MR CHAN CHUN-YING (in Cantonese):
Deputy President, Chief Executive Carrie LAM delivered her fourth Policy Address in her term of office at the difficult time for Hong Kong when we need to restore our confidence to strive ahead.
Over the past one-odd year, Hong Kong with an open economy which heavily relies on service industries has been hard hit by the Coronavirus Disease 2019 (“COVID-19”) pandemic with drastic deterioration in its economic condition and a rapid increase in its unemployment rate. In the first half of last year, Hong Kong’s GDP shrunk by 9% in real terms, recording the largest decline for a six-month period. Given a comparatively low base number in the previous period, the year-on-year economic decline in the latter half of the year has narrowed, but according the latest estimation by the Chief Executive, the decline will still be 6.1% for the whole year.
Amid the pandemic, business is slack in all trades and industries. The quarterly unemployment rate of Hong Kong has risen from 3.3% in late 2019 to 6.6% in last December. At present, the actual number of unemployed people stands at 245 000 which is actually more than a double of the 124 000 in late 2019 as mentioned by the Deputy President just now. What comes as quite a relief is that Hong Kong’s merchandise trade has benefited from the strong external trade of the Mainland and started picking up since the latter half of last year. According to the statistics of the Census and Statistics Department, Hong Kong’s import and export of goods have reverted to an increase in the third quarter of last year. In comparison, the pandemic has relatively minor impacts on Hong Kong’s financial and property markets. The linked exchange rate remains stable while the banking system and the market basically operate in a smooth manner.
The disturbances arising from the opposition to the proposed legislative amendments and the COVID-19 pandemic have seriously undermined the social stability and economic development of Hong Kong. Fortunately, subsequent to the promulgation and implementation of The Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (“the National Security Law”) on 30 June last year, stability has been gradually restored in our society. That said, there is a difficult road ahead to control the pandemic and revive the economy, given the widespread anxiety among the public and the urgent need to rebuild market confidence. In order to enhance the community’s confidence in Hong Kong, the Chief Executive specifically postponed the delivery of her Policy Address and personally led a government delegation to Beijing, Guangzhou and Shenzhen, which succeeded in securing support from the Central Government in the form of some new policies that are beneficial to Hong Kong. These policies offer us some substantive assistance in respect of promoting the development of the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”), consolidating Hong Kong’s status as an international financial centre and international aviation hub, and the development of an international innovation and technology (“I&T”) hub. I believe that the support from the Central Government will help Hong Kong emerge from the present predicament more speedily.
Deputy President, divided into 167 paragraphs in 10 chapters, this Policy Address of some 30 000 words focuses mainly on areas such as navigating through the epidemic, adding new impetus to the economy, increasing housing and land, building a liveable city, improving people’s livelihood, and nurturing talents, and all the relevant policy initiatives aim at resolving the perennial and thorny problems in Hong Kong. If they can be implemented expeditiously, there will definitely be improvements in people’s living. As regards the details of other policy areas of the Government, they have been set out in the second Policy Address Supplement (“Supplement”). In the Supplement, each policy area is presented in two parts, namely “Progress Made” and “New Initiatives”, and as compared with the Supplement published last year―actually the year before last―the part of “Challenges Ahead” has been cut out from each chapter.
Media practitioners in the community are of the view that the Supplement is essentially the self-appraisals of the 13 Policy Bureau Directors. According to the statistics of various policy areas covered in the Supplement, the Chief Executive has announced a total of 791 initiatives since taking office, of which 90 have been taken up by the Development Bureau: 60 with progress made while 30 are new assignments. Among the 13 Policy Bureaux, the Development Bureau ranks first in terms of the number of initiatives assigned. Ranking next to it as the busiest Policy Bureau is the Food and Health Bureau. This is particularly the case at present when it is charged with the heavy and crucial responsibility of preventing and controlling the pandemic. Of the 791 initiatives, 70 have been tasked to the Food and Health Bureau and it has also been assigned 30 new ones. Among the four Policy Bureaux which have been assigned more than 50 initiatives, the Education Bureau has achieved a completion rate of 86%, whereas the remaining Policy Bureaux, including the Financial Services and the Treasury Bureau which is the most closely related to me, appear to have just performed so-so. This Bureau is responsible for 25 of the 791 initiatives. Among them, 18 have made progress, i.e. a completion rate of 72%, and 7 are new ones.
