Speech at Panel on Financial Affairs

Development in financial technologies

Mr CHAN Chun-ying enquired about the Administration’s plan to promote the development of Fintech including the development of “Know-your-customer Utility” (“KYCU”) in the banking industry which could enhance the efficiency of account opening process. In view of the public concern about personal privacy, he asked if the Administration would promote the development of personal KYCU upon implementation of the initiative to provide electronic identities (“eIDs”) for all Hong Kong residents.

On the development of KYCU, SFST advised that the Government was examining the matter with the Hong Kong Monetary Authority (“HKMA”). HKMA was collaborating with the Hong Kong Association of Banks (“HKAB”) on exploring a potential KYCU solution for corporates. HKMA was also examining the feasibility of a KYCU for individuals, which could make use of eIDs being developed by the Innovation and Technology Bureau. It was envisaged that KYCU for individuals would involve a customer database and eIDs would be used for authentication to access the database. The banking industry, as well as the securities industry, were expected to benefit from such KYCUs to streamline customer on-boarding. KYCU for individuals might also be extended to cover individuals from the Mainland and overseas in future. In addition, SFST advised that SFC had issued guidelines to the securities industry on the account opening procedures for non-local clients with a view to facilitating local securities firms in soliciting business from such clients. As regards client suitability assessment, he remarked that the procedures to be applicable would depend on the types of investment products involved.


Development of offshore RMB business

Mr CHAN Chun-ying and Mr WONG Ting-kwong sought details of measures the Administration would implement to enhance Hong Kong’s role as a premier offshore RMB business hub.

SFST responded that the Government would launch a number of measures to strengthen Hong Kong’s role as a premier offshore RMB business hub such as exploring the possibility of including in the two-way mutual access mechanism a wider range of investment products (e.g. exchange-traded funds), and extending the Mainland-Hong Kong Bond Connect to cover Southbound Trading. Besides, regulatory authorities of Hong Kong and the Mainland were discussing the establishment of an investor identification system for the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect. Hong Kong would also discuss with the Guangdong Province on measures (including tax concessions) that could help the local financial services – 8 – Action industry and professionals to tap opportunities arising from the development of Bay Area. Furthermore, the Government would encourage the Asian Infrastructure Investment Bank (“AIIB”) to leverage Hong Kong’s status as an international financial centre and its capital markets to support AIIB’s operation. Hong Kong’s offshore RMB business would be strengthened if AIIB decided to issue bonds in Hong Kong.

SFST further advised that around 70% of the world’s offshore RMB payment transactions were processed via Hong Kong in the first half of 2017. When planning for the further development of Hong Kong’s RMB business, the differences between the RMB in onshore and offshore markets should be taken into account. It was envisaged that Hong Kong’s RMB payment and settlement services would be strengthened further with progress in the internationalization of RMB.


Hong Kong’s participation in the Belt and Road Initiative

Mr CHAN Chun-ying enquired about the Administration’s measures to help local enterprises to participate in the financing of infrastructure projects under the BRI. He asked if the Administration would expedite negotiations of CDTAs with countries along the Belt and Road route (particularly member countries of the Association of Southeast Asian Nations), and assist local companies in establishing contacts with the official authorities concerned through Government’s overseas offices (e.g. Hong Kong Economic and Trade Offices).

SFST responded that the Government would formulate measures to enhance market access for Hong Kong companies in countries along the Belt and Road route. Hong Kong had already signed CDTAs with a number of jurisdictions along the Belt and Road route and the Government would continue its work in expanding the CDTA network. Nonetheless, given the international trend of jurisdictions to implement the automatic exchange of financial account information on a multilateral basis, there had been fewer incentives for jurisdictions to conclude CDTAs with Hong Kong. He added that the Government had organized a number of visits to markets along the Belt and Road route to promote the strengths of Hong Kong, and welcomed Members’ suggestions on other promotional measures to be taken.


Development of green finance

Mr CHAN Chun-ying supported the Administration’s initiative to develop green finance through the issuance of Government green bonds, and invited the Administration to consider the recommendations in the recent report of Our Hong Kong Foundation on the subject. He asked whether the subscription of Government green bonds would be opened to retail investors; and if so, how the Administration would enhance the attractiveness of the bonds given the lower yields of such bonds compared to bonds issued by private organizations. The Chairman suggested that the Administration should promote Hong Kong as a major green certification centre in the Asia-Pacific region, which would be conducive to developing green finance.

SFST responded that the Government was aware of Our Hong Kong Foundation’s report. The Government had already put in place a number of – 11 – Action facilitation measures in relation to the development of green finance. For instance, eligible green bonds would be exempt from profits tax under the existing legislation. As regards the development of a retail market for green bonds, it would be necessary to enhance public understanding of the higher compliance costs associated with green bonds, and there was currently no plan to develop a retail market for Government green bonds. SFST added that the Government would promote the establishment of green certification schemes which would be conducive to developing green finance in Hong Kong.