HK economy growing well

Financial Secretary Paul Chan

I would like to share with you what we are doing, and what we are planning to do, to get where we want to be.

 

To some extent, of course, the future of Hong Kong – a small, export-oriented economy – is shaped by the world around us: the global economy, our business partners and our prospective partners.

 

There were moments, last year, when it seemed the sky might splinter if not fall. Today, with the first quarter all but done, I must say it is looking just fine, thanks. Indeed, it’s looking very spring-like: full of promise and possibilities.

 

Starting with the US economy. As US Federal Reserve head Janet Yellen said, earlier this month, following the announcement of the Fed’s second rate hike in the last three months, “The simple message is the economy is doing well.” To that, I can only add: please continue doing well.

 

The European Union is also moving, if moderately, in the right direction, while the Mainland economy continues to grow. Trade flow in Asia overall has picked up.

 

I am not suggesting a year of crystal-blue skies, not with all the momentum-draining variables out there. Known or unknown. In the US, faster-than-expected interest-rate hikes could deepen policy divergence among major central banks, shifting capital flows and sparking renewed global financial market volatility. It could also have a negative impact on asset prices here in Hong Kong.

 

US protectionism a trade concern

And more than tea leaves may be required to work out the new US administration’s overall policy direction, with its seeming embrace of protectionism – a concern for global financial markets as well as trade.

 

Brexit negotiations ahead may create broader turbulence, and general elections in France and other major European economies have the impact to ratchet up the risks to our global economy – and, of course, to Hong Kong.

 

The good news is that our economy in 2016 got stronger the further we moved through the year, growing by some 3.1%, year-on-year, in the fourth quarter, thanks largely to improving exports and resilient domestic demand.

 

This year, our external trade should benefit from a more benign global economic environment. The Trade Development Council’s Export Index rebounded from 33.7% in the fourth quarter last year to 47.1% through the first quarter this year. Our export confidence was up for all our major markets. Separately, the improvement in visitor arrivals in recent months could well boost our services exports and retail sales.

 

I am hopeful, too, that domestic demand will hold up, boosted by a variety of variables, from full employment and favourable income conditions to intensive building and construction activity. And I am confident that the fiscal package delivered in my February Budget Speech will stimulate the economy.

 

Modest economic growth forecast

Taking that, and more, into consideration, I believe that the Hong Kong economy will grow 2% to 3% in 2017. Up modestly from last year’s 1.9%.

 

As for inflation, it’s expected to ease further, from 2.3% last year to 2% in 2017.

 

The long-term promise of Hong Kong begins with our location – at the heart of Asia. The economic centre of gravity has long been shifting to Asia, and the pace of that movement has accelerated since the 2008 Global Financial Crisis. Asia, today, is the engine of global growth.

 

The Mainland continues to lead the way, even as its shifts from investment- and manufacturing-led growth to a greater focus on services and consumption.

 

Hong Kong’s deepening economic integration with the Mainland and our ties to other Asian economies have served us well. Indeed, we have benefitted hugely from the region’s enviable growth and sustained wealth accumulation. As has, I might add, Credit Suisse in its strategic focus on the Asia-Pacific region.

 

Moving to the future tense, Hong Kong will continue to benefit from our deep regional and strategic ties.

 

HK among the world’s top five IPO fundraising centres

Getting to the meat of the matter – 2016 was another good year for Hong Kong’s equity market. For the second year in a row, we ranked first, globally, in funds raised through initial public offerings (IPOs). Indeed, we have been among the world’s top five IPO fundraising centres for the past 15 years.

As of January, our market capitalisation exceeded HK$26 trillion.

 

Such achievements would not have been possible without our resourceful, ever-adaptable industry. And this Government is committed to doing all it can to perpetuate success at a world-beating level.

 

That’s why, in my February Budget Speech, I pledged to further develop our listing platform. Why Hong Kong Exchanges & Clearing is now looking at ways to enhance our listing competitiveness.

 

Together with the Securities & Futures Commission, our securities regulator, HKEX is reviewing its Growth Enterprise Market board and looking into the feasibility of introducing a new board. Down the road, it will launch a public consultation on the suggested proposals.

 

Launching more financial products

We are putting considerable effort, as well, into our bond market, looking to expand our product list. Alongside the iBond, Silver Bond and other securities, we issued two US$1 billion, five-year sukuks over the past two and a half years.

 

Guided by their success, we issued a third sukuk just about four weeks ago. Its issuance size is US$1 billion, and it will mature in 10 years. It’s also worth noting that Hong Kong is the first AAA-rated government to launch a sukuk with a 10-year tenor.

 

This extends the yield curve and sets an important benchmark for potential issuers – both in Hong Kong and around the world. Not less important, it showcases Hong Kong’s ability to service Islamic finance.

 

We are committed, as well, to the offshore Renminbi bond market. Its continuing development will enhance our bond market, while boosting our offshore Renminbi business.

 

Hong Kong’s first Renminbi bond was issued 10 years ago. Today, the cumulative amount of offshore Renminbi bonds issued here has reached RMB735 billion. Issuers range from the Central People’s Government to a wide variety of financial institutions and corporations from the Mainland and around the world.

 

The Bond Connect boosting HK’s bond market 

More good news on the development of Hong Kong’s bond market: the announcement by Premier Li Keqiang two weeks ago about the Bond Connect is a testimony of our continued effort in this respect.

 

Asset management is another fast-growing segment of our financial sector. And for good reason. Economic liberalisation, deepening capital markets and rapid economic growth in Asia have led to accelerated wealth accumulation, and to greater demand for asset and wealth management services in the region.

 

Corporations licensed for asset management here enjoyed a year-on-year growth of about 15 per cent.

 

Our combined fund-management business weighs in at some HK$17 trillion. Hardly pocket money.

 

And, rest assured, we are working to strengthen Hong Kong’s position as a premier asset management centre.

 

One key initiative is last year’s legislative framework for open-ended fund companies. The new fund vehicle will attract more funds to Hong Kong, expanding industry offerings while helping build Hong Kong’s fund creation capabilities.

 

We expect the initiative to be up and running next year.

 

Let me add that in my Budget, I announced that all open-ended fund company forms – onshore or offshore, publicly or privately offered – would enjoy a profits-tax exemption.

 

The mutual recognition of funds also offers considerable benefits. Since the 2015 implementation of a mutual recognition of funds arrangement with the Mainland authorities, 54 funds have been authorised. These are now being offered directly to retail investors in the two markets.

 

Aggregate net sales to date amount to some RMB8 billion.

 

Hong Kong’s attractiveness as a fund domicile received another boost in December, when we entered into a similar arrangement with Switzerland.

 

HK the world’s largest offshore Renminbi business hub 

I mentioned, earlier, the value of our Renminbi bond business. Hong Kong’s Renminbi involvement, of course, goes well beyond bonds. Indeed, we are now the world’s largest offshore Renminbi business hub.

 

Our offshore Renminbi liquidity pool counts some RMB600 billion. In 2016, banks in Hong Kong handled over RMB4.5 trillion in trade settlement, a more than tenfold increase in just the past six years. Indeed, this volume accounts for about 75% of all the offshore Renminbi settlements in the world.