Deputy President, apart from the Policy Address and its Supplement being considered as a self-appraisal, some in the community have also commented that the Policy Address this year has overemphasized our integration into GBA. But I do not quite agree with this view, because when it comes to Hong Kong’s future development, we must take proactive actions to integrate into the overall national development by extensively participating in the development of GBA. It is only in this way that we can find a new engine for the development of Hong Kong’s economy. With a population of 72 million, a GDP of US$1.7 trillion, and vibrant impetus and potential for economic development, GBA will definitely be able to provide new impetus for the further development of Hong Kong’s economy.
The Policy Address contains a series of important initiatives in relation to the deepening of Hong Kong-Mainland cooperation which are worth looking forward to. First, it concerns the mutual access between the Mainland and Hong Kong financial markets. Last March, the Z/Yen Partners in the United Kingdom and the China Development Institute in Shenzhen jointly published the Global Financial Centres Index Report in which Hong Kong fell out of the first three places for the first time, ranking merely the sixth. Then, in the latest report published in September, Hong Kong has slightly moved up one place to the fifth. I hope that the Government will continue to play a proactive role in deepening the mutual access between the financial markets of the two places, so as to push Hong Kong back to the first three places.
In my view, there are three major opportunities presented by the mutual access between financial markets. Firstly, it is the opportunity for cross-boundary financial management. The Mainland is one of the world’s fastest growing markets where people rapidly accumulate wealth. With their increasing demand for asset allocation services, the Mainland market has become increasingly important to the private wealth management industry of Hong Kong. Deputy President, according to the survey cited in the Hong Kong Private Wealth Management Report 2020, the responding institutions stated that among the assets under their management, the percentage from the Mainland had increased from 35% in 2019 to 40% last year. It is estimated that the percentage will further increase to 54% in the next five years, considering especially the fact that GBA ranks first in the country in terms of wealth growth potential, and one fifth of the high-net-worth households with assets amounting to RMB10 million or above are from Mainland cities in GBA.
Last June, the People’s Bank of China (“PBoC”), the Hong Kong Monetary Authority (“HKMA”) and the Monetary Authority of Macao jointly announced the launch of the cross-boundary wealth management connect pilot scheme (“Wealth Management Connect”). Since then, the local banking industry has actively made preparations to launch this business, and I have also invited the Secretary for Financial Services and the Treasury Christopher HUI to attend seminars held by the industry to listen to the views and suggestions of members of the industry. Later, the authorities announced that the Northbound and Southbound Wealth Management Connect are respectively subject to a unilateral aggregate quota of RMB150 billion and a quota of RMB1 million for individuals.
The Policy Address has proposed expediting the implementation of Wealth Management Connect. This will open up a wider market for the private wealth management industry of Hong Kong, and bring to it a new round of development opportunities. Under Wealth Management Connect, settlement will be carried out in Renminbi (“RMB”), with currency conversion conducted in the offshore markets. The relevant funds can be remitted and managed in a closed-loop through the bundling of designated remittance and investment accounts. This mechanism can encourage more RMB remittance and settlement to be conducted in Hong Kong, and help our offshore RMB business to further develop and prosper. Moreover, to make it convenient for Mainland residents to open investment accounts in Hong Kong, I really hope that the Government will strive for the Mainland authorities’ consent to allow Hong Kong incorporated banks’ branches, subsidiaries, holding companies and designated banking partners in GBA to provide service such as cross-boundary attestation for account opening and remote product presentation for Mainland residents intending to make investment in Hong Kong, while, conversely, allowing banks in Hong Kong to carry out the attestation required of Hong Kong residents for their Mainland banking partners.
Secondly, it is the opportunity for development of green finance. PBoC, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission and State Administration of Foreign Exchange have jointly issued the “Opinion on Providing Financial Support for the Development of the Guangdong-Hong Kong-Macao Greater Bay Area” which proposes promoting cooperation in green finance in GBA through supporting Hong Kong to develop a green finance hub in GBA and establish an internationally recognized green bond certification institution, encouraging more enterprises in GBA to use Hong Kong as the platform for green project financing and certification, and supporting Guangdong’s financial institutions to issue green financial bonds and other financial products in Hong Kong. In the future, Hong Kong can develop GBA into the most important green finance centre in Asia and provide sufficient financial support for the development of a low-carbon bay area by such ways as issuing benchmark green bonds, hosting global conferences on green finance and investment, establishing a green labelling scheme, and endeavouring to train the relevant finance talents.
