Legislative Council meeting Bill 2nd Reading – Appropriation Bill 2021

MR CHAN CHUN-YING (in Cantonese):

President, in response to the epidemic, the Government changed its miserly and penny-pinching image and opened the coffers last year, which is commendable. As a result, the fiscal deficit has reached a historic high of $257.6 billion. Before announcing the Budget, Financial Secretary (“FS”) Paul CHAN dressed up as a chef to seek public views during the consultation period. However, since over 7 million people have countless different tastes, it is believed that the Budget can hardly satisfy the needs of everyone. Besides, there were strong public expectations for the Government to continue to “hand out candies”. I believe some people did feel very disappointed after the announcement of the Budget.

This year’s Budget once again forecasts a deficit of over a hundred billion dollars. Instead of continuing the long-standing practice of “handing out candies indiscriminately”, FS has accepted Members’ suggestions and put forward a wide variety of relief measures while endeavouring to maintain Hong Kong’s competitiveness and consolidate our pillar industries. These efforts should definitely be acknowledged. Therefore, I support this Budget. In the following, I will first talk about some initiatives relating to the financial industry in the Budget.

President, the financial industry is one of the most competitive industries in Hong Kong. Over the past two decades, the actual annual increase in the value-added of the industry has averaged 6.8%, which doubles the growth rate of Hong Kong’s Gross Domestic Product (“GDP”). In the past two years, Hong Kong’s economy has been mired in a deep recession due to the “black-clad violence” incidents arising from the opposition to the proposed legislative amendments, the Sino-United States (“US”) trade conflicts, US’s threat of financial sanctions and the COVID-19 epidemic. However, our financial market has been operating normally and has demonstrated some resistance and resilience to the impacts, which once again shows the strengths Hong Kong has derived from developing the financial industry for a long time. Therefore, the Budget makes considerable mention of the ways to further reinforce and enhance Hong Kong’s status as an international financial centre, and proposes various measures in a number of areas ranging from the development of the bond market and securities market to asset and wealth management.

First of all, on promoting the diversified development of the bond market, Hong Kong’s bond market is currently the third largest in Asia ex‑Japan in terms of issuance in local currency. FS has announced in the Budget that he will lead a steering group to formulate a roadmap for promoting the diversified development of Hong Kong’s bond market and reinforcing its functions. He will also introduce measures in areas such as green bonds, mutual market access and retail bonds. In addition, in order to expand the issuance of green bonds, the Budget proposes to double the borrowing ceiling of the relevant programme to allow for issuance of green bonds totalling $175.5 billion within the next five years. This will give us more room for piloting the issuance of green bonds that involves more types of currencies, project types and issuance channels.

In the Budget, the Government has decided to consolidate the Pilot Bond Grant Scheme and the Green Bond Grant Scheme rolled out previously into a Green and Sustainable Finance Grant Scheme so as to lower the costs of issuance for eligible bond issuers. In fact, the Government successfully offered a 30-year tranche in December last year, which is the longest-tenor US dollar-denominated government bond in Asia. These are conducive to establishing Hong Kong’s status as a green and sustainable finance hub in the region.

Since the launch of Northbound Trading of Bond Connect in 2017, the scale of transaction has been growing, whereas no definite timetable has been set for Southbound Trading. The Budget expressly proposes that Southbound Trading be targeted for launch within this year, which will provide more international and diversified bond investment options for Mainland investors while expanding the liquidity pool of the Hong Kong market correspondingly and bringing more demand for exchange rate and interest rate risk hedging. This will definitely further establish Hong Kong as an international risk management centre.

The Government has also proposed to issue $24 billion of Silver Bond and $15 billion of iBond, and lower the eligible age for subscribing Silver Bond to 60. It is believed that these measures will facilitate the development of the retail bond market while offering Hong Kong people another investment product with stable returns.

Secondly, on consolidating the leading advantages of the securities market, Hong Kong has been a world-leading fund-raising equity market for many years. In seven of the past 12 years, Hong Kong ranked among top three in the world in terms of Initial Public Offering funds raised. In 2018, the Hong Kong Exchanges and Clearing Limited (“HKEX”) amended the Listing Rules to permit listings of biotech companies that do not meet the Main Board’s financial eligibility criteria and permit listings of companies with weighted voting right structures. Currently, there have been 43 companies listed under this new regime in Hong Kong, including 10 China Concept Stock companies returning to Hong Kong for secondary listing. These companies have a combined market capitalization of over $11 trillion, accounting for 25% of the current total market capitalization in Hong Kong.