 

The Belt & Road Initiative will offer additional opportunities to expand our cross-border Renminbi fund flow – and a great deal more beyond that, to be sure.

 

Indeed, Hong Kong is well placed, well equipped, to help promote closer economic co-operation and connectivity among the more than 60 countries that have embraced a Belt-Road future.

 

Infrastructure financing, asset management and risk management are just a few areas that Hong Kong can put its financial know-how to good use.

 

The Infrastructure Financing Facilitation Office for Belt-Road projects

To take full advantage of the opportunities, the Hong Kong Monetary Authority last year set up the Infrastructure Financing Facilitation Office. Its goal is to spur the investment and financing of Belt-Road infrastructure projects by bringing together key stakeholders.

 

To date, more than 60 Mainland, Hong Kong and international organisations, including multilateral financing agencies, development banks, investors, asset managers and professional services firms, have joined the Office as partners.

 

Last week, the Asian Infrastructure Investment Bank approved Hong Kong’s application as a non-sovereign member. We are going to obtain LegCo’s funding approval for capital subscription as soon as possible and expect to complete the formalities by the middle of this year. We expect, as well, that our financial and professional services sector will provide valued support to the Bank’s operations and will benefit immensely from such involvement.

 

And then there’s Fintech. According to Accenture, global investment in Fintech ventures grew 10%, to US$23 billion, in 2016.

 

And the good news, certainly from my perspective, is that the Mainland and Hong Kong together accounted for almost half of that total, surpassing North America for the first time.

 

Developing Fintech

Hong Kong, blessed with a sophisticated information and communications infrastructure to support its deep pool of financial talent, can become the prime springboard for global Fintech companies looking to enter the Mainland market. No less important, Hong Kong can connect Mainland Fintechs eager to “go global”.

 

We are working to fast-track the development of Fintech in financial service providers of all sizes.

 

Banks can now use the Hong Kong Monetary Authority’s Fintech Supervisory Sandbox to test their Fintech initiatives, doing so without having to fully comply with the usual supervisory requirements.

 

And some 50 Fintech start-ups are receiving comprehensive support under Cyberport’s dedicated Fintech incubation programme, launched also last year.

 

Our target is to help 150 Fintech start-ups scale up their business by 2020. Our ambition is somewhat loftier: we would like to help raise a prized unicorn, or three, from the herd.

 

The Government is determined to promote Hong Kong as a hub for the application and setting up of standards for Fintech. That includes distributed ledger technology.

 

The HKMA and the Hong Kong Applied Science & Technology Research Institute are exploring, with a number of banks, the feasibility of applying distributed ledger technology. Last year, they published a White Paper on this.

 

They will continue to examine the technology in the coming year, keen to make it happen for Hong Kong.

 

While I can’t predict the future, and while Hong Kong can’t simply will it, we can plan for it. What’s more, we can help enable those plans.

 

In that regard, it certainly helps that Hong Kong is blessed with a “one country, two systems” framework. That our economic fundamentals are robust, our financial system resilient and our professional services sector multicultural and multi-talented.

 

Financial Secretary Paul Chan gave these remarks at the Credit Suisse Asian Investment Conference 2017 on March 27.

 

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Developing cruise tourism

Secretary for Commerce & Economic Development Gregory So

Last Saturday, Queen Mary 2 and Seabourn Sojourn berthed at the Kai Tak Cruise Terminal simultaneously; and on Sunday, the terminal received Genting Dream and Costa Victoria in the morning, and MSC Lirica together with Hapag-Lloyd Europa 2 in the afternoon. It was the first time ever that four cruise vessels berthed at the Kai Tak Cruise Terminal during different time of the same day. The Ocean Terminal in Tsim Sha Tsui was also busy with welcoming two international cruise vessels, namely Hapag-Lloyd Europa and Crystal Symphony at the same time. Only at one weekend, these eight cruise vessels brought a total of over 10,000 cruise visitors to Hong Kong.  The cruise vessels were from multiple international cruise brands, with itineraries covering homeporting and transit calls at Hong Kong, and with both long and short durations. These illustrate clearly the diversified cruise tourism market in Hong Kong.

 

The Kai Tak Cruise Terminal has gained considerable experience in receiving mega-sized cruise vessels. With the concerted efforts of the Tourism Commission, relevant Government departments and the terminal operator through discussing the arrangements and preparing suitable operational plans, the overall operation and transport arrangements were smooth and orderly even under the exceptional scenarios of having four cruise vessels at berth within the same day. This demonstrates the Kai Tak Cruise Terminal’s capability of and capacity to receiving and handling mega-sized cruise ships in order to support the rapid development of cruise tourism in Hong Kong.

 

Queen Mary 2 will return for its second visit of the year and berth at the Kai Tak Cruise Terminal on April 1, bringing more than 2,000 cruise visitors to Hong Kong, the majority are overseas “fly-cruise” visitors i.e. visitors taking flights to Hong Kong to join cruise journeys; or ending their cruise journeys at Hong Kong and then take flights back home.  The cruise line said that the number of their “fly-cruise” visitors with cruise journeys starting at Hong Kong increased by 30% last year. Most of these visitors would stay for a few days in Hong Kong for sightseeing and shopping prior to their cruise journeys, bringing economic benefits to Hong Kong.

 

In fact, one of our strategic directions for cruise tourism development in Hong Kong is to cultivate more diversified source markets through promoting “fly-cruise” tour.  The Government has allocated an additional funding of $10 million in the Budget last year to cooperate with cruise lines or travel agents, on a matching basis, for the promotion of “fly-cruise” tour through the Hong Kong Tourism Board. The programme aims to encourage more overseas visitors to take flights to Hong Kong for joining cruise journeys, and to stay overnight in Hong Kong before or after their cruise journeys. This can increase their length of stay and spending in Hong Kong, thereby benefiting the hotels, the attractions, retail as well as other related industries. The programme receives positive feedback and is well-received by the trade.

 

The Government is committed to promoting the further development of cruise tourism. We will refine our strategic directions for cruise tourism development and launch corresponding initiatives from time to time so as to attract more cruise vessels and cruise passengers to Hong Kong. The specific initiatives for 2017 include: (i) to continue with “fly-cruise” tour promotion to cultivate the Southeast Asia and long haul source markets; (ii) to introduce a shore excursion products scheme for cruise passengers, so as to encourage travel agents and the travel trade to design shore excursion itineraries with more local features, and to encourage more cruise passengers to visit Hong Kong, extend their length of stay, increase their spending and enhance the attractiveness of Hong Kong as a cruise destination; and (iii) to strengthen the promotion at the Southern China market for increasing the penetration of cruise tourism in Hong Kong thereat. The above measures aim at expanding the source markets for cruise tourism in Hong Kong and to benefits different sectors of the trade, so as to bring greater overall economic benefits to Hong Kong. The Government will increase the resources allocated to HKTB in taking forward the above initiatives.