In 2019, the cumulative green bond issuance in Hong Kong reached US$7.1 billion, among which low-carbon buildings dominated use of proceeds at a record high of 61% of the annual issuance.Last May, HKMA and the Securities and Futures Commission initiated the establishment of the Green and Sustainable Finance Cross-Agency Steering Group which focuses on the two aspects of regulatory policy and market development to bolster Hong Kong’s position as a green finance centre in Asia and globally. In fact, with our unique advantages, Hong Kong can really play a significant role in Mainland’s development of green bonds and green finance. I believe it is just the opportune moment for Hong Kong to foster the development of green finance and this will offer us a promising prospect.
The third opportunity is presented by digital RMB. PBoC is making strenuous effort to take forward the pilot work of digital RMB, i.e. Digital Currency Electronic Payment (“DCEP”), in the Mainland. Currently, the trial sites include the Beijing-Tianjin-Hebei region, the Yangtze River Delta region, GBA, and the central and western regions where the right conditions exist. If cross-boundary use of digital RMB is made possible, it will certainly be of great help to RMB internalization. In my written question last October, I already urged the Government to lobby PBoC to designate Hong Kong as a trial city outside the Mainland for digital RMB. In his Article in inSight last month, the Chief Executive of HKMA, Eddie YUE, also stated that HKMA and the Institute of Digital Currency of PBoC are discussing the technical pilot testing of using digital RMB for making cross-boundary payments, and are making the corresponding technical preparations. While there is not yet a timetable for the launch of digital RMB, it will certainly offer an additional electronic payment option to those in Hong Kong and the Mainland who need to make cross-boundary consumption.
Deputy President, the second major initiative relating to the interconnectivity between the two places is the joint development of the Shenzhen/Hong Kong Innovation and Technology Co-operation Zone (“SITZ”). During the latter part of the last century, Hong Kong and the other three Asian dragons similarly experienced a constant exodus of low-end manufacturing industries. But different from the other three dragons which underwent restructuring towards high-end technology industries, Hong Kong restructured its industries to focus on finance and real estate, thus resulting in the lagged development of our technology industries. Compared with the Mainland and the major economies in our surrounding area, our expenditure on research and development (“R&D”) accounts for a far lower proportion of our GDP owing to have impacted Hong Kong enterprises which have set up factories in the Mainland for manufacturing goods for export in various ways.
These Hong Kong-owned enterprises are in the predicament caused by the sluggish United States and European markets, and the Mainland has become an important market for them. The Policy Address has stated that the Central Government supports Hong Kong enterprises to tap into the Mainland market. This refers to not only the sale of goods to the Mainland domestic market, but also exporting Hong Kong’s professional services to the Mainland. I believe that this initiative will be beneficial to Hong Kong enterprises and our development, and will also enable Hong Kong enterprises to make contribution to the country’s new development pattern of “dual circulation” with their strengths in domestic and international connections.
As proposed in the Policy Address, a Mainland Enterprises Partnership Exchange and Interface Programme will be launched in the coming year to facilitate exchanges and networking that foster cooperation between Hong Kong’s professional services sector and Mainland enterprises, strengthen the capacity building of both sides, and enhance the international outlook, market orientation and professional standards of various projects. Professional services industry is one of the pillar industries of Hong Kong and enjoys a competitive advantage. This well-thought-out programme should be implemented expeditiously to enable it to achieve its effect sooner.
Deputy President, in addition to fostering our integration into GBA, the SAR Government should also keep strengthening our infrastructure (including the financial infrastructure) so that we can consolidate our status as an international financial centre.
In fact, the International Monetary Fund (“IMF”) stated in last October’s issue of Fiscal Monitor Report that having taken a severe hit from the COVID-19 pandemic, governments of different countries should seize the opportunity of low interest rate to invest in infrastructure, so as to drive economic recovery from the COVID-19 pandemic. According to IMF’s calculation, if advanced and developing economies increase their public investments by an amount equivalent to 1% of their GDP, the overall GDP will increase by 2.7% and the growth of private investments will increase by 10%, creating 7 million jobs directly. Also, 20 million to 33 million jobs will be created on the whole, when considering the indirect macroeconomic effects.
In light of this, the SAR Government should, on the one hand, carry out its anti-epidemic work properly and, on the other hand, continue to invest in infrastructure. It is encouraging that the Policy Address has made it clear the Government will continue to invest in local infrastructure with an estimated annual expenditure of HK$100 billion on average in the next few years. What is more, in her letter addressed to Legislative Council Members last night, the Chief Executive revealed that the funding for works projects which the Government is going to seek approval will amount to HK$180 billion in 2021. Meanwhile, Guangdong and Hong Kong will continue to deepen cooperation in the aspect of infrastructure. Examples include the Airport Authority Hong Kong investing in the Zhuhai Airport by way of share acquisition; and improvement being made to the infrastructure of land boundary control points. I believe the cooperation will stimulate the economy and create considerable employment opportunities.
