AmCham proposes key measures in response to the consultation of Chief Executive Carrie Lam’s inaugural Policy Address, emphasizing innovation, collaboration and China’s economic initiatives. The Chamber is optimistic that Hong Kong’s new leadership will forge ahead with fresh development, incorporating China’s major economic pillars and the city’s unique position
By Kenny Lau
Upon the 20th anniversary of returning to Chinese sovereignty and a new administration, Hong Kong has much to celebrate in 2017 as the world’s freest economy under “One Country, Two Systems.” More importantly, riding on China’s “resolved, firm and strong” commitment of support, Hong Kong can capture fresh economic opportunities, but it will require a clearly defined, long-term strategy, AmCham advocates in a position paper submitted to Chief Executive Carrie Lam.
In proposing specific policy measures, AmCham is of the view that Hong Kong’s future is dependent on technology, innovation and collaboration as a regional and global partner. Under a new wave of major initiatives – including China’s Belt & Road, Greater Bay Area as well as a general direction in smart city development – Hong Kong is encouraged to strive beyond logistics, trade and conventional finance in charting a new course of growth.
Despite Hong Kong’s unique position and strong foundation in the rule of law, freedom and tax efficiency, fewer multinational corporations are operating in the city today. Only by strengthening its financial services sector, connecting its markets with China and extending its coverage across Asia can Hong Kong become a destination of choice among MNCs and international start-ups alike, AmCham believes.
So far, qualified foreign institutional investors (QFIIs) in Hong Kong have had insufficient access to China’s bond and equity markets because of existing quotas in place. As such, Hong Kong would benefit hugely from an unrestricted flow of investment capital by working with the Chinese government on a two-way channel free of quotas.
The launch of “Stock Connect” and “Bond Connect” between Hong Kong and the markets of Shanghai and Shenzhen has been critical to the expansion of financial links with China. The program, however, remains limited due to a range of unresolved issues. In fact, many are keen to see more products (e.g. ETFs) and further negotiation by the government regarding requirements for retail investors.
Likewise, the China-HK Mutual Recognition of Funds (MRF) is another important initiative providing access to China’s capital markets. For the first time, non-Chinese providers will be able to offer their funds directly to China’s private wealth market worth US$18 trillion without a local provider. Again, there are remaining issues (regarding distribution arrangement, account opening and foreign exchange) pending further adjustment.
Furthermore, Hong Kong can serve as a regional hub of asset and wealth management by joining the Asia Region Funds Passport, a multilateral framework in which Australia, Korea, Japan, New Zealand and Thailand are participating economies. It will allow Hong Kong to grow its industry of managed funds and promote sustainable economic development by facilitating the region’s savings toward productive investment.
Hong Kong has cultivated a reputation as an early advocate and adopter of “smart city” technologies that simultaneously promote sustainability, public health and social welfare. Yet, an innovative economy goes beyond technology. There is a cluster of tangible as well as intangible assets, including – but not limited to – talent development, inclusiveness and diversity as well as environmental policy (which are all AmCham’s priorities).
With respect to technology, Hong Kong is well positioned to be a fintech leader. Crucially, it is a growing industry which could help the city stay competitive by becoming an international platform for tech developers and a hub connecting individual markets in Asia with the globe. The city’s ambitions, evident in the recommendations made by a government steering group, are shared by the Chamber.
Earlier this year, AmCham launched a subcommittee to support the government in promoting fintech development and suggested that Hong Kong work closely with key industry players and other governments to develop a vibrant market in Asia. The Chamber believes it will require a well-thought out position and an effective communications strategy to garner public support.
Despite a talented and creative population of youth, talent development remains a roadblock in the drive towards an innovative economy. AmCham has repeatedly stressed that education in Hong Kong should foster a workforce with a high standard of language abilities and multi-dimensional skills to think and act creatively. Above all, a fundamental mindset change is required to make education a dynamic process in today’s knowledge-based economy.
Moreover, Hong Kong’s talent pool is undermined by the current immigration policy of excluding same-sex couples who are legally married in a foreign country from obtaining dependent visas and resident status. It is therefore difficult for companies to recruit and retain the best talent for the city’s business community unless government policy dictates otherwise - an inclusive policy which should also support local ethnic minority and students with special education needs (SEN).
While Hong Kong’s air quality has improved in recent years, AmCham continues to call for stronger cooperation with Guangdong on reducing emissions from ships in transit and in port, coupled with a focus on tackling roadside air pollution through the adoption of electric vehicles. Similarly, Hong Kong should empower individual energy users through the roll-out of smart meters by utility companies as incremental steps to help reduce energy consumption.
Greater Bay Area
The recent framework agreement to deepen Guangdong-Hong Kong-Macao cooperation provides great leverage for Hong Kong to attract foreign businesses looking to reach a market combining Macau and nine other mainland Chinese cities. The initiative of creating a Greater Bay Area by connecting eleven cities in southern China should only strengthen Hong Kong’s status as a regional and international business hub, AmCham emphasizes in the advocacy paper.
Hong Kong’s trade in services (e.g. legal, accounting and finance) with Guangdong Province has been growing – and it should expand other services (e.g. asset & risk management, corporate treasury, insurance, media & marketing and higher education) under the concept of economic integration in the Greater Bay Area. An institutional arrangement to facilitate cross-border collaboration with transparency and public participation is critical to motivating community involvement.
The Chamber also believes that the city will become a leader under the initiative if it develops a proactive strategy maximizing its unique position provided in the “One Country, Two Systems” framework. A Hong Kong-driven strategy is of utmost importance to convey a clear direction and message to the international community that the city’s participation moves ahead according to the best interest, values and ethical rules of the people of Hong Kong.
Belt & Road
AmCham applauds the Hong Kong Monetary Authority’s decision to establish the Infrastructure Financing Facilitation Office (IFFO) to strengthen Hong Kong’s regional hub status for infrastructure financing. With the possibility of a regional office of the Asia Infrastructure Investment Bank (AIIB) in the city, HKMA is urged to formulate an institutional arrangement for collaboration between AIIB in Hong Kong and relevant stakeholders.
Additionally, given Hong Kong’s international experience, it needs to continue working with Mainland China to establish itself as the premier choice for financial, legal, engineering & design and consulting services relative to the initiative. The commissioner is encouraged to engage in regular dialogue with international businesses on the latest trends, policies and opportunities as China moves forward with the unprecedented commercial undertakings.
An open society with free speech and press freedom, diverse culture and intellectual property protection, Hong Kong has historically had a particularly advantageous position internationally: a mix of creative media, digital media marketing, branding services and advertising industries. Within Asia, Hong Kong is strongly placed to witness a boom in the region following the globalization of Chinese businesses under new Belt & Road initiatives.
However, Hong Kong faces fierce competition in the era of globalization and needs to vocally celebrate, protect and grow its regional status of international commerce to capture business opportunities, particularly in the Greater Bay Area and along the Belt & Road markets. A thoughtful, comprehensive strategy is key to overcoming the challenges of public support and international recognition for Hong Kong as it continues to prosper under “One Country, Two Systems.”
Forging & Branding a New Position – A proposal of key measures in response to CE Carrie Lam’s upcoming policy address