Financial Services Industry
39. Hong Kong is the third largest financial centre in the world, ranked high in areas such as stock market, asset management and banking. We have a stable and flexible capital market with ample liquidity, free flow of capital, commodities and information, a wealth of talent, a sound legal system and an independent judiciary. These are the key attributes underpinning our success.
40. However, to cope with the increasing competition, we have set out a clear vision and blueprint for boosting the development of Hong Kong's financial services industry. Apart from deepening and widening our financial markets, we need to further strengthen Hong Kong's role as a bridge linking the Mainland with the international market. We should not only seize the opportunities brought by the Greater Bay Area development and the Belt and Road Initiative, but should also eye on the world, particularly the Asian regions with potential for development. Moreover, we have to enhance the resilience of our financial system, further improve our regulatory regime to strengthen financial security, and increase investor confidence and protection.
41. We have been introducing reforms in various areas and made considerable progress. Aside from consolidating our strengths, we have developed new competitive edges to further enhance the overall competitiveness of our financial services sector.
Stock and Bond Markets
42. Hong Kong's capital markets are thriving. To enhance our attractiveness to the new economy sector, the Stock Exchange of Hong Kong launched a new listing regime last April, under which emerging and innovative enterprises with weighted voting rights structure, as well as pre-revenue or pre-profit biotechnology companies, are allowed to list in Hong Kong. By end-2018, seven enterprises had listed in Hong Kong under the new regime. Last year, we raised a total of $286.5 billion through initial public offerings, the highest in the world for the sixth time over the past decade.
43. The Government has introduced a host of measures to promote the development of Hong Kong's bond market. These include launching the Pilot Bond Grant Scheme to encourage enterprises to issue bonds in Hong Kong, as well as offering tax concessions to attract more investors to our bond market.
44. To improve the quality of listed companies, legislation was enacted in January this year to expand the remit of the Financial Reporting Council (FRC), enhance the independence of the regime for auditors of listed entities and strengthen investor protection. I have decided to increase the amount of seed capital for the FRC to $400 million to help it migrate to the new regime, and exempt the levy under the new regime for the first two years.
Green Finance
45. There is now a global shift towards sustainable development. To promote the development of green finance in Hong Kong and diversification of related products, the Government rolled out the Green Bond Grant Scheme last year to attract organisations to arrange financing for their green projects through our capital markets and encourage them to make use of the green finance certification services in Hong Kong. We are glad to see that many local, Mainland and even international organisations, such as the World Bank, the Asian Development Bank and the European Investment Bank, have chosen to issue green bonds in Hong Kong. Last year, green bonds issued in Hong Kong amounted to some US$11 billion, more than triple that of 2017. Besides, we are gearing up for the inaugural issuance of government green bonds and will encourage the relevant sectors to incorporate green elements into corporate governance and operation in a more effective manner.
Offshore Renminbi Business
46. Hong Kong is a global offshore Renminbi (RMB) business hub and the world's largest offshore RMB liquidity pool, processing more than 70 per cent of RMB transactions globally. We are also one of the busiest RMB foreign exchange trading centres. With the advantages of well-established market system and financial infrastructure, close ties with the Mainland market and the support of the Central Government, Hong Kong is set to become a premier platform for international investors to access the Mainland market and allocate RMB assets.
47. In collaboration with the industry and the Mainland authorities, we will continue to explore expansion of the channels for two-way flow of cross-boundary RMB funds. This will give us further room for exceling our distinct role in the Mainland's gradual liberalisation of the capital account, internationalisation of RMB and integration with global financial markets. We will continue to contribute to our country in opening up its financial market in an orderly manner.
Mutual Market Access
48. Apart from developing Hong Kong's capital markets, we have also been actively promoting mutual access with the Mainland. This will not only benefit our financial services industry, but also contribute to the two-way opening-up of the Mainland market to the world. The Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect, the Bond Connect as well as the Mutual Recognition of Funds Arrangement are important milestones of mutual access between the capital markets of Hong Kong and the Mainland. We will continue our efforts to increase the quotas for and expand the scope of mutual access as well as extend the Bond Connect to cover southbound trading.
49. The weighting of China A-shares in various international indices has been increasing since its inclusion into MSCI, FTSE Russell, etc. in 2018. Rising international investment inflows into the Mainland's capital markets will help enhance Hong Kong's role as an offshore intermediary risk management centre for the Mainland's capital markets, thereby promoting the development of more financial products and services.
