Speech at Panel on Commerce and Industry

National 14th Five-Year Plan

Deepening and widening mutual access between the financial markets of the Mainland and Hong Kong

Mr CHAN Chun-ying enquired about the measures to be taken by HKSARG in support of the “Fintech 2025” Strategy launched by the Hong Kong Monetary Authority (“HKMA”) to facilitate the development and use of central bank digital currencies, namely e-HKD and e-CNY, in Hong Kong; how Hong Kong could develop its position as a green and sustainable financing hub to provide matching service to Mainland businesses; and the progress and implementation timetable of Wealth Management Connect (“WMC”).

Under Secretary for Financial Services and the Treasury (“USFST”) advised that HKMA’s technical pilot testing with the Digital Currency Institute of the People’s Bank of China (“PBoC”) on using e-CNY for making cross-boundary payments went smoothly. HKMA was collaborating with PBoC on the next phase of technical testing, including the feasibility of broadening and deepening the use of e-CNY for cross-boundary payments. It would offer an additional, safe, convenient and innovative means of cross-boundary retail payments to residents in Hong Kong and the Mainland. It would also enhance the efficiency and user experience of cross-boundary payments, and help promote the financial interconnection among the various cities of the Greater Bay Area.

USFST added that in order to support green and sustainable bond issuance and lending to further enrich the green and sustainable finance ecosystem in Hong Kong, the Green and Sustainable Finance Grant Scheme was launched in May 2021 to provide subsidy for eligible bond issuers and loan borrowers to cover their expenses on bond issuance and external review services. The Scheme would last for three years. In fact, the world’s first Greater Bay Area-themed international green bonds was issued in September 2019 in Hong Kong, which was well-placed to become a major offshore green bond market for Chinese-domiciled entities to raise funds for their green transformation.

As regardsWMC, USFST advised that in May 2021, the Guangdong financial regulators promulgated the draft implementation guidelines of the scheme for public consultation. The latest guidelines provided more flexibility including allowing Mainland residents to open an investment account under Southbound Scheme by remote on-boarding and allowing each eligible bank to partner with more than one eligible bank in the other market. HKMA would continue to work closely with the relevant authorities to expedite the implementation of WMC.

Progress report on Research and Development Centres in 2019-2020 and 2020-2021

Target level of industry income

Mr CHAN Chun-ying said that he had all along supported the work of the five R&D Centres. Noting that all five R&D Centres had met the target level of industry income of 30% which was set in 2017-2018, he suggested that the Administration should raise the target level to, say 35%, to further enhance the R&D Centres’ performance. Regarding the industry income of the Hong Kong Applied Science and Technology Research Institute (“ASTRI”) in particular, Mr CHAN enquired about the reasons for: (i) 39% decrease in industry contribution and 70% decrease in contract services in 2020-2021 compared to 2019-2020; and (ii) being able to obtain the largest number of patents among all R&D Centres through the years.

PSIT advised that prior to 2017-2018, the target level of industry income was only 20%. Although it was subsequently raised to 30%, all the R&D Centres were able to meet through considerable effort the new target during the first four-year cycle. The Administration would review from time to time, and might raise the target further if necessary. PSIT added that due to its larger scale compared to the other R&D Centres, ASTRI was capable of undertaking more R&D projects, and thus able to obtain a larger number of patents than other R&D Centres. In response to the Chairman’s further enquiry, PSIT advised that the number of patents to be obtained by an individual R&D Centre was determined by the number of projects completed, scale of the R&D Centre and its annual budget on patent-related projects, etc. ASTRI would keep an eye on the number of patents to be maintained and filed every year.

Acting Co-Chief Executive Officer cum Chief Operating Officer, ASTRI advised that the COVID-19 pandemic and the work-from-home arrangement had adversely affected the income from industry contribution and contract services as more time was needed for ASTRI to liaise with business partners and agree on the project arrangements. That said, in parallel with the steady rise in licensing/royalty income in these years, the number of contract services had increased in both 2019-2020 and 2020-2021, indicating that the demand for ASTRI’s R&D work remained, although the industry had become more conservative in investing in R&D.