Speech at Council Meeting-Members’ Motions Debate on the 2023 Policy Address


President, based on the practical experience gained over the past year or so, the Chief Executive has delivered a new Policy Address under the theme of “A Vibrant Economy for a Caring Community”.  Having extensively taken on board the views of various sectors of the community and members of the public, this Policy Address puts forward about 640 initiatives to help Hong Kong explore new directions and open up new horizons in the complex and volatile global economic environment where challenges and opportunities coexist.  It combines ambitious and visionary aspirations with pragmatic steps.  Therefore, I support this Policy Address and the Motion of Thanks.

The Policy Address has made pledges on a number of livelihood issues, and a stable and harmonious society is an important vehicle for the fulfilment of these pledges.  Hong Kong has achieved a transition from chaos to order and is advancing from stability to prosperity, thanks to the Hong Kong National Security Law and the improved electoral system.  The forthcoming District Council (“DC”) election will reshape DCs into pluralistic, balanced and professional bodies, instead of being an ineffective bridge for public opinion that has neglected people’s livelihood, flouted the law, and even threatened national security in the past.  This will help improve the efficiency of governance at the district level.  In addition, the enactment of legislation on Article 23 of the Basic Law will create a more stable social environment for Hong Kong, so that we can focus our attention on and realize the genuine interests of the public.

At the same time, the Policy Address attaches great importance to Hong Kong’s economic and financial development.  It proposes a number of measures, such as moving ahead with the Northern Metropolis, enhancing the development of the “eight centres”, and establishing a framework for the financing of major development projects.  The goals of the “eight centres” and the Northern Metropolis cannot be achieved overnight.  Although they will hopefully become important new areas of growth for our future economy, the financial services sector will remain the main pillar of Hong Kong’s economy for some time in the future.

At the Central Financial Work Conference held last month, it was mentioned that we should “make significant efforts in the areas of technology finance, green finance, inclusive finance, pension finance, and digital finance”, as well as consolidate and upgrade Hong Kong’s status as an international financial centre.  Finance has long been a shining icon of Hong Kong.  At this special historical moment, it has even become an unshirkable mission for us to expand and strengthen the financial sector.

A host of measures are introduced in the Policy Address to enhance Hong Kong’s competitiveness.  In the following, I would like to discuss three aspects.

The first aspect is the consolidation of our position as an international financial centre.  Let me start with the competitiveness of the capital market.  In recent years, the turnover of Hong Kong stocks has been on the decline, which has dampened the desire of enterprises to seek listing in Hong Kong.  The Policy Address announces that the recommendations of the Task Force on Enhancing Stock Market Liquidity (“the Task Force”) have been accepted and that measures will be introduced to lower transaction costs, improve the transaction mechanism, and reform GEM.  Among these measures, I believe the one that has attracted the most attention in the market is the downward adjustment of the rate of stamp duty on stock transfers from 0.13% to 0.1%.  This amendment was passed at the Third Reading in this Council last week.

However, stock market performance and trading volume hinge on many factors, including investors’ expectations about the outlook of the market, economic performance, capital flows, company earnings, and whether there are continuous listings of enterprises with potential.  The recent stock market weakness is also driven by macro factors, including high interest rates and the uncertain geopolitical and global economic outlook.  Even though these new measures cannot change the macro fundamentals, they can send a positive message to the market and make it clear that the Government will adjust its policies in the light of the market conditions.  I believe this will help boost the investment sentiment.

In addition to introducing the stamp duty reduction measure, the Government should expeditiously implement the Task Force’s recommendations on promoting the listing of overseas issuers, facilitating share repurchase by issuers, maintaining trading under severe weather, improving the transaction mechanism, strengthening market promotion, etc., so that Hong Kong’s stock market can regain its vibrancy and glory.

Next is the competitiveness of the offshore Renminbi (“RMB”) business.  The Policy Address puts forward measures to strengthen the offshore RMB business and deepen financial cooperation in the Greater Bay Area (“GBA”).  It also proposes to press ahead with the inclusion of RMB counters under the Southbound Trading of Stock Connect to facilitate the trading of Hong Kong stocks in RMB, take forward the introduction of offshore Mainland government bond futures, and enrich the variety of RMB investment products.