 

With the concerted efforts of stakeholders concerned, the cruise tourism in Hong Kong has been growing steadily over the past few years. The overall number of ship calls in Hong Kong increased by 115%, from 89 in 2013 to 191 in 2016. Moreover, the overall cruise passenger throughput (arrivals and departures) increased by 254%, from around 190,000 in 2013 to around 677,000 in 2016. We expect that in 2017, both the number of ship calls and passenger throughput will continue to record growth, and amongst which, the number of ship calls at KTCT is expected to go up further to around 200.

 

We see immense potential in developing cruise tourism in Hong Kong. We will continue to keep abreast of the latest development of cruise tourism internationally and within the region. We will also evaluate the strategic development directions for cruise tourism periodically and to launch suitable measures, with a view to developing Hong Kong into the leading regional cruise hub.

 

This article by Secretary for Commerce & Economic Development Gregory So was published on March 25.

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HK a globalisation success story

Chief Executive CY Leung

It gives me great pleasure to be here today, to share with you Hong Kong’s perspective, and our experience, in globalisation and free trade.
      
These two realities are, to be sure, closely related. Free trade helps create a globalised economy, where finished products often comprise materials and components from different parts of the world. Trade also grows faster, and easier with global economic integration – thanks to the expedited flow of goods, services, capital, people, knowledge and technology across borders.
 

HK, free trade’s firm supporter      
Hong Kong has always been a staunch supporter of free trade. Article 115 of the Basic Law, our mini-constitution, stipulates that Hong Kong shall, and I quote, “pursue the policy of free trade and safeguard the free movement of goods, intangible assets and capital.” Unquote. There are no tariffs on goods entering Hong Kong. And we do not subsidise our exports. We offer a level playing field for all companies – local or foreign, large or small. It is no surprise that Hong Kong has been ranked the freest economy in the world for the past 23 years in a row by the Washington-based Heritage Foundation.
      
If there is one thing that Hong Kong can share on global economic development, it would be Benjamin Franklin’s insight that “no nation was ever ruined by trade, even seemingly the most disadvantageous”. Free trade, after all, is the framework upon which our prosperity rests.
      
Hong Kong, with an area of only 1,100 sq km, has little natural resources. But that turned out to be a blessing in disguise, for we have little choice but to invest in our people, technology and, no less importantly, trade and commerce, which in turn depends on regional and international connections and connectivity.
      
We started out as an entrepôt in trade between the Mainland of China and other parts of the world, then an international trade centre offering all kinds of commercial, financial and professional services. Today, Hong Kong is the world’s seventh-largest exporter of merchandise trade and the 14th-largest exporter of commercial services. Last year, the total value of trade in goods came in at US$974 billion, and total trade in service amounted to US$172 billion. Trading and logistics contributes 22% of Hong Kong’s GDP, employing about 750,000 people.
      
So because of trade – free trade – we have been able to punch above our weight. Our experience clearly shows that free trade not only creates wealth and jobs, it also promotes innovation and competition, encourages savings and investments, and enables more goods and services to reach consumers at lower prices. It is no coincidence that Hong Kong is hailed as Asia’s “shopping paradise”, as well as the world’s second largest recipient of foreign direct investment.
      
We will continue to uphold free trade. All the more in the age of globalisation and technology, where people, societies and businesses are increasingly bound together, fostering international collaboration and specialisation, as well as lowering transaction costs across national boundaries. While there may be temporary aberrations and setbacks for domestic political play, we believe that longer-term, trade globalisation is an irreversible trend.
      
As a founding member of the World Trade Organisation, Hong Kong has always been an active member of the multilateral trading system. And, under “one country, two systems”, “Hong Kong people administering Hong Kong” with a high degree of autonomy, we are empowered by the Basic Law to pursue trade agreements with our trading partners. Article 151 allows us to conclude and implement agreements with foreign economies and international organisations in economic, trade, financial and other fields.
      
We are now deep into Free Trade Agreement negotiations with ASEAN – the Association of Southeast Asian Nations – our second-largest trading partner after the Mainland of China.
 

HK extending its global reach    
As for Investment Promotion & Protection Agreements, we concluded IPPAs with Canada and Chile last year, bringing the number of IPPAs signed by Hong Kong to 19. We initialled a draft text with Mexico this January, and are looking to negotiating IPPAs with Iran and Russia.
      
In support of our efforts to advance trade co-operation with the world, the Hong Kong Government is expanding its network of overseas representation, in the form of Economic & Trade Offices (ETOs). Last year, we set up an ETO in Jakarta, where the ASEAN secretariat is located. This year, we will open an ETO in Seoul. And we have begun work on establishing ETOs in India, Mexico, Russia, South Africa and the United Arab Emirates. Our goal is to take the number of ETOs in foreign countries from 11 – the number when I took office four and a half years ago – to a total of 18.
      
Meanwhile, our Trade Development Council and Invest Hong Kong, with offices around the world, serve to promote Hong Kong as a global trade and investment hub through regular business fairs, conferences and visits.
      
We continue to reach out to the world in trade, because we know that trade liberalisation expands economic opportunities. In recent years, however, some economies have turned to restrictive trade measures in the wake of anti-globalisation sentiments and economic difficulties at home.
      
Protectionism is never the answer. High tariffs can only protect domestic industries for so long. In the long-term, protectionism hurts the economy. Productivity will decline, innovation will be strangled without competition, goods and services will be more expensive, real wages will decrease, and standard of living will drop.
      
As President Xi Jinping said at the World Economic Forum in Davos earlier this year, and I quote, “Pursuing protectionism is like locking oneself in a dark room. While wind and rain may be kept outside, that dark room will also block light and air. No one will emerge as a winner in a trade war.”  We must, said President Xi, “remain committed to developing global free trade and investment, promote trade and investment liberalisation and facilitation through opening-up and say no to protectionism.” Unquote.
      
Such commitment was, I am glad to note, shared among global economic leaders at the APEC Economic Leaders Meeting in Peru last year, where leaders of the 21 member economies – including Hong Kong, China – pledged to “support free and open trade and investment”, and to “resist all forms of protectionism”.
      
Indeed, the solution to domestic economic difficulties lies not in palliative trade distorting measures, but in finding new ways to grow the economy, in creating new industries and better-paid jobs, in helping domestic industries adapt and upgrade, and in building a fairer system for distributing globalisation gains.
      
Hong Kong, rest assured, will continue to work with the world in furthering trade liberalisation – not only for the benefit of ourselves as a free trade economy, but of all countries and all peoples who can, and will, profit from the wellspring of opportunity and prosperity that comes with free trade and globalisation. Hong Kong’s experience – Hong Kong’s success – is the most compelling testimony.
 

Chief Executive CY Leung made these remarks at the Boao Forum for Asia Annual Conference in Hainan on March 24.

 

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New taxis to meet market demand

Secretary for Transport & Housing Prof Anthony Cheung

Responses from the public and taxi trade to the Government’s latest proposal on franchised taxis seem to be quite diverse. The public generally welcomes the new choice and calls for its early introduction, whereas some members of the taxi trade are worried about the impact of the new franchised taxis on existing taxis.