In addition, I think financial infrastructure should also tie in with financial development in the future. While HKMA has gradually introduced a number of initiatives such as virtual banking, Stored Value Facility, Faster Payment System and Open Application Programming Interface (“API”) over the past few years, some financial infrastructure is beyond the purview of HKMA. I hope that the Government can adopt the following two proposals which have been repeatedly raised by me.
First, the resources allocated to the Financial Services Development Council (“FSDC”) by the Government has all along been fairly limited. Its manpower and resources are not sufficient for it to fully perform its role in areas such as conducting strategic research and formulating recommendations, promoting market development and nurturing talents. I hope that the Government will continuously increase the resources devoted to FSDC, so that it can constantly offer advice and suggestions for Hong Kong’s financial development.
Second, in order to enhance the efficiency in carrying out due diligence regarding individual customers’ credibility, banks have kept exploring the enhancement of their platforms of customer credit information, and the Government has also introduced electronic identity authentication for members of the public. If a personal information database, i.e. what is referred to as Know-your-customer Utility (“KYCU”), can be concurrently established, financial institutions like banks, insurance companies, securities firms will then be able to make use of this Government platform to collect account openers’ information which is in standardized format, saving customers the trouble of providing the information repeatedly themselves and making the account opening process much smoother. Not only is this in line with the international regulatory standards, but also able to achieve the objective of inclusive finance. The SAR Government should draw reference from the approach adopted by the Singaporean Government and take up the role as a proactive leader to meet this need of society as soon as possible.
Deputy President, next, I wish to remind the SAR Government that it should expeditiously review its philosophy about the deployment of its fiscal reserves. Around the world, I believe, not many economies can consistently run budget surpluses without fiscal liabilities―to be more precise, with no net liabilities or, to put it simply, having only net assets―and possess huge fiscal reserves. Also, governments around the world generally will not disclose the size of their fiscal reserves, unlike Hong Kong where there is high transparency. Currently, the wealthiest economies in the world can be divided into two major types. The first type consists of such countries as Norway, the United Arab Emirates, Kuwait, Saudi Arabia and Qatar which accumulate their financial resources with their rich oil resources. Another type―for example, Hong Kong and Singapore―is comprised of places which lack natural resources and rely mainly on their fiscal discipline to preserve the financial resources accumulated through economic development. What these countries and places are in common is that they do not have a standard for measuring what is “the optimal level of fiscal reserves”. Most of them just limit their annual disposable fiscal reserves to less than a certain percentage, or require their governments to strive for a balanced annual budget with no deficit while being able to promote economic stability and sustainable development.
Deputy President, now, all trades ad industries in Hong Kong are anxious for a rebound, and many enterprises and individuals are in desperate need of assistance. As regards how the Government should make effective use of the remaining fiscal reserves which now stand at some HK$800 billion, there are actually many different views and demands in society. Regrettably, the Policy Address has failed to give any response. As the leader of the SAR, the Chief Executive should reveal her most updated financial management philosophy in response to the latest situation to indicate the direction in which our fiscal reserves should be used, so that the fiscal surplus can be ploughed back into society to revitalize our economy and invest in our future.
Deputy President, the Government’s procurement of vaccines has undoubtedly brought new hope for pandemic control, but the Government must not slack off in its arrangements for ancillary facilities and implementation. Its foremost task is to encourage members of the public to receive vaccination. Regarding the untrue rumours on the Internet, the Government should not just keep expressing regret and then leave it at that. Instead, it should address this problem at root by coming up with more effective ways to eradicate false information on the Internet. The Government should also require members of high-risk groups to be vaccinated, and arrange for people who engage in industries involving frequent close contact with the public to receive vaccination and regular compulsory testing, so as to ensure that our society will return to normal operation expeditiously.
Titled “Strive Ahead with Renewed Perseverance”, the Policy Address has responded to all the issues of public concern and proposed some 200 new initiatives to bring hope to Hong Kong. Therefore, I will definitely support the Motion of Thanks. But if the pandemic persists, it will be impossible for any of the work to start, and our hope may be dashed. The inconsistent stringency of the Government’s anti-epidemic measures and the fluctuating pandemic situation have already left the public physically and emotionally drained. I strongly urge the Government to take decisive actions to achieve the target of “zero infection” stated in the Policy Address, so as to enable Hong Kong to start afresh sooner.
I so submit. Thank you, Deputy President.