These measures are not only a positive response to market needs, but can also expand the shareholder base of Hong Kong stocks, which in turn helps to enhance stock liquidity.  At the same time, they also allow Mainland investors to avoid exchange rate risks.  In fact, the Government should strengthen the offshore RMB business as soon as possible.  This will help promote Hong Kong’s role in international trade, investment and financing, while also consolidating its position as an important platform for the internationalization of RMB.

Let me move on to the competitiveness as a green finance hub.  The Policy Address mentions matching more international capital for green and sustainable investment projects in GBA, as well as offering more efficient and convenient green financial products and services for enterprises and investors.  This includes the launch of a dedicated proof-of-concept subsidy scheme for green financial technology (“fintech”) in 2024, which will provide early-stage funding support for pre-commercialized green fintech.

It is the first time that the Government proposes to provide a proof-of-concept subsidy specifically for green fintech.  This is a clear direction and is of great significance as it drives the transformation of green fintech from theory to practice.  Funding is usually the key determinant of the success or even survival of a project in its initial stage of development.  Through government subsidies and support, Hong Kong can develop more green fintech projects.  This will not only hopefully establish Hong Kong as a global centre for green fintech research, development and application, but can also facilitate the rapid development of the green finance ecosystem, thereby attracting more international institutions and enterprises to use Hong Kong as a green finance base.

The Policy Address also mentions the continuous expansion of government green bond issuance.  Hong Kong’s green bond market has experienced explosive growth in recent years.  Despite difficult global bond market conditions last year, Hong Kong’s green bond issuance still grew by 42% to a record high.

The Government must maintain its determination and efforts to promote green economy transformation, for example by continuing to extend tax concessions, providing loan guarantees for eligible green projects, and organizing green finance forums and seminars, so as to attract more Mainland and overseas institutions and investors to participate in Hong Kong’s green bond market.

Last but not least is the competitiveness in attracting foreign talents.  The Government will relaunch the Capital Investment Entrant Scheme to attract foreign capital and talents to Hong Kong.  The scheme will attract top talents on the one hand, and create more demand for wealth management business, financial services and related professional services on the other.  The three measures of stamp duty reduction and suspension proposed in the Policy Address will also help reduce the costs of residential property acquisition for those who come to Hong Kong through talent schemes, thus enabling them to settle down and take root in Hong Kong.

As for the “multiple-entry visa” to the Mainland for foreigners working in companies established in Hong Kong, I believe this will attract more foreign enterprises to consider setting up operations in Hong Kong and will facilitate their staff to travel to the Mainland for business purposes, thereby reinforcing our unique role in connecting the Mainland with the world.  All these policies should be implemented and taken forward expeditiously.

The second aspect is to adopt an industry-oriented approach to enhance development momentum.  Hong Kong has long been facing deep-seated conflicts, and the Policy Address has provided targeted responses to these conflicts.  It has also come up with a directional top-level design for its policies and outlined a development blueprint.  There are both practical measures and long-term visions.

The Government plans to provide sufficient land for the future of Hong Kong through the Northern Metropolis and Kau Yi Chau Artificial Islands (“KYCAI”) projects in order to solve the housing supply problem.  It also intends to promote diversified economic development through an industrial policy to get rid of the relatively homogeneous industrial structure in the past.

President, the term “產業”, which is rendered as “industry”, “industries” or “industrial”, appears 35 times in the Chinese text of this Policy Address, which is more than that in last year’s Policy Address, and the description of “industry-oriented” appears for the first time this year.  The adoption of the industry-oriented approach as a policy priority is a new highlight this time around.  This suggests that the Government will become a proactive promoter of industries, and its governance philosophy has moved from “positive non-interventionism” and “big market, small government” in the past to a clear pursuit of a better integration of a “capable government” and a “highly efficient market”, which will help boost investor confidence.

For a long time, the service industries have accounted for more than 90% of Hong Kong’s economic output, and the industrial structure is not diversified enough.  The so-called “four pillar industries” (i.e. financial services, tourism, trading and logistics, and professional services and other producer services) accounted for about 60% of Hong Kong’s GDP (Gross Domestic Product) and half of its employed population before the epidemic.  In other words, the Hong Kong economy has always been fully tilted towards the service industries.  The imbalanced industrial structure not only hinders the comprehensive and healthy development of the economy, but also makes Hong Kong’s economic performance vulnerable to the impact of individual sectors.

