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Financial Secretary

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Moving towards governance and prosperity

Looking back at Hong Kong’s past development, we have always been performing our strengths to serve the needs of our Country. Starting from trade and manufacturing industry, and followed by the northbound relocation of factories with the rise of the service industry, Hong Kong has now turned into a hub of high value-added sectors, such as financial and professional services. Although the content of the industry may change over time, the formula to success has always remained the same and guided us to development and prosperity. Nonetheless, as we can see from the 1997 Asian Financial Crisis, the burst of IT stocks bubble in 2000, and the 2008 Global Financial Crisis, while the financial industry can boost the development of real economy, the risk of financial crisis could also deal severe blow to the real economy and people’s livelihoods, or even endanger social stability. Thus, sound risk management not only is the key to prosperity and development, but also the prerequisite to social safety.

Keeping this view in mind, it helps us to build a clearer perspective and gain more confidence to look beyond the present and see the wide range of possibilities for the future.

In my recent interviews with the media, the discussions had been focused on how Hong Kong could grasp the new opportunities in the new era of our Country’s new development.

Being the Country’s international financial centre, Hong Kong makes unique and active contribution to the country’s strategic development of the financial market. Each of the steps involved are taken under a risk-controlled manner. The development trail of the mutual financial market access enlightens us that prudent start and progression can ensure more sustainable development. The Shanghai-Hong Kong Stock Connect launched in 2014 had less than RMB 200 billion of trade value in the first year, but the trading volume subsequently increased and with the scheme being expanded to Shenzhen-Hong Kong Stock Connect, the annual trade value of last year had reached over RMB 15,000 billion.

Similar development has been observed in Bond Connect. The average daily turnover of Northbound Trading under Bond Connect which was launched in 2017 was about RMB 1.5 billion initially and gradually increased to RMB 26 billion today, representing an increase of about 17 times in a few years’ time. 60% of the foreign holdings of Mainland onshore bonds are acquired through Northbound Trading under Bond Connect and the amount has increased to around RMB 3,800 billion recently. This shows that the programme is widely supported by international investors.

Four years have passed and the details of the long-awaited Southbound Trading under Bond Connect were announced last week. The scheme will be formally launched this week, taking the development of Hong Kong’s bond market to a new level. Institutional investors in the Mainland can make diversified asset allocation in Hong Kong’s bond market through Southbound Trading, and more international institutions will consider issuing bonds in Hong Kong. The capital and debt issuers can be matched more effectively. The Shenzhen Municipal Government will also issue RMB-denominated bonds in Hong Kong, which is the first time for a Mainland municipal government to issue bonds in Hong Kong. The SAR Government also plans to include RMB-denominated green bonds in the Government Green Bond Programme. These initiatives will enrich and add impetus to Hong Kong’s bond market, further stimulating the development of the market.

With a view to providing more comprehensive and sophisticated financial services in Hong Kong, it is necessary to create a conducive environment for deepening the development of the bond market. The Steering Committee on Bond Market Development in Hong Kong chaired by me has commenced work to review the “ecosystem” of Hong Kong’s bond market holistically, including bond issuance, trading, clearing, listing, custody, taxation, credit rating services, etc., so as to improve the transparency and efficiency of local bond trading.

In fact, the Southbound Trading under Bond Connect or the Cross-boundary Wealth Management Connect in the Guangdong-Hong Kong-Macao Greater Bay Area, both introduced recently, provide major favourable conditions to promote cross-boundary use of RMB. The schemes also open up the Mainland’s capital account on an appropriate scale, enrich the spectrum of RMB financial products available for investment, providing a more diversified and energetic environment for the use of RMB outside the Mainland and satisfying the asset allocation needs of individuals and enterprises. As more offshore RMB is attracted for accumulation and investment in Hong Kong, our RMB liquidity pool could be further expanded, consolidating Hong Kong’s status as the world’s largest offshore RMB business centre, thereby promoting RMB internationalisation of the Country in a steady and prudent manner

Apart from policies and measures, we also have to pursue the development of infrastructure and co-ordination in the region, with a view to achieving maximum synergy. To facilitate the development of Qianhai, which will be another important hinterland for Hong Kong’s financial and professional sectors to prosper and for our young people to live and start their own businesses, as well as the cooperation between Hong Kong and Shenzhen in technology development in the Loop and its proximate area, we need to provide better infrastructure and other supporting measures for people to live and work. We have to speed up the review of the development planning for the New Territories North and the frontier area, so that Hong Kong could seize the opportunities brought by our Country’s development, providing our people better career prospect and more decent living space.

In fact, from the gradual expansion and deepening of the connection between the two financial markets, to the implementation of the Qianhai Plan, the various contents, measures and directives share a common feature, i.e. to adopt policy and institutional innovation to transform barriers to advantages, well manage potential risks, and be positive and determined in overcoming difficulties to achieve new impetus for new development.

To better grasp the opportunities brought by the Country’ development, apart from policies and infrastructure, it is also important to ensure a safe, stable and pragmatic social environment in Hong Kong. On institution, we have enacted legislation to safeguard national security and enhance Hong Kong’s electoral system. The first important election after the enhancement of the electoral system, i.e. the 2021 Election Committee Election, will be held today. Next will be the Legislative Council Election and the Chief Executive Election. To fully implement the basic principle of “patriots administering Hong Kong” through these three elections also demonstrates the well management of risks. By this, we can prevent the intervention of external forces and to bring Hong Kong back on track. It will also create a conducive environment for effective governance, allow the society to tackle the deep-seated problems which have hindered Hong Kong’s development, with a view to enhancing the living quality of our people, and move towards development and prosperity.

September 19, 2021


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