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Financial Secretary


Safeguarding national security together

As the local epidemic situation is stabilising gradually, many people have taken the opportunity to relax a bit during the Easter holidays, visiting the countryside or spending time with families. Some have used the consumption vouchers to buy daily necessities or for shopping. I also went out these few days to have first-hand observation of the market situation. For sure, as long as the epidemic is brought under control, the local economy can recover gradually. If the momentum can be maintained with a view to achieving “dynamic zero” infection, the business environment in Q2 should improve and help our economy rebound from the recession in Q1. As such, we have to formulate an effective anti-epidemic mechanism that can mobilise the swift response of the whole society in order to prevent any resurgence of infections or new wave of outbreak from severely affecting our economy, society and people’s livelihoods. Despite the stabilising epidemic situation, I appeal to all of you to stay alert to prevent infection, particularly by maintaining good hygiene and receiving jabs on time. In response to the Government’s appeal, I have earlier received the fourth dose of COVID-19 vaccination.

Over the past two years, the epidemic has dealt a severe blow to the economy and the society, showing that security is the prerequisite for development and development is the cornerstone of security. By effectively controlling the epidemic and achieving “dynamic zero” infection, we can provide the greatest safeguard and protection for the economy, which is also the greatest support to people’s livelihoods and daily lives.

It was the National Security Education Day two days ago and our country had taken the opportunity to promote this important topic from different angles to enhance people’s understanding. When talking about national security, people may first think of national defense and the military. However, this is only one of the many aspects of national security. Just like home security, apart from locking doors and windows properly, we would also take precautionary steps to prevent potential threats. There are different aspects of national security. The holistic view of national security consists of five essential elements, namely (1) taking the people’s security as the ultimate goal; (2) achieving political security as the fundamental task; (3) regarding economic security as the foundation; (4) with military, cultural and public security as means of guarantee; and (5) promoting international security so as to establish a national security system with Chinese characteristics.

Only by implementing the national security work could we create a stable political environment and defend our development interests, so that our people could strive for better livelihoods. It involves multi-dimensional and multi-disciplinary work. The implementation of the National Security Law in Hong Kong has strengthened our institution and enhanced our capacity in relevant aspects. The National Security Education Day helps us develop a more thorough understanding of this crucial topic, thus strengthening the foundation of the relevant work.

National security encompasses 16 areas, including economic security, technological security, cyber security, ecological and resource security. As for the economic aspect, national security includes security of the economic system, economic order, economic sovereignty and economic development. Ensuring the security of these aspects is key to safeguarding the overall social security and development environment.

Hong Kong is a small and fully open economy. The work to strengthen Hong Kong’s economic security is important not only to our own development and social stability, but also to our duty to safeguard national security.

As the world is undergoing changes not seen in a century, we are facing a complicated, volatile and challenging external environment. Politically, apart from the rise of protectionism and unilateralism and the intensifying geopolitical tensions, the US and other western countries have been trying to suppress the development of our country from various fronts. Economically, in recent years, the governments of the US and some European countries have raised debts of massive scale and the central banks of many countries have implemented extremely accommodative monetary policies, greatly increasing macroeconomic and financial market vulnerabilities. At the same time, the COVID-19 pandemic has caused structural changes to the development and distribution of the global supply chains, as well as to logistics and transport.

Although the external environment is challenging, we have been strengthening our security work on various fronts.

In the face of unilateralism, we have to expedite our work in implementing multilateral economic and trade agreements to ensure the continuous, safe development of Hong Kong’s key industries. By maintaining economic and trade relations with other places on a fair and mutually beneficial basis, we could fight for greater space of investment and development for our enterprises.

At the same time, we must continue to develop innovation and technology to enhance Hong Kong’s core competitiveness and optimise and diversify our economic structure. We should plan for the long-term sustainable development of our economy, make efforts to enhance our economic resilience and enrich the development of our industries, thus making our economic growth more inclusive with higher quality. All these are not only for strengthening our economic security, but also for creating more high-quality and diversified jobs so that people could better share the fruits of development.

To strike a balance between security and development, we should enhance our economic core competiveness and flexibility internally, while strengthening and diversifying our networks externally. We are pursuing a similar direction in maintaining financial security. The core advantages of our financial market include our steadfast Linked Exchange Rate System (LERS), robust financial system, and the highly transparent and well risk-managed operation of different parts of the market. Hong Kong’s foreign currency reserve amounted to over US$480 billion, representing 1.8 times of our monetary base. This has provided a solid support to Hong Kong’s monetary stability and supported the market’s confidence in the LERS.Even in the face of external fluctuations and heightened risk-averse sentiment in the stock market in recent months, there has been no notable capital outflow so far. The Hong Kong dollar exchange rate has been fluctuating between the convertibility undertakings of 7.75 to 7.85 per US dollar according to the market’s demand and supply. The net balance of the banking system amounted to over HK$330 billion, showing sufficient liquidity in our market.

Hong Kong’s financial market has built up strong and solid buffer and resilience, which help us withstand shocks to the market caused by external factors. The capital adequacy ratio of our banking system stood at 20%, far exceeding the international minimum standard of 8%. The average liquidity coverage ratio of our banks reached 150%, far exceeding the minimum legal requirement of 100%. According to both regular and ad-hoc stress tests conducted by the Hong Kong Monetary Authority, our banking system can withstand potential shocks under extreme market environment. Moreover, transactions or short selling deals have been conducted orderly in stock, futures and derivatives markets. The margin deposit requirement will be adjusted according to risk changes and so far there have been no signs of abnormal concentrated position or cross-market manipulation. We will stay vigilant and work with financial regulators to continually monitor signs of systematic risk through our round-the-clock, cross-market and coordinated monitoring mechanism and respond decisively if necessary.

National security is the key foundation for any country and the prerequisite for the protection of people’s wellbeing. The holistic view of national security consists of not only national defence and the military, but also economic, social and resource security, as well as the interests of sustainable development. Only by strengthening our holistic view of national security could we achieve the great rejuvenation of the Chinese nation amid challenges.

April 17, 2022

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