MR CHAN CHUN-YING (in Cantonese):
President, the economic performance of Hong Kong has been stable so far this year, but the biggest uncertainty before us is the trade dispute between China and the United States stirred up by the latter. Since the end of September, the United States has imposed tariffs on more than US$200 billion worth of Chinese imports. The United States President Donald TRUMP has threatened an additional US$267 billion of tariffs, i.e. all Chinese products imported into the United States, if his meeting with President XI this month fails to reach any agreement. Although the situation has eased somewhat in these few days, the trade conflict may escalate. As Hong Kong cannot be spared in this conflict, we must prepare for the bleak and chilly winter of an economic downturn likely to be caused by the trade war between China and the United States.
The Chief Executive’s Policy Address was presented in this context. There are not many new initiatives for the financial services. The relevant measures are mainly to consolidate Hong Kong’s current status as an international financial centre and a global offshore Renminbi business hub, and to grasp the opportunities brought by the Guangdong-Hong Kong-Macao Greater Bay Area (“the Greater Bay Area”) and the Belt and Road Initiative.
In the face of an uncertain environment, as far as the financial services industry is concerned, Hong Kong should explore a more diversified market, create a better business environment and leverage on the opportunities brought forth by the Greater Bay Area, in particular to vigorously develop cross-border financial services. The population of the Greater Bay Area is close to 70 million and the GDP is US$150 million. With the commissioning of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Zhuhai-Macao Bridge (“HZMB”) in recent months, the links between the Mainland and Hong Kong have been strengthened further. The cross-border financial services industry should not miss out on these opportunities. The industry should enhance the alignment between the financial markets in the Mainland and Hong Kong in respect of cross-border attestation service for account opening, cross-border mortgage, cross-border personal wealth management, cross-border mutual recognition for the insurance industry, and so on.
With regard to cross-border attestation service for account opening, Hong Kong residents now face difficulties in opening accounts with Mainland banks. According to the Mainland regulatory requirements, if a customer wants to open a personal bank account with a Mainland bank, he has to visit a particular branch or business unit of the bank in person to complete the account opening procedure. A particular branch or business unit of the opening bank shall not request a branch or business unit of other banks or other institutions to handle the account opening procedure on behalf of the opening bank. However, against the background of facilitating cross-border business and living in the Greater Bay Area, appropriate policy adjustments or measures should be introduced to facilitate the implementation of cross-border attestation service for account opening, as long as risk prevention measures are taken.
Second, we come to cross-border mortgage. We find that cross-border living and working is quite inconvenient as the Greater Bay Area is currently divided into three different banking markets as per administrative region. By rough estimation, there are more than 500 000 Hong Kong residents living in Guangdong currently. Their demand for consumption and home ownership are huge. Hong Kong residents have been finding it difficult in applying for personal credit or mortgage loans in Guangdong. However, in recent years in Hengqin of Zhuhai, Hong Kong and Macao residents purchasing properties there are allowed to apply for loans from abroad, and the funds can be inwardly remitted for their use. If this policy on cross-border mortgage loan can be extended to the whole Pearl River Delta Region, Hong Kong’s pressing housing needs will be alleviated.
Third, in terms of cross-border personal wealth management, Hong Kong is now a global asset management centre. In 2017, Hong Kong’s asset and wealth management business reached US$310 million. However, Guangdong residents are not able to purchase Hong Kong’s wealth management products direct. Such data is sufficient proof of the development potential of cross-border personal wealth management. We can consider establishing a closed-end cross-border wealth management channel to meet the needs of Mainland residents and facilitate Hong Kong residents living in the Mainland on a permanent basis.
Fourth, in respect of cross-border mutual recognition for the insurance industry, we see that many Mainland residents have taken out insurance policies in Hong Kong in recent years. However, as there is no overseas settlement mechanism for the insurance industry, it is quite difficult for them to pay premiums for new policies or to pay renewal premiums. It is also troublesome to handle cross-border claims and deliver after-sales services. With the commissioning of HZMB, motor insurance for drivers travelling among the three places also becomes very complicated. In fact, the Government may consider taking charge of coordination in dealing with cross-border mutual recognition for the insurance industry, cross-border sales and collection of premiums on behalf of outside insurers under the framework of the Greater Bay Area.
President, the Chief Executive stated in the Policy Address that the Government has adopted a five-pronged approach in facilitating development of financial technology (“Fintech”), namely promotion, facilitation, regulation, talents and funding. I am very grateful to the Hong Kong Monetary Authority (“HKMA”) for its efforts at launching the Faster Payment System in September as scheduled to link banks and stored-value payment facilities. The public only needs to use a mobile phone number or an email address as account proxy for the payee to make real-time money transfer anytime and anywhere. A common QR code standard was also launched in September, with which merchants and customers alike can make retail payments across different e-wallets. It has significantly improved the standard of Hong Kong in respect of electronic payment and mobile payment systems. However, security always come first in the pursuit of convenience and speed. The Government should enhance regulation on the use of personal data and identity verification and strengthen inspection on system security before Fintech products are launched, so that people can use Fintech products and enjoy the convenience brought by Fintech products with ease and peace of mind.