 

The Government has all along been listening to views in the wider community. The Government first mooted the idea of a new premium taxi service in November 2015, to meet the community’s demand for personalised and point-to-point public transport services of higher quality. We have met with the taxi trade, unions and other stakeholders through various channels, as well as monitoring public opinions and media comments. Suitable adjustments are now made to the preliminary proposals put forward in June 2016, to address the concerns and worries of the taxi trade on the one hand, and to better meet the passenger demand for more efficient and higher quality “online car hailing” service on the other hand.

 

The 600 franchised taxis to be introduced represent only about 3% of the 18,000-odd taxis in Hong Kong. Hence they should not be seen as a threat to the survival of ordinary taxis. Their role is to bridge the gap in the existing taxi market and respond to a very clear market demand for new choice. With differential in fare level as well as operating and service features (including each fleet will be required to comprise at least 50% of wheelchair-accessible taxis), it will help define two complementary taxi sectors. As an international city, Hong Kong can accommodate two types of taxis to meet the diversified demand, just like, for example, Singapore and Tokyo.

 

In response to the concern of some trade members about an unrestrained number of franchised taxis in future, the Government has now proposed to stipulate a statutory cap on the number of franchised taxis at 600. Any future adjustment of the cap will require legislative amendment.

 

Having regard to the views of the taxi trade, the Government may consider relaxing the proposed mandatory tendering requirement to have a formal employer-employee relationship between the franchisee and the drivers. Yet, we still consider an employer-employee relationship conducive to providing employment stability for drivers and attracting new blood to the trade. Hence, tenderers’ specific proposals for monitoring drivers’ service quality as well as their reward and penalty system will be an essential criterion for assessment.

 

To address the concern that existing taxi operators may be excluded from participating in the franchised taxi market, the Government now proposes to give higher score to tenderers with experience in operating taxi and other public transport services in Hong Kong, provided they will operate the new service under the franchise model. We further propose that operators be required to pay a franchise fee.

 

Some worry that the launch of franchised taxis may aggravate traffic congestion.  Looking at it from a different perspective, the target clienteles of franchised taxis will include some private car commuters; hence franchised taxis may actually help reduce the number of private cars on the road.

 

In response to the taxi trade’s concern about the shortage of drivers, we consider that appropriate facilitating measures (including proper driver training and more stable and better-protected employment arrangement) will help attract new blood to the trade.  The Government is reviewing the existing requirement that applicants for driving licences of commercial vehicles (including taxis) must hold a valid licence for driving a private car or light goods vehicle for three years and above.

 

Franchised taxis are a new choice for passengers who need premium service, while existing taxis, with lower fare, will continue to provide the bulk of taxi service for the general public. As such, the Government will certainly not abandon the existing 18,000-odd taxis. We will continue to work closely with the taxi trade to explore how to improve the existing taxi service and formulate some proactive facilitation measures.

 

In the course of studying the launch of franchised taxis, the Government has listened to the views of the whole community, not just those of the taxi trade. We are not working behind closed doors. The public demands more choices and reforms. We have to think out of the box and act responsibly.

 

Secretary for Transport & Housing Prof Anthony Cheung issued this article on March 23.

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Nurturing young athletes

Chief Executive CY Leung

2016 was a busy year for Team Hong Kong. Among countless other sports competitions, our athletes joined the world’s very best in the Rio Olympic Games and the Rio Paralympic Games. Winning medals, applause, admiration and respect – from not only fellow Hong Kongers, but all those who had watched you play; all those moved by your tenacity, perseverance, and your can-do spirit.

 

Such is the spirit of Hong Kong. You have inspired our young people as to the value of passion, commitment, diligence, and team work. And this is how sports go beyond entertainment and recreation. How sports build a community that is healthier, livelier, and stronger.

 

So I am very pleased to see an increasing interest in sports among Hong Kong people. Many of our young ones, in particular, are showing potential as top athletes. Our Rio Olympics delegation, for example, was on average below 23 years old. Over 70% of them qualified for the Olympics for the very first time.

 

This is encouraging news, and proof that the Government’s efforts in nurturing young athletes and promoting sports development are bearing fruit.

 

This year, we are devoting more resources to promoting sports in the community and supporting elite sports. In my Policy Address, I announced that the Government will inject $1 billion into the Elite Athletes Development Fund. We will spend $20 billion in the coming five years to build and improve sports and recreation facilities, counting a total of 26 projects and 54 facilities – sports grounds, football pitches, tennis and basketball courts, a sports centre, swimming pool complexes, and others.

 

And of course, the Kai Tak Sports Park – the largest sports complex to be built in Hong Kong – is in the pipeline. Pre-construction will begin next year, for completion in 2022. Once in operation, we will be attracting even more international sports events to Hong Kong, enhancing our image as Asia’s sports city.

 

My heartfelt thanks to the Sports Federation & Olympic Committee of Hong Kong, China, and today’s title sponsor, Samsung, for organising this celebrated event. My thanks, as well, to the SF&OC, athletes, trainers, medical professionals, and everyone else who played a part in Hong Kong’s sporting achievements in 2016.

 

I congratulate all winners of the Hong Kong Sports Stars Awards, and wish you tremendous success in future games. Thank you.

 

Chief Executive CY Leung gave these remarks at the Samsung 2016 Hong Kong Sports Stars Awards Presentation Ceremony on March 21.

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Keeping HK competitive

Financial Secretary Paul Chan

Spring, of course, is the new season. A time of change, of beginnings – in nature certainly and, this year, in politics as well. What with the fourth Hong Kong Chief Executive to be elected in just five days’ time.

 

That impending, imposing, reality means that the 2017-18 Budget will straddle two terms of Government, two Chief Executives.

 

That presented a challenge in preparing the Hong Kong Budget for next year. It had to be forward-looking, but without pre-empting too much the next-term Government. It had, in short, to balance the demands for the moment with the needs of the future.

 

On the local economy, we have made, I am pleased to tell you, a good start to the year. The Trade Development Council’s Export Index rebounded from 34 in the fourth quarter of last year to 47 through the first quarter of 2017. Our export confidence was up for all our major markets.

 

Exports and retail sectors recovering 

More recently, Asia’s production and trading activities also strengthened. That will lift Hong Kong’s goods exports. If the recent improvement in inbound tourism continues, it will surely support our recovery in services exports and retail sales as well.

 

The labour market in Hong Kong, which is in a state of full employment, should continue to underpin local consumption.

 

That’s why I forecast the Hong Kong economy to grow by 2% to 3% this year, a modest but welcome uptick from last year’s 1.9% growth.

 

Of course, as a small and open economy, Hong Kong is inevitably influenced by external forces.

 

That includes the economy of the United States. We are mindful that the new administration’s economic policy agenda remains unclear. While the US may introduce stimulus measures conducive to global economic growth, there is also increasing market concern over whether it will roll out trade protection measures.

 

Last week, the US Federal Reserve raised interest rates for a second time in three months. While the pace of US interest-rate normalisation down the road would ultimately hinge on the developments in the US economy, the forthcoming interest rate hikes could be faster than expected. This will in turn affect global trade, investment and financial flows, as well as local equity and property prices.

