’s economic engine.

Create wealth for Hong Kong
After identifying the right positioning for Hong Kong, the FSTB will accord top priority to take forward proactive policy initiatives to expand the market and hence create wealth for the local economy and the financial services industry. Below are the key areas of work in this regard.

The securities market is an important financing channel to support the growth of the real economy and enterprises. Our market size will grow if innovative reforms are introduced to the listing regime, such as providing facilitation for large-scale advanced technology enterprises to list and raise funds in Hong Kong. Moreover, the mutual access between the capital markets of the Mainland and Hong Kong has provided immense potential for growth and development. Take ETF Connect and Swap Connect (the launch of which has been announced recently) as an example, both can be enhanced and expanded continuously. For the next step, we will work with the Mainland authorities and regulators to explore the commencement of a new era of “Mutual Market Access 2.0”, having regard to the needs of our country and the market. Some measures that we may consider is to further expand the eligible securities of Stock Connect (for example, including more returning Mainland stocks listed in Hong Kong into the Southbound Stock Connect), and increase the choice of risk management tools for overseas investors. On the one hand, it will meet the asset allocation needs of mainland investors, and on the other hand, it will allow overseas investors to better invest in mainland assets and manage related risks, and strengthen the role of Hong Kong's risk management center.

On the development of our own market, the introduction of tax concessions for family offices will strengthen our role as an asset and wealth management centre which facilitates the convergence of global capital in Hong Kong. As for the diversification of financial products, the passage of the relevant legislation enables us to develop the new insurance-linked securities market, which will increase the capacity of the insurance industry and offer more investment options to institutional investors.

While the size and turnover of the financial market are affected by various macro factors rather than simply by individual policy initiatives, our work as shown above will definitely achieve quantifiable results which will be reflected in the performance of the local financial services industry in the medium to long term. For example, following the launch of the Stock Connect, the capital inflow brought by the Northbound Trading to the Mainland A-share market has reached over RMB1.6 trillion, while the inflow brought by the Southbound Trading to the Hong Kong stock market has exceeded HK$2.3 trillion. As for the asset and wealth management business, a dedicated team has been set up under InvestHK for the promotion of family office business. Since last June, assistance has been provided to 14 family offices to start or expand business. These family offices have made a total investment of over HK$1.2 billion in Hong Kong and are expected to create more than 180 new jobs in the coming two years.

Improve efficiency for the society
Apart from creating wealth, the FSTB will also review its internal processes and optimise the use of technology, so as to increase efficiency and improve governance as well as reduce costs and expenses, with a view to bringing actual benefits to society.

Starting from 2023-24 onwards, the Inland Revenue Department will, after making gradual enhancements to the existing platform, launch a new electronic platform for enterprises, tax representatives and individuals to file tax returns. Apart from offering better user experience, the new platform is expected to achieve a savings of about HK$170 million in three years. Meanwhile, the Official Receiver’s Office under the FSTB will launch a new platform for electronic submission service by end 2023. The platform will handle on average nearly 180 000 documents or forms received annually and will reduce the manpower costs by about HK$9 million every year. Lastly, the centralised e-MPF Platform for all employees, self-employed persons and employers in Hong Kong is expected to be fully implemented in 2025. By then, the centralised platform will handle the administration work of about 10 million MPF accounts in Hong Kong under the 27 schemes provided by 13 trustees. Not only will the administration costs of all MPF schemes be reduced by about 30% in the first two years, a quantifiable savings of as high as HK$30 billion to HK$40 billion will also be achieved in ten years after the launch of the platform.

The Government has also strived to enter into CDTAs with more tax jurisdictions. At present, the negotiation with about seven tax jurisdictions has entered a relatively advanced stage. We expect that about 47 large MNE groups and 18 conglomerates with operation in Hong Kong will benefit from the signing of these new CDTAs.

Tap into future opportunities
Our country is now the world’s second largest economy. Riding on the strong support of the motherland, Hong Kong should broaden its vision and horizon and, by capitalising on our financial strengths, further integrate into the national development, thereby creating more future opportunities.

Internationalisation of RMB is a top priority in promoting the development of our financial services industry. Thanks to the sustained economic growth of our country and its robust balance of payments structure, it will be a long-term trend for international investors to hold more RMB assets. As the investments in RMB assets offer stable returns and its market trend is differentiated from other assets, RMB assets is a favourable choice in asset allocation for institutional investors. In its recent evaluation on the weighting of special drawing rights conducted every five years, the International Monetary Fund has lifted the weighting of RMB from 10.92% to 12.28%, clearly reflecting the growing international recognition of the fact that RMB has become more freely usable. Looking ahead, the growth potential of RMB is huge as its share in the foreign reserves held by central banks worldwide is under 3% only whereas foreign ownership in the Mainland stock and bond markets is merely 3% to 5%. We will continue to take forward the policy of facilitating the progress of RMB internationalisation and implement key measures such as allowing the Southbound Trading of Stock Connect to be denominated in RMB. We will also further explore more feasible options of revitalising the offshore RMB ecosystem so as to increase the use of RMB in the capital market.

Following President Xi’s steer on “relying on Hong Kong, serving the Mainland and opening up to the world”, Qianhai has been positioned as the Shenzhen-Hong Kong Modern Service Industry Cooperation Zone since its development. As we have established close communication and co-operation mechanisms with the Qianhai Authority, ground-breaking measures will be rolled out jointly to assist the financial services industry of Hong Kong in seizing the opportunities in Qianhai. We will first focus on implementing preferential and facilitation policies for the private equity fund sector and promoting the establishment of a mechanism on the synergistic development of Shenzhen-Hong Kong venture capital and private equity industry.

Conclusion: Making active response with prompt action
Hong Kong has started a new chapter and is progressing from governance to prosperity. I will lead the FSTB to become a policy bureau of “active response” and “prompt action”. By taking forward pragmatic policy initiatives to create wealth, improve efficiency and tap into future opportunities, FSTB will strive to meet the earnest expectations of the Central Government and the general public.


Christopher Hui
Secretary for Financial Services and the Treasury

8 July 2022