Wealth and Asset Management Industry
50. Hong Kong has an unparalleled edge in developing asset management business. We are one of the leading international wealth and asset management centres in Asia. In 2017, the total value of asset managed by Hong Kong's asset management industry amounted to over $24 trillion. Over 2 200 public funds were approved for distribution in Hong Kong last year. The Greater Bay Area development will bring enormous business opportunities for Hong Kong.
51. In recent years, private equity funds are developing rapidly in the global market, drawing in the capital, talent and expertise necessary for the business development of a large number of business entities, technology companies and start-ups, while driving demand for related professional services such as management, accounting and law. The related economic activities brought by the operation of private equity funds also create business opportunities in the service industry, in particular conference and exhibition, hotel, and tourism.
52. Following the implementation of the open-ended fund company regime in July 2018, we are now studying the establishment of a limited partnership regime for private equity funds, with a view to providing the industry with more fund structure choices. We will also study the case of introducing a more competitive tax arrangement to attract private equity funds to set up and operate in Hong Kong.
53. Starting from 1 April this year, different types of onshore and offshore funds meeting certain conditions will be eligible for profits tax exemption. As regards fund distribution channels, following the agreements with the Mainland, Switzerland, France, the UK and Luxembourg, we will continue our work on mutual recognition of funds arrangements with other jurisdictions to broaden the distribution network of local fund products.
A Hub for Regional Headquarters
54. Having more enterprises outside Hong Kong to establish their regional headquarters here will help consolidate Hong Kong's status as an international financial centre and expand the size of our treasury market. Last year, the total number of companies with regional headquarters in Hong Kong increased to over 1 500, representing a year-on-year growth of over eight per cent. Besides, more and more Mainland enterprises have chosen Hong Kong as the platform for their businesses to go global.
55. Given that many multinational corporations co-locate their corporate treasury centres (CTCs) with their regional headquarters, we have been offering tax concessions to qualifying CTCs since 2016. The Government will continue to enhance the relevant tax measures to strengthen our competitiveness.
Insurance Industry
56. Hong Kong's insurance industry is well-developed and is an integral part of our diversified financial businesses. We are committed to promoting Hong Kong's role as an international risk management centre and helping the industry seize the business opportunities brought by the Greater Bay Area development and the Belt and Road Initiative.
57. In fact, businesses such as captive insurance, reinsurance and marine insurance have considerable development potentials in Hong Kong. To promote their development, we have introduced relevant taxation and regulatory measures. For example, last year we amended the legislation to extend the 50% tax concession for captive insurance companies' businesses to cover both offshore and onshore risks, with a view to drawing more enterprises to set up captive insurance companies in Hong Kong. Moreover, the Government will propose legislative amendments to provide tax concessions for marine insurance and the underwriting of specialty risks, and allow for the formation of special purpose vehicle companies specifically for issuing insurance-linked securities. We will continue to look into measures that are conducive to the development of the industry.
Financial Technologies
58. There are currently over 550 financial technologies (Fintech) companies in Hong Kong with wide business coverage. We have been keeping up our efforts to provide a conducive environment for Mainland and overseas Fintech companies and attract them to Hong Kong.
59. Last year saw significant progress in the application of Fintech. The Faster Payment System (FPS) and the Common QR Code Standard for Retail Payments launched by the Hong Kong Monetary Authority (HKMA) in September 2018 has received overwhelming response. The Government is planning for the use of the FPS to provide the public with greater convenience in paying taxes, rates and water charges. The Transport Department, the Immigration Department and the Leisure and Cultural Services Department (LCSD) will examine the feasibility of accepting payments through the FPS at their shroff counters on a pilot basis.
60. The HKMA will shortly issue virtual banking licences. Banks will also implement the Open Application Programming Interface functions in phases. These will bring more innovative banking services to the public. The Insurance Authority (IA) also approved the first authorisation of virtual insurers last December, marking a new chapter for insurance technology development in Hong Kong.
61. On the regulatory front, the Securities and Futures Commission (SFC) announced a new regulatory approach for virtual assets in November 2018 with a view to exploring ways for encouraging market innovation while protecting investors. Moreover, the HKMA and the SFC are making use of the Global Financial Innovation Network to share with other regulators the experience and knowledge in relation to the supervision of Fintech applications.
Talent Training
62. In last year's Budget, I announced the establishment of the Academy of Finance, which will serve to pool the strengths of tertiary institutions, the financial services sector, professional training bodies and regulators so as to attain two major goals, namely nurturing financial leadership and encouraging applied research in cross-sectoral areas. The HKMA is taking the plan forward in full swing, with a view to establishing the Academy in mid-2019.
63. Apart from grooming local talent, we also encourage financial talent from outside to pursue their careers in Hong Kong through various talent admission schemes.
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