At present, many economies around the world are making an all-out effort to develop strategic industries (especially in areas such as new energy and artificial intelligence).  In the face of the nationwide efforts made by other places in promoting industries, the key to Hong Kong’s pursuit of an industry-oriented approach is to invest in industries where we have comparative advantages and to achieve complementarity with other GBA cities, so as to avoid wastage of resources.

At the same time, an industrial policy has the benefits of enhancing Hong Kong’s competitiveness in various fields, strengthening our international status and soft power, attracting more international enterprises and high-end talents, and achieving sustainable development.

However, it should be noted that the Government must be involved in the implementation of the industrial policy throughout the process, including advance planning and land development.  It is also necessary to coordinate in areas such as enterprise attraction, talent admission, tax concessions, financial support, living and housing, collaboration among industry, academic and research sectors, and intellectual property protection.  Only in this way can we systematically link up and organically integrate our strengths in various aspects to create a highly efficient system, improve the efficiency of resource allocation, and promote the rapid realization of planning visions.

The third aspect is to make proper planning for the financing of major infrastructure projects.  The two important projects, namely the Northern Metropolis and KYCAI, are the largest development projects in Hong Kong in the next two decades.  They are expected to provide some 3 000 ha and 1 000 ha of new land respectively, accounting for a total of 55% of the land supply secured by the Government.  While they require funding exceeding HK$1 trillion, as well as a large scale of investment in the early stage of development, they cannot generate revenue in the short term.

The annual capital works expenditure has been maintained at a level of $80 billion in the past few years, and is expected to grow continuously to $100 billion in the coming years.  It is indeed difficult for the Treasury to cope with these expenditures at the same time with the Government’s current fiscal reserves and tax revenues alone.

For such large-scale and multi-year projects, comprehensive and diversified financing options are essential.  Given the immense complexity and huge scale of these projects compared to previous single infrastructure projects, a single financing method may not be appropriate.  Perhaps there is a need to adopt a combination of financing options and raise funds in accordance with the respective policy objectives, economic value, commercial viability, etc. of different projects.  Therefore, it is necessary to establish an interdepartmental structure dedicated to coordinating and managing financing options.

The Policy Address proposes the establishment of the Committee on the Financing of Major Development Projects and the Office for the Financing of Major Development Projects to assess the feasibility of bringing in private investors for these projects, and thoroughly evaluate their financial viability to ensure the Government’s fiscal sustainability.  The establishment of this office is precisely in line with the current needs, as it will be helpful to the Government in consolidating existing financial and monetary resources, coordinating the development and management of various major projects, and arranging financing options that meet the needs of different projects, thereby easing the financial pressure on the Government and achieving an all-win situation.

President, I believe that bringing in private investors should be regarded as the key to solving the financing problem and should be accorded the highest priority.  Building on the existing public-private partnership (“PPP”) models, the SAR Government should boldly innovate PPP proposals in the light of the new circumstances to make them more attractive to the private sector.

Now that both the office and the committee have been established, the Government should expeditiously determine the staffing, as well as finalize the financing directions for major infrastructure projects, such as the Northern Metropolis, KYCAI, and the future Three Railways and Three Major Roads.  It should make it clear that a relatively large proportion of the funds will be raised primarily through the market, thereby allaying public concerns about the current affordability of public finances and reducing social controversy.  At the same time, the Government should adopt a diversified and innovative approach that includes elements of public engagement to mobilize various sectors of the community to take an active part in promoting the accelerated development of major infrastructure projects.

President, as the new Policy Address creates more favourable conditions for Hong Kong’s long-term development, prosperity and stability, it is expected that the local economy will develop in a sustainable and steady manner.  The Policy Address also discusses various livelihood issues in considerable detail and puts forward many policy measures.  Of course, these policy measures require funding support.  While there are views in the community that the Government’s public expenditure has increased significantly in recent years, there is no strategic discussion whatsoever in this year’s Policy Address on how to generate revenue.  I hope that in the Budget to be announced later, the Government will put more emphasis on revenue generation to build up public confidence in both the policy implementation and fiscal management of the Government.

President, I so submit.