 

Then there’s Brexit, together with general elections this year in several major European nations. Some have called 2017 “Europe’s year of political reckoning”. In any case, developments there will further complicate the political and economic outlook for Europe and the world at large.

 

To cope with these, and countless other challenges, we need strategies that help us thrive. Clear, forward-looking policies and initiatives designed to make our public finance as sound and sustainable as possible in today’s global economy.

 

Strengthening pillar industries 

We must strengthen the competitiveness of our pillar industries that have served us so well. We must also do what we can to encourage emerging industries.

 

We shall continue our investment in infrastructure, while nurturing talent and promoting innovation and technology.

 

At the same time, we must uphold social justice, enhance Hong Kong’s quality of life and ensure that the rewards of success are available to the many rather than the few.

 

That means allocating resources for poverty alleviation, the elderly and the youth. It means promoting a caring and inclusive society, while creating the means to realise upward mobility.

 

In the process, however, we must assess the prevailing funding requirements, and the medium- to long-term financial implications of each proposed initiative.

 

We must adhere to fiscal discipline – to ensure that our expenditure growth will be broadly in line with our affordability.

 

As I have stressed over the past few weeks, windfall revenue of a capital nature is no justification for substantial increases in recurrent expenditure, nor substantial tax cuts. Our fiscal reserves should allow Hong Kong to withstand economic swings and meet the needs of the community – all in a sustainable manner.

 

Overhauling the tax regime 

In this year’s Budget, I proposed setting up a tax policy unit to examine issues from a macro perspective. We shall assess the impact on our competitiveness when aligning our tax practices with international standards, and actively study ways to foster development of our industries through tax measures.

 

We shall also enhance our tax regime, exploring options to increase revenue and/or broaden the tax base to provide us with adequate resources to support Hong Kong’s sustainable development.

 

Ladies and gentlemen, there is no place in the world quite like Hong Kong: strategically located in the heart of Asia and the gateway to the Mainland, we boast world-class infrastructure, a free enterprise system both highly flexible and efficient, and the unique advantage of “one country, two systems”. Add to all that a low and simple tax regime, the free flow of capital, people and goods, and a pluralistic society that embraces the rule of law, and you can understand why we have come as far as we have. Why our pillar industries have served us so well.

 

Indeed, trade and logistics, financial services, business and professional services, and tourism collectively contribute close to 60% of our GDP and about half of our employment opportunities.

 

To consolidate these industries, it is essential that we enhance their competitiveness.

 

Starting with the trade and logistics industry. And for good reason. Despite the relatively small scale of our economy, Hong Kong is the world’s eighth-largest trading entity. We rely heavily on the export and re-export business.

 

Pursuing free trade 

The Government will continue to expand our free trade agreements and Investment Promotion & Protection Agreement (IPPA) networks.

 

Our IPPA with Canada entered into force last September, while that with Chile was concluded last November. In all, we have signed 19 IPPAs to date, with more on the way. Negotiations with Mexico, Iran and Russia are ongoing.

 

At the same time, we will continue to explore further expansion and enhancement of CEPA, and carry on with the negotiation of free trade agreements with ASEAN, as well as Georgia and Maldives under the Belt & Road Initiative.

 

We are, as well, working to establish a Trade Single Window to promote cross-border customs co-operation and expedite trade declaration and customs clearance.

 

We will continue to work closely with the industry to foster the long-term development of high value-added maritime and port services, as well as high-value-added transhipment, cross-boundary e-commerce and air cargo business.

 

We place importance, as well, on helping Hong Kong businesses find new markets for their products and services. Last year, we opened an Economic & Trade Office (ETO) in Jakarta, Indonesia – our 12th ETO – to boost our ties with ASEAN countries. This year, we are working to set up new ETOs in a number of other countries, including Korea, India, Mexico, Russia, South Africa and the United Arab Emirates.

 

At the same time, we are expanding our presence in the Mainland, adding four more liaison units – in Tianjin, Zhejiang, Guangxi and Shaanxi – this year.

 

Competition is fierce, endlessly so, among the world’s major financial centres. We must ensure that our financial market remains competitive, robust and of the highest standard.

 

Joining the Asian Infrastructure Investment Bank 

Hong Kong is in the process of joining the Asian Infrastructure Investment Bank (AIIB) as a non-sovereign territory. With extensive experience in implementing, managing and operating infrastructure projects, and a sophisticated and liquid financial market, as well as the availability of a wide range of top professionals, Hong Kong can contribute to the success of AIIB and further reinforce our position as a premier international financial centre.

 

Meanwhile, we are proposing to extend profits tax exemption to onshore privately offered, open-ended fund companies. This should attract more funds to Hong Kong, enhancing our fund-creation capabilities, and will help boost Hong Kong into a full-fledged fund service centre.

 

There is a promising future in aircraft financing. And we plan to offer tax concessions in this area, further strengthening our status as an international financial centre.

 

Tourism has long been a pillar industry, helping drive the growth of related industries and businesses. It has, recently, experienced challenges and may continue to do so in the coming year, which is why my Budget introduced several support measures. The Amendment Bill will be introduced to the Legislative Council by the end of June this year.

 

We have also earmarked $243 million to enhance Hong Kong’s appeal. That includes supporting local mega-events, promoting diversified tourism products, providing funding support for our cruise business, as well as training for members of the tourism industry.

 

We are also promoting Hong Kong’s role as a major business services centre.

 

Last November, we launched the $200 million Professional Services Advancement Support Scheme to support our professional services sector.

 

Boosting I&T 

All well and good. But if we are to remain a consequential player in the global economy – today and tomorrow – we need to move beyond our pillar industries. And we are doing so, investing heavily in innovation and technology (I&T) to power our future.

 

Indeed, we have come a long way since the establishment of the Innovation & Technology Bureau, 16 months ago.

 

A variety of policies and programmes, totalling about $18 billion, have been launched to promote I&T. And, in this year’s Budget, I earmarked another $10 billion to boost the I&T sector. This is no small commitment. I shall set up a committee on I&T development and re-industrialisation. I shall also explore super tax deductions for R&D expenditure under the new tax policy unit.

 

If I&T is about business, about doing it more efficiently, it is also about quality of life. It’s why we are committed to developing Hong Kong into a smart city. Why a comprehensive smart city study is under way.

 

It is also why we shall launch the $500 million Innovation & Technology Fund for Better Living by the middle of this year. The Fund is all about improving the daily lives of the people of Hong Kong, including our underprivileged and our elderly. Including all of you here today, of course. And we look forward to getting your can’t-miss inspirations.

 

Supporting SMEs

It is equally important for our SMEs adopt I&T to enhance their competiveness. It’s why, last November, we introduced the Technology Voucher Programme. It provides each eligible SME with funding of up to $200,000.

 

The programme promotes the use of technological services and solutions for better operational efficiency, while creating business opportunities for our I&T industry. The response from SMEs has been encouraging, I am pleased to note.

 

SMEs’ vitality and business prowess are of crucial importance to the development of our economy. To the future of Hong Kong.

 

With that in mind, and considering the tentative performance of the global economy, my Budget offers a number of support measures for our SMEs.