The Budget proposes that HKEX review the overall secondary listing regime, including whether Greater China companies with non-weighted voting rights structures have to be companies in the information and technology field in order to seek secondary listing in Hong Kong through the new concessionary route. I believe this measure can further attract listings or secondary listings of Mainland enterprises in Hong Kong, which is conducive to maintaining Hong Kong’s position as a capital raising centre. With an aim of facilitating the expansion of Stock Connect’s capacity, the Budget proposes to, among other things, reinforce mutual stock market access between Hong Kong and the Mainland, progressively include exchange traded fund (ETF) and other types of assets, and expand the scope of such investment options. I trust that these measures can continue to meet the demands of various kinds of investors in Hong Kong.

On seizing new opportunities in asset and wealth management, Hong Kong is currently the largest international asset management hub and international private wealth management centre in Asia, and second only to Switzerland in the world. In 2019, in the face of the dual challenges posed by the “black-clad violence” arising from the opposition to the proposed legislative amendments and the Sino-US trade conflicts, the asset and wealth management business of Hong Kong still recorded an increase of 20% to HK$28.7 trillion. Despite the epidemic, the number of asset management companies in Hong Kong increased by 3.9% to 1 878 last year.

Major central banks around the world have now lowered their policy interest rates and implemented new rounds of quantitative easing policies, leading to a substantial increase in the amount of global funds. Hong Kong should utilize its position as the largest asset and wealth management centre in Asia and the advantages of its mutual access with the Mainland to attract more fund inflows into Hong Kong. This Budget has introduced a number of supportive measures, including allowing foreign investment funds to re-domicile to Hong Kong, providing subsidies to cover the expenses paid to local professional service providers for open-ended fund companies set up in or re-domiciled to Hong Kong in the coming three years, reviewing the relevant tax arrangements for family offices in Hong Kong, and encouraging the listing of more real estate investment trusts in Hong Kong. These three targeted measures are all aimed to expand the liquidity pool of the asset and wealth management industry in Hong Kong, and introduce more products that are eligible for investment. The development direction is pretty reasonable.

President, just now I have talked about how the Budget facilitates the development of the financial industry, but in fact, many other industries in Hong Kong, including the retail and catering industries, have been hit hard since 2019. The Government has taken Members’ views on board in this Budget, and will issue electronic consumption vouchers in instalments with a total value of $5,000 to each member of the public, involving $36 billion. Moreover, the Government has announced that four stored value facility operators have been selected, with the target of commencing registration and payment in this summer vacation. Nonetheless, I personally hope that in order to benefit the people and boost local consumption, the authorities should allow more flexibility in the use of the vouchers.

Regarding the financial support for individuals, despite the absence of unemployment assistance fund that the public have been hoping for, the Budget has introduced a 100% Personal Loan Guarantee Scheme with a ceiling of $80,000 for those who have been unemployed for a period of time. In fact, I have also suggested FS to introduce this measure. I hope that the Government will vet and approve the applications expeditiously after the scheme is open for application, and, in the light of the actual application situation, examine whether it is necessary to further raise the amount of the loans later to help the unemployed ride out the hard times.

The COVID-19 epidemic has been raging for over one year. The vaccination programme which commenced this year originally offered hope of achieving “zero infection”, but the effectiveness of the programme has been rendered uncertain by the emergence of virus variants, doubts about the efficacy of the vaccines, and the unsatisfactory vaccination rate. It is envisaged that the situation of unemployment and business closure may further deteriorate this year. Therefore, it is appropriate for the Government to prepare relief measures in advance and implement them in time. Among the major economies around the world, only Mainland registered positive growth in GDP over the past year, whereas others suffered negative growth. In the face of this rare crisis in history, the governments of various countries have adopted a new mindset to tackle the new challenges, and flexed their fiscal muscles to boost the economy. In spite of a substantial deficit, Hong Kong’s current fiscal reserves still stand at some $900 billion. The Government should consider adopting more new fiscal philosophies, promoting the reform of the economic structure and tax regime, and adopting various bold fiscal measures to boost the economy and invest in the future so that Hong Kong can shake off the doldrums as soon as possible and maintain its competitiveness.

President, I so submit.