As you will appreciate, this year’s Policy Address was prepared amid ongoing, unprecedented unrest in society. I and my colleagues have been making every effort to help Hong Kong ride out this storm over the past few months, so inevitably we could not devote as much time as we would like to this Policy Address. But still, we managed to put forward over 220 new initiatives.

Last year when I spoke at this luncheon, I described the 2018 Policy Address as a pro-business Policy Address. In fact, in the first two years of my term, we put in place many initiatives to facilitate the work of businesses. We also hosted joint promotional events overseas. Together with many of you from the business chambers, we proudly tell the Hong Kong story.

The situation we are facing now is obviously very different, more challenging and inevitably distressing. The challenges ahead are complicated both externally and locally. Externally, the China-U.S. trade disputes and conflicts in the technology arena have increased the downside risks facing the global economy. 

While external uncertainties have brought immense pressure, I would say that the local situation is much more worrying. Hong Kong has proven time and again that we can withstand external economic shocks, be it the Asian financial crisis in the late 1990s or the financial tsunami 10 years ago, but what is happening in Hong Kong now is unprecedented. 

There has been extensive violence in various districts over the past four months. A handful of rioters initiated attacks and sabotage in an organized and planned manner. They doxxed and beat people holding different views, vandalised public facilities, set fires in MTR stations and shops, and hurled petrol bombs at police officers, spreading chaos and fear in Hong Kong and seriously disrupting people’s daily lives.

Inevitably, the economy will be hard hit. Visitor arrivals experienced a drop of 30 to 40% in August and September. In the first half of October, the drop was about 50%. Retail sales volume showed a fall of 25% in August compared to last year. The catering industry is also hard hit and hundreds of restaurants may have to be closed if the situation persists. All these figures are very alarming, especially if you consider the fact that these relevant industries employ some 600,000 people.

The Financial Secretary has a wide range of initiatives to support enterprises, safeguard jobs, stabilise the economy and strengthen livelihoods. Many of the measures target small and medium enterprises, which account for over 98% of local enterprises and around 45% of total employment in Hong Kong.

To assist our SMEs, we have announced to waive 27 groups of government fees and charges for 12 months to benefit a wide range of sectors from logistics, retail, catering, tourism, construction, to agriculture and fisheries. Rent reduction by 50% for six months will be provided to tenants of various government business premises. We have announced new initiatives to help our SMEs cope with liquidity problems by offering loan guarantee under more relaxed terms. 

The supporting measures, together with the one-off relief measures announced in the 2019-20 Budget, total around $64 billion and are expected to provide a 2% impetus to our economy.

Although the launch of these supporting measures may cause fiscal deficit, we consider that we need to spend the money. Our economic fundamentals are robust, as evidenced by a sustained current account surplus, strong fiscal reserves, abundant foreign exchange reserves, and a huge net international investment position.

We have so many business leaders in the audience, I will ask you to contact and liaise with my colleagues, so that we can proactively engage with business chambers to listen to your concerns and suggestions for explicit and tangible measures that we can introduce.

I also emphasised in the 2019 Policy Address the importance of sustained economic growth. We will continue to play the role of “facilitator” and “promoter,” making efforts to increase land supply, nurture talent, promote external affairs, improve the business environment and implement tax concession measures with a view to enhancing the competitiveness of Hong Kong. 

We will also continue our efforts to attract foreign investment. Indeed, we are very encouraged by the result that over 9,000 Mainland or overseas companies have a presence in Hong Kong. Among them, over 1,500 are regional headquarters, representing a 9.1% increase over 2017. 

It is essential that we continue to expand our overseas and Mainland markets, and we have done a lot in the past two years. We doubled the number of free trade agreements signed with other economies, and established our 13th overseas economic and trade office, in Bangkok, Thailand. 

I note that the chambers have all issued positive statements in response to my Policy Address, for which I am extremely grateful. However, I also note one point in common in your statements. You all want to see the violence in society to stop. 

On this, I would like to emphasise the Government’s determination to stop the violence, and our commitment in ensuring the comprehensive and effective implementation of the “One Country, Two Systems” principle in Hong Kong. Despite the difficult external and domestic environment, Hong Kong retains its core strengths as an international financial centre with an unrivalled geographical location, the rule of law, an independent judiciary, the free flow of information and a wide pool of professional talent.

Hong Kong is going through a testing time, and I appeal to all of you to work together with us, to stand up against violence, so that social order can be restored. Once that is achieved, the Government will collaborate with relevant organizations, chambers of commerce and professional bodies to carry out promotional work to rebuild international confidence.

At the same time, I and my team are looking to address the deep-seated conflicts in society as revealed by the social unrest. We will continue to talk to people, and through continuing dialogue, I believe we will not only find a peaceful way forward, but also make Hong Kong even stronger than before.