 

Ladies and gentlemen, we are as determined as you are to build a better Hong Kong. For ourselves and our businesses, sure. But also for the community we live and work in, the community our children will one day inherit.

 

My thanks to the Hong Kong General Chamber of Commerce and the many other Chambers, local and international, that helped make this luncheon possible. And that help, day after day, to realise Hong Kong’s future.

 

Financial Secretary Paul Chan gave these remarks at the Joint Business Community Luncheon on the 2017-18 Budget on March 21.

 

via Moroccan Trader Keeping HK competitive

Promoting racial diversity

Chief Secretary Matthew Cheung

Hong Kong is home to a diverse and multi-racial community, with more than 200,000 ethnic minority people choosing to settle here. I truly appreciate that many ethnic minorities, having been here for generations, such as Shalini who is the fourth generation of her family in Hong Kong, play important roles in shaping the city’s history. And many indeed contribute to making our home a better place to live in. We embrace the value of racial equality that makes us an inclusive, cohesive and strong community here.

 

Since the enactment of the Racial Discrimination Ordinance back in 2008, the Equal Opportunities Commission (today we have both the current and the former chairmen here – Professor (Alfred) Chan and Dr (York) Chow) has endeavoured to increase public understanding of the law and promote cultural inclusion through a diversity of publicity and educational activities, including weekly radio programmes, newspaper advertisements, roving exhibitions, school drama performances and talks at schools. The Equal Opportunities Commission has set up an Ethnic Minorities Unit to promote anti-discrimination. The Government has also produced a documentary series called Hong Kong, My Home for local TV channels and the Internet to help the public understand the cultures and customs of different nationalities here in Hong Kong. In the light of the positive feedback, a second documentary series was broadcast in 2016, and a third drama series is in production. Radio Television Hong Kong is also running a media education programme for secondary and primary school students from March to July this year with a theme on “racial harmony”. Undoubtedly, our efforts in promoting racial equality will certainly continue.

 

Supporting ethnic minorities

We also strive to cater for the special needs of ethnic minorities and ensure equal opportunities for them in all facets of life. A range of measures have been introduced to unleash their potential.

 

At the community level, we are providing funding assistance to six support service centres and two sub-centres to offer learning classes, counselling, integration programmes and interpretation services to ethnic minorities. We also commission non-governmental organisations to organise mutual help networks, volunteer programmes or community visits to help ethnic minorities adapt to the local culture.

 

To help students of ethnic minorities build up their confidence and interest in learning the Chinese language, we assist schools in developing school-based learning materials and adopting more flexible teaching strategies. The Policy Address this year announced that the Government would provide additional resources for eligible kindergartens admitting eight or more non-Chinese speaking students starting from the next school year to help improve the Chinese proficiency of these students, with a view to fostering a closer bond between ethnic minority groups of students at schools.

 

The Government also takes the lead to improve the career prospects of ethnic minorities. As far as job opportunities in the Government are concerned, we have comprehensively reviewed the Chinese language proficiency requirements and recruitment formats of relevant government jobs. Where appropriate, and without compromising the satisfactory performance of duties, we have in fact adjusted such requirements set for individual grades to ensure that ethnic minorities, like other applicants, have equal access to employment opportunities in the civil service. Since 2010, over 20 grades in the civil service have made suitable adjustments. We are seeing more and more ethnic minority faces in the civil service, most notably in the disciplinary forces such as the Police and the Correctional Services Department, and in fact the two departments have taken over 40 minority recruits altogether.

 

No doubt, knowledge in the languages and cultures of ethnic minority communities is conducive to the provision of public service for these communities in Hong Kong. A very good example is the recent incident where a Hong Kong-born Pakistani police constable successfully persuaded a suicidal compatriot to come down from a 20-metre-high crane after talking to him in their native language of Urdu. You cannot do it with a Cantonese-speaking police constable. This is very impressive indeed. Another example is the Employment Service Ambassador Programme of the Labour Department launched in September 2014. Trainees of the Youth Employment & Training Programme who can communicate in ethnic minority languages are engaged as ambassadors to help ethnic minority job seekers make use of various job search facilities and services at job centres, industry-based recruitment centres and job fairs. The Labour Department has so far employed 78 Employment Services Ambassadors.

 

Vocational knowledge and skills are no less important to job seeking. The Vocational Training Council offers dedicated vocational and professional education and training programmes to non-Chinese speaking youth and adults to meet their multifarious training needs. Also, the Labour Department has been making continuous efforts to canvass and disseminate vacancies suitable for ethnic minorities and organise large-scale and district-based inclusive job fairs to enhance their employment opportunities. Last year, two large-scale inclusive job fairs as well as 12 district-based inclusive job fairs were organised, with the construction industry being the major provider of jobs.

 

Joint efforts required to boost social inclusion

However, the Government’s effort alone is certainly not sufficient. We need different sectors to join hands to promote social inclusion. We appreciate the good work of think tanks like the Zubin Foundation, which have conducted numerous research studies on ethnic minorities in Hong Kong and put forward constructive recommendations for policy makers and private organisations alike.

 

My special thanks must go to the Zubin Foundation and Spencer Stuart today for their continuous efforts in identifying talented ethnic minority individuals. This year altogether 22 candidates are on the Diversity List. What is more, the new category of “Community Connectors” has been introduced to feature ethnic minority individuals who have notable experience in directly working with fellow ethnic minorities to support them on issues ranging from employment and education to health and welfare. Government bureaux and departments will certainly draw reference from the Diversity List in strengthening the membership of our advisory bodies or statutory boards. We look forward to welcoming more elite representatives from different ethnic groups to join hands with us in serving Hong Kong and the community.

 

The Government will continue to develop Hong Kong into a socially inclusive society. We are grateful to have you as our partners. We have one mind, one heart and, of course, one purpose, and that is to break down all barriers to racial equality and to cement the community together. On this note I wish you all good health, and every success in your endeavours in enhancing the common good of our society. 

 

Chief Secretary Matthew Cheung gave these remarks at an event organised by the Zubin Foundation to mark the International Day for the Elimination of Racial Discrimination on March 21.

via Moroccan Trader Promoting racial diversity

Charity lauded for healing needy children

Chief Executive CY Leung

For 25 years, the Beam International Foundation has brought happy faces to needy children throughout the Mainland of China. Last year, Beam completed 11 medical missions and nearly 2,000 free surgeries for children suffering from cleft condition in Guizhou, Sichuan, Xinjiang, and other parts of the Mainland.

 

What the Foundation offers far exceeds cosmetic change. Its operations bring real hope, confidence, renewed promise and relief to needy children – and to their families and friends.

 

So many smiles flow from Beam, and the many people behind it. Partner hospitals, medical professionals, charity partners, donors, volunteers, trainers and, of course, Sir David Akers-Jones.

 

For a good many of those 25 years, Sir David has been at the helm of Beam. Sir David knows well the power of a child’s smile. And beyond that, the critical importance of goodwill and charity, of creating opportunity, through advocacy as well as aid.

 

The training scholarship set up by Sir David in 2013 helps young Mainland surgeons advance skills in cleft lip and palate surgeries. These young surgeons – while passing on the skills at their parent hospitals – volunteer their services in every corner of the Mainland of China, helping thousands of children beam – again.

