The external environment was the first topic raised by Financial Secretary Paul Chan in his speech at the Joint Business Community Luncheon on 19 March. The trade conflict between the United States and Mainland China topped the list of concerns, he said, adding that there were other problems in this relationship that will affect Hong Kong.
“We would welcome an eventual agreement on the trade front, but at the same time we are conscious of the possibility of conflict in some of the deep-seated structural issues,” he said, which means continuing volatility in the U.S.-China relationship is to be expected.
“This seems to be unavoidable, and the impact would be felt on business sentiment, the business environment as well as financial market sentiment.”
Chan’s second concern regarding the global climate is that there is a different dynamic in international cooperation than that which prevailed just a few years ago.
“Back in 2008, when the global financial crisis happened, countries worked together in a concerted effort to avoid the tremendous negative impact on the global economy. And it was successful.”
Today, amid growing populism, we cannot depend on the same cooperation if another financial crisis were to hit. In addition, lower interest rates mean that the “policy room for manoeuvre has become a lot slimmer.”
But the global environment also presents good news for Hong Kong, Chan added, such as the economic growth in Asia – particularly India, ASEAN and Mainland China – which are creating new and growing consumer markets.
“Previously, it seemed that manufacturing is done in Asia and then goods are shipped to Europe and the U.S. for consumption. But with a growing middle class and a growing strength in developing Asia, in the future goods will be manufactured in Asia and consumed in Asia.”
Other opportunities that the Financial Secretary noted were the Greater Bay Area and Belt and Road initiatives, and “the unstoppable innovation and technology wave across the world.”
In terms of the economic outlook in the near term, Chan reported that the economy of Hong Kong had been “volatile and complicated” in the past year, with a noted slowdown in growth in the fourth quarter. So the Government is predicting a prudent 2-3% growth for 2019.
The Financial Secretary explained that he had chosen to focus on two sectors – financial services and innovation and technology (I&T) – to highlight the Government’s vision.
Financial focus
“We chose financial services because it is our pillar industry, our core strength, but yet we face tremendous competition,” Chan said. “So how should we enhance ourselves to remain competitive and stay ahead of the game?”
He explained some of the measures the Government has taken, such as amending the listing rules to allow more innovative companies to list in Hong Kong, and launching a Pilot Bond Grant Scheme to encourage companies to issue bonds here. It has also launched a Green Bond Grant Scheme, plans to improve the insurance sector, and anticipates the continued growth of the Stock Connect.
“These are the areas that, if we play our cards right, could bring us tremendous growth in the coming years.”
There are also plans to develop the wealth and asset management sector. The Financial Secretary noted that residents of the Greater Bay Area – the wealthiest region of the Mainland – set aside about 27% of their earnings for insurance and investments.
“That presents tremendous opportunities to us,” he said. “Our vision is to become the international financial centre of not just China, but Asia and the world.”
To develop the talent needed for the financial services sector, the Hong Kong Monetary Authority will launch the Academy of Finance this year, which will further enhance our status as a global hub for the industry, Chan said.
“Hong Kong will no longer only be an international financial centre, but a centre of excellence in terms of applied research in financial matters, as well as a place for top-notch international talent to share experience and expertise.”
Encouraging I&T
For the successful development of the I&T sector, what is important is talent and ecosystem, Chan said, which are overlapping demands. This is why the Government has invested in I&T infrastructure including the Lok Ma Chau Loop, the Science Park and Cyberport.
“If we are serious about developing innovation and technology, we need to deal with the talent issue. By having more top-notch institutions and universities and tech companies here, we will be able to draw talent from overseas.”
The Financial Secretary reported that this push has been successful in attracting the attention of prestigious overseas universities – including Harvard, John Hopkins, Oxford and Cambridge – which have expressed their interest in carrying out research projects in cooperation with Hong Kong institutions.
“When these projects are realised, and when we are able to attract tech companies to come here, then the ecosystem will become clear,” he said. “Then our young people will see more hope and opportunities on that front.”
Competitiveness and livability
Speaking more generally about competitiveness, The Financial Secretary said that he was investigating how the city’s Future Fund could invest in areas that would enhance Hong Kong’s competitive advantage. The Tax Policy Unit (TPU) will also be moved to directly under the Financial Secretary’s Office.
“We thought it was the right moment for us to upgrade this office and, when necessary, inject more resources to make the TPU a tool not just for working on international compliance, but for enhancing our competitiveness.”
In terms of improving the environment for all, the government is also looking at liveability. The Financial Secretary explained that in this area, the Government is making a sustained effort in healthcare in particular. Its initiatives include funding to create another 14,000 hospital beds, as well as additional doctors, nurses and other healthcare professionals.
“Apart from economic development, it is very important for us to make Hong Kong a liveable city,” Chan said.