HKMA expects that the first batch of virtual banking licences can be issued at the end of this year or early the next. It is expected to add new impetus to the banking industry in Hong Kong and help implement financial inclusion more effectively. The Open Application Programming Interface framework for the banking industry will also allow access by third-party service providers and their access should offer options of innovative financial services to members of the public.
Fintech in Hong Kong has a good foundation and development prospects. As stated by the Financial Secretary some time ago, we have brought together more than 250 Fintech companies in Cyberport, engaging in businesses that include big data, blockchain and mobile payments. In fact, the Pearl River Delta is also an important region of science and technology. Shenzhen is even considered “China’s Silicon Valley”. The cities in the Greater Bay Area are all actively recruiting Fintech talents.
The Hong Kong Government must formulate corresponding policies to encourage and promote Fintech in Hong Kong, so that the Fintech companies can offer competitive terms to potential talents including remuneration packages, accommodation, working environment, education for children and medical insurance to attract such talents to set foot in Hong Kong.
Very often we emphasize the need for talents in the domains of innovation and technology. In fact, the financial industry also needs talents. In the 2018-2019 Budget, the Financial Secretary proposed the establishment of an Academy of Finance in Hong Kong to train talents in the financial services industry. In response, HKMA took forward this initiative quickly and stated that the Academy would nurture senior management personnel for the banking industry. However, given that all businesses are competing for talents, should HKMA not extend the target groups to basic rank employees and middle-level talents? In addition, measures such as tax concessions to encourage self-education, admission schemes for talents and professionals, and more practical financial courses in tertiary institutions are also worth consideration for allocation of additional resources. I hope that HKMA and relevant government authorities will pay great attention to them
Infrastructure is important. For the financial industry, a better business environment means good financial infrastructure, among other things. Now when financial institutions provide products or services to clients, they have to follow a Know Your Client (“KYC”) due diligence procedure. HKMA is currently working with the banking industry to prepare a Know-your-customer Utility (“KYCU”) which is a central database. At present, this is still a commercial operation, unlike in Singapore where it is a government-run facility. I believe KYCU of the financial industry will soon enter the electronic era, so when we are talking about the next stage of KYCU or even eKYCU, the Government should take the lead in funding the infrastructure because, after all, almost all the most important and reliable data of the people are held by the Government.
Lastly, President, I would like to talk about my views on the offsetting arrangement of the Mandatory Provident Fund (“MPF”) System from the perspective of economy and business. For start-ups and small technology companies, MPF accounts for an important part of their operating cost that they have to bear. Years ago, the Government hoped that the industry would support the MPF System and so proposed the offsetting mechanism, allowing employers to offset the long service payment or severance payment with the accrued benefits derived from the employer’s contributions. Eighteen years have passed since MPF was introduced in 2000 and we have heard divergent views from the community. The labour sector holds that MPF is meant to provide for retirement whereas the long services and severance payments are used to cope with the urgent needs of the unemployed people upon dismissal by their employers. Therefore the two should not be confused. Meanwhile, the business sector reiterates that offsetting long service and severance payments with MPF contributions is a long-standing practice. It was precisely because at that time the Government agreed that there were some overlapping between long service and severance payments and MPF, the offsetting arrangement was put in place so that employers need not bear double expenses. Therefore, the abolition of the offsetting arrangement would defeat the original intention of setting up MPF, violate the spirit of contract and also renege on the promise made by the Government to the business sector when it introduced MPF. In order to resolve the disputes, the current-term Government has finally come up with a solution to the issue of abolition of offsetting which was announced in the Policy Address.
In order to abolish the offsetting arrangement, the Government has proposed in the Policy Address to enhance the government subsidy scheme for enterprises that need to pay long service and severance payments. The subsidy period will be extended significantly to 25 years from 12 years proposed originally. The financial commitment of the entire government subsidy scheme will also be increased from the originally proposed $17.2 billion to $29.3 billion. I support these two enhancements. Of course, it would be better if the Government could provide support for a longer subsidy period and make a larger financial commitment. Generally speaking, a 25-year period would be enough to cover the normal life cycle of many businesses. For a worker, 25 years means the prime of his working life. In any case, I believe the subsidy scheme launched by this Government will be able to help the enterprises, strike a balance between the interest of the business sector and the labour sector, solve the MPF offsetting arrangement which has beleaguered micro, small and medium enterprises for years in particular, and also facilitate the sustained operation of local businesses and encourage employees to concentrate on their work. Despite the mainstream opinion being in favour of the Government’s initiative as I know, there are views in the community asking for fine-tuning of the initiative. Therefore, the Administration should also heed good advice readily and consider accepting constructive suggestions such as making fine-tuning like extending the subsidy period and increasing the total financial commitment. The Government should fully consider the historical reasons, make due commitments and implement these initiatives as soon as possible.
President, my remarks have focused mainly on the economic and financial measures that have been or should be covered in the Policy Address. As the focus of this year’s Policy Address is on the land supply problem in Hong Kong, I will speak again in the fourth debate session on “livable city” and make a relevant financial analysis of it.
Thank you, President.