 

And for that, we are grateful to Sir David. For his devotion to the betterment of lives of others.

 

This evening, we also gather to celebrate the 25th – times 3.6 – birthday of Sir David Akers-Jones. In his inimitable way, Sir David has made immense contribution to Hong Kong and the country. In the words of the senior partner for whom I worked 20, 30 years ago, Sir David always has a sense of quiet authority about him. As I speak, my mind is filled with fond memories of the many dinner discussions that Sir David hosted, from his home in Island House in Tai Po decades ago, to Dragon View in Sham Tseng. At one such dinner in May 1989, I was carrying a huge Motorola mobile phone, and that was 1989, and had to leave it on just in case Regina, my wife, had to call me – we were expecting our first child. And I have had numerous meetings with Sir David, on housing, the Girl Guides, nature, country parks, and germinating acorns of cyclobalanopsis edithiae, a local oak.

 

So, thank you, David, and happy birthday. Thank you for all that you have done for Hong Kong and China. And happy anniversary too to Beam. I trust that Beam will carry on the good deeds under the capable leadership of Dr Pang, and put the smiles back on the faces of many more children on the Mainland. Thank you.

 

Chief Executive CY Leung gave these remarks at the Beam International Foundation 25th Anniversary Gala Dinner on March 17.

 

via Moroccan Trader Charity lauded for healing needy children

Pursuing quality education

Chief Secretary Matthew Cheung

EdUHK, formerly known as the Hong Kong Institute of Education, came into being on May 27, 2016. However, HKIEd had a long history and impressive track record of some 20 years. With drive, determination and passion for growth, excellence and transformation, the Education University of Hong Kong is the only dedicated academic and training institution for teacher education in Hong Kong. Throughout the past two decades, the university has nurtured numerous outstanding and caring educators and professionals. Its continuous efforts in achieving educational excellence are widely appreciated and globally recognised. In the 2016 Quacquarelli Symonds World University Rankings, it took the second place in Asia and the 12th in the world as the best institution in the subject of education.

 

The Education University of Hong Kong Foundation, renamed from the HKIEd Foundation set up in December 2014, has also made significant achievements in the past two years. Through its work in fund-raising, alumni relations and community building, it has helped garner strong public support for the strategic and sustainable development of EdUHK.

 

The Hong Kong Special Administrative Region Government attaches great importance to education. It tops the Government’s policy agenda and accounts for 21% (the lion’s share) of the Government’s total recurrent expenditure. Our financial provision for education in 2017-18 is estimated to be $78.6 billion representing an increase of 30% since the start of the current-term Government in 2012-13. To ensure Hong Kong’s long-term competitiveness, we strive to enhance Hong Kong’s human capital by enhancing the quality of education, offering more internship and exchange opportunities to students and encouraging the workforce to pursue continuing education.

 

The Government will implement free quality kindergarten education from the 2017-18 school year. Recurrent expenditure on kindergarten education is expected to increase by around $2.7 billion, and approximately 70% to 80% of subsidised half-day kindergarten places will be free-of-charge. Meanwhile, we have set out to promote STEM education (that is science, technology, engineering and mathematics). Additional resources were provided to primary schools last year for the purpose. For secondary schools, there will also be an additional one-off subsidy of $200,000 per school to support their school-based STEM programmes. To nurture talent at the post-secondary education level to meet our social and economic needs, we have decided to regularise the Study Subsidy Scheme for Designated Professions/Sectors from the 2018-19 academic year. About 13,000 students will benefit from the scheme each academic year.

 

Besides allocating more resources to schools and students, we believe that professional development opportunities for our teaching force are of paramount importance as teachers play a pivotal role in ensuring a high-quality education system. In this regard, the Government will introduce a three-year pilot scheme of paid non-local study leave for teachers. Under the scheme, serving secondary school teachers can take part in specific courses or on-site experiential learning attachment programmes for about one to three months to broaden their perspectives and enrich their experience.

 

At the same time, we are enlisting the co-operation and expertise of various stakeholder groups to deliver system changes. One of our partners, the Committee on Professional Development of Teachers & Principals (COTAP), has promulgated an overarching strategic plan known as T-excel@hk, which sets out a comprehensive framework for getting the teaching profession geared up through robust professional development strategies. Funding support from the Quality Education Fund is provided for related COTAP projects and initiatives from the 2016/17 school year onwards. One such initiative is the development of a set of standards for the teaching profession to provide clear reference for teacher preparation, continuing professional development (CPD) and school leadership development. In the coming months, local teacher education universities will be invited to give their views on the draft Professional Standards for Teachers of Hong Kong to help refine it.

 

We would not have made it this far in our pursuit of quality education without our strategic partners. I would like to pay warm tribute to EdUHK for its sterling contribution to teacher education in Hong Kong over the years. As one of the five local teacher education universities, it has participated actively and given us staunch support in various education-related policies and initiatives, including initial teacher training, practicum as well as CPD of serving teachers and school leaders.

 

Looking ahead, I am confident that the University will build on its strengths and craft an even better future for education in Hong Kong. I wish the University every success in its future endeavours. Last but not least, let me send my warmest congratulations to all the scholarship recipients today. Education is a most worthy cause to pursue and I wish you all the best in achieving your goals. 

 

Chief Secretary Matthew Cheung gave these remarks at the Education University of Hong Kong Scholarship Presentation Ceremony on March 16.

via Moroccan Trader Pursuing quality education

Corporate governance is key

Secretary for Financial Services & the Treasury Prof KC Chan

The CRF (Corporate Governance Roundtable) held last week brought us up to speed on the latest international trends and actions taken by other economies. And this roundtable gives us an excellent and timely opportunity to identify and discuss common issues with international experts, share experiences and develop ideas and solutions most appropriate in the Hong Kong context for enhancing corporate governance.

 

Corporation plays a pivotal role in our modern economy. It is a proven tool for pooling resources from individuals and sharing risks. It provides an institutional form through which we can co-operate with each other to achieve something that requires collective efforts; something which we may not able to do just as a group of unconnected persons.

 

There are now more than 1.3 million companies registered in Hong Kong. Despite the economic ups and downs over the past decade, the uncertainties following Brexit and the change of administration in the United States, Hong Kong remains a vibrant business hub and an international financial centre. Our success is built on a number of very important strengths, including a level playing field for all businesses, a clean and efficient government, a low and simple tax regime and the rule of law.

 

As a leading international financial and business centre, Hong Kong attaches great importance to corporate governance. We believe that for companies to be successful, competitive and sustainable in the long term, a high standard of governance is indispensable.

 

A key issue pertaining to good corporate governance is information disclosure. I understand that this is also a topical issue deliberated at the CRF last week. Better disclosure can help us make informed decisions and better manage risks. Let me share what have been moving ahead with in this regard in Hong Kong.

 

First, we have completely rewritten our company law and make it a piece of modern legislation. The new Companies Ordinance brings substantial improvements, making the operation of companies more transparent and strengthening accountability of directors. Every private company is also required to have at least one director who is a natural person.