Thank you once again for hosting this joint business luncheon for me and my colleagues. Let’s hope Hong Kong will soon be able to emerge from the storm and embrace the rainbow. 

Q&A Session

Question: I’m a retailer, with shops in Causeway Bay, North Point, Fortress Hill and Yuen Long. Our staff are suffering from tear gas, and, as soon as the Government declared a riot, our insurance was invalidated. When we apply for government guaranteed loan, or help to digitalise, it is difficult to access the funding. So the question is, you’ve got lots of schemes, how will you get the money to the SMEs who are in urgent need of help? 

Chief Executive: Let me assure you that we are with you at this very difficult time. On the issue of insurance, I have asked the Secretary for Financial Services and the Treasury to examine it to see what special measures we could put in place. Because we are facing unprecedented circumstances, these do warrant exceptional measures. 

About the many funding schemes for SMEs, the Secretary for Commerce and Economic Development has actually taken several proactive steps to try to bring all these funds together. So hopefully there will be a one-stop type of facilitation in order to help SMEs to access the funds.

If you find that the things that we have put in place are not good enough, all of us need to work harder in order to make sure that the money that we want to put to the target enterprises will reach them. I think we have already changed that, and we are happy to advance the money so as to ease the cash flow of the SMEs. We’re certainly looking for improvements every day in order to overcome this crisis together. So let’s join hands to solve some of these problems.

Q: The violent incidents in recent months have seriously damaged Hong Kong’s international image and taken a toll on our economy, especially the tourism industry. A number of exhibitions, trade fairs, conferences and mega events have been cancelled. Would the Government consider immediate measures, such as financial incentives, to support business travellers and local organizers of MICE activities? 

CE: The Government is making every effort to preserve all these international conferences and events. For example, last week, we had a major international forum on the Greater Bay Area, inviting a lot of overseas guests. Just this morning, I was officiating at the International Water Association Asia-Pacific conference, which attracted a thousand participants from all over the world. 

Coming back to the tangible things that we could offer, we have rolled out some initiatives on the tourism front and are happy to consider more. But I hope to impress upon you that we really want to do things which are targeted in order to ensure their effectiveness. So, if there is anything you feel we could do, in terms of attracting more international events – especially after the situation stabilizes – then we can go all out to promote them. 

If industry leaders come up with specific ideas, for example you have a conference you want to host next year and you want us to provide more support, let us know. If you are bringing in distinguished delegates from outside, and you want a reception in Government House, let me know. I’m very forthcoming to join with you to show our hospitality to visitors from all over the world.

Q: The Greater Bay Area (GBA) is an important growth engine for the Mainland economy. In addition, Hong Kong is expected to make great efforts to develop the innovation and technology (I&T) industry. The coverage of certain technology talent schemes will be extended to companies outside the Hong Kong Science and Technology Park and Cyberport. So may I know if the Government has any plans to help local technology companies grasp the GBA opportunities? 

CE: I&T is the singular policy area that this term of Government has put in a lot of time, attention and resources. At the moment, many of the fund schemes are not confined to Cyberport and Science Park. If there are certain areas which we could further relax, we are happy to consider. 

On the Greater Bay Area, we are only about nine months into the execution of this plan, but a lot already has happened. We have already rolled out two batches of facilitating measures and I hope very soon the Greater Bay Area Leading Group will meet for the third time, and another batch of measures will be implemented.

In the last four or five months, we have been coping with a lot of unprecedented circumstances, but I can tell you that our work on the Greater Bay Area actually has not been significantly hampered. 

We are talking about how we can make a better use of the bridge and also the land-based control points. So we will be seeing even more easy access between Hong Kong and the Greater Bay Area that will facilitate the flow of people and goods. 

Q: Housing is at the top of your list of priorities. What are the most successful outcomes over this last year in housing, and the biggest challenge that we’re still facing? What policies have you seen overseas that could be brought to Hong Kong? 

CE: In June last year, I rolled out six housing policy measures, one of which was to adopt a different pricing formula for the subsidised sale flats. Because hitherto, there was a complaint that even for subsidised sale flats, the selling price was pitched with reference to the market prices. So last June, we adopted a different pricing formula which de-links the subsidised sale flat pricing from the private market and links it to affordability. 

Since land formation and land supply take time, we need to give people back confidence that the flats are affordable. 

If our hearts go out to the people who are inadequately housed, then the first thing is to lift them out of this situation. This can be done either by giving them some cash to mitigate the difficulty or to give them transitional housing, instead of just saying “you have to wait.” 

In the next few years, we will build 10,000 transitional housing units.  I do feel that, perhaps in years to come, nicely built transitional housing will become a feature in our housing programme, and that is something we learnt from some overseas experience.