 

The Companies Ordinance also mandates all Hong Kong incorporated companies to include a business review in their directors’ reports, which should include a discussion of their environmental policies and performance, their compliance with relevant laws, and an account of their key relationship with employees, customers and suppliers.

     

With enhanced corporate transparency and additional disclosure requirements, investors can more easily analyse the risk profiles and investment potential of companies, monitor their progress and performance, and take action when they believe that directors are not acting in the interests of the companies.

 

To further enhance Hong Kong’s business environment, we also brought into operation another piece of legislation a month ago which improves and modernises Hong Kong’s corporate winding-up regime. It provides further measures to increase the protection of creditors as well as streamline and enhance the integrity of the winding-up process.

 

In parallel, we are also preparing legislation to introduce a new statutory corporate rescue procedure. This will help companies with long-term business prospects facing short-term financial difficulties. The goal is to balance the interests of creditors, shareholders and employees. Besides, we are also taking steps to consider how best we can further facilitate corporate insolvency work that involves cross-border jurisdictional issues.

 

At the international level, corporate ownership, transparency and the sharing of data are important issues being discussed at G8 and G20, and countries around the world are taking active steps to introduce reforms to implement the various initiatives agreed at the leadership summits. I understand that at last week’s CRF, more than 80 % of the delegates indicated that their countries are already planning to implement measures to request companies to disclose their beneficial owners. More than 70 % of the delegates consider that disclosure of beneficial ownership will enhance the competitiveness of their jurisdictions.

 

Disclosure of beneficial ownership is not an easy task to both the authorities and the companies. There are many complications and novel issues. 

 

But this initiative will not be effective without close international co-operation. As part of this international movement to improve the legal framework to enhance corporate governance and transparency, we have carried out two consultation exercises, one on the disclosure of beneficial ownership of companies and the other on the codification of customer due diligence and record-keeping requirements applicable to designated non-financial businesses and professions. We plan to introduce a licensing regime for trust or company service providers whereby they will be required to obtain a licence and satisfy a “fit and proper” test before providing business to the public. We will spare no efforts to ensure that the corporate governance regime in Hong Kong is up to date and benchmarked against international best practices.

 

High standard of corporate governance strengthens the competitiveness of Hong Kong, and is one of our core competencies as a global financial centre. In fact, for the past decade, our stock market has been among the top five globally for IPO funds raised every year and was ranked first in the world for two consecutive years in 2015 and 2016. 

 

We know that a listed company is a particular form of corporation. Deployed properly, it is an effective tool for mobilising resources. Because it raises funds from the public, a listed company is also subject to more stringent regulation than other forms of companies. Hong Kong has also made good progress in this area as well.

 

As our front-line regulator, the Stock Exchange of Hong Kong promotes the corporate governance of listed companies and reviews the Corporate Governance Code and the Environmental, Social and Governance Reporting Guide from time to time in light of regional or international developments.

 

In 2014, the Stock Exchange revamped the risk management and internal control aspects of the Corporate Governance Code to strengthen issuers’ disclosure and directors’ accountability. With effect from 2016, the Corporate Governance Code requires listed issuers to disclose, on a “comply or explain” basis, a number of risk management related matters, which will further strengthen issuers’ disclosure and directors’ accountability in this area.

 

The Stock Exchange also incorporated the environmental, social and governance, also known as ESG, disclosure requirements making the relevant ESG disclosure requirements applicable to all listed companies in Hong Kong, regardless of their place of incorporation. Further, the Stock Exchange upgraded certain ESG disclosure obligations from voluntary to “comply or explain”, after receiving strong support in a market consultation exercise. This will further raise the standard of ESG disclosure of our listed companies.

 

According to a recent Corporate Governance Review, 80 % of the Hang Seng Composite Index companies discussed ESG issues either in their annual reports or ESG reports, representing a significant increase from the figure of 49 % reported in 2015. Another study also found that 86 % of the Hang Seng Index listed companies were early adopters of disclosure requirements relating to internal control and risk management systems. All these reflect that nowadays listed companies in Hong Kong are paying more attention to the disclosure of relevant non-financial information, in addition to financial information.

 

Apart from issuers, investors also play an important part in enhancing corporate governance of listed companies. To promote a healthy investment culture, the Securities & Futures Commission, or SFC, published the Principles of Responsible Ownership in March last year. The principles aim to provide guidance on how investors in listed companies should fulfil their ownership responsibilities, and encourage an investment culture where engagement with investee companies is seen as paramount and fundamental.

 

We note that during the consultation process of the Principles of Responsible Ownership, there were concerns that Hong Kong may see increasing activities of shareholder activism as in the US and Europe, where activist investors use aggressive tactics such as public campaigns to force the company management to adopt specific changes.

 

In Hong Kong, shareholder activism tends to be less adversarial than in the US and Europe. Shareholder engagement will promote consensus-building, help pre-empt aggressive activist acts and enhance corporate governance. We believe in this regard the Principles of Responsible Ownership will help by promoting effective shareholder engagement with investee companies. This culture will in turn strengthen corporate governance of the listed companies.

 

Corporate governance defines the quality of our market. This brings me to the subject of market quality, which is the key to the competitiveness of our listing regime. The Government has always been very concerned about market quality issues and supports the SFC’s monitoring and law enforcement efforts in upholding the quality of our listing market.

 

To cite a few latest moves, with regard to the Growth Enterprise Market IPO placings, the SFC issued a set of guidelines in January on the expected standards of conduct of intermediaries. It has also issued a joint statement with the Stock Exchange regarding the roles of applicants and intermediaries. The SFC and the Stock Exchange announced that they were closely monitoring rights issues and open offers that substantially dilute the interests of non-subscribing minority shareholders. I have every confidence that the SFC will continue to closely monitor these transactions to protect the interests of shareholders and uphold the market quality.

 

Internationally, our efforts to enhance Hong Kong’s business environment and competitiveness have been well recognised. In the World Bank’s Doing Business Report 2017 released last October, Hong Kong was ranked the world’s fourth easiest place to do business among 190 economies. Among the 10 indicators, Hong Kong was ranked the third worldwide in both “Protecting minority investors” and “Starting a business”. We were also recognised as the most competitive and freest economy in a number of international reports. All these are a vote of confidence in Hong Kong’s status as an international financial and business hub, and increasingly a hub for young and energetic start-ups also.

 

Ladies and gentlemen, the corporate governance regime is an evolving one. The trust and reputation our corporate governance regime now enjoys is the hard-earned result of the continuous efforts and commitment of companies, directors, investors and all relevant stakeholders, including professional personnel, who make good governance their priority.

 

For the roundtable today, you will be able to hear more insights on issues relating to information disclosure, risk management and effective board leadership. I am particularly delighted to see that there are students from local universities and young professionals joining us today. They are our future corporate and board leaders. The earlier they learn about the art and craft of good corporate governance, the more effective leaders they will be in future. I encourage you, our future leaders, to take the first step of this journey today.

 

 

 

Secretary for Financial Services & the Treasury Prof KC Chan gave these remarks at the opening of the Corporate Governance Roundtable on March 13.

via Moroccan Trader Corporate governance is key