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00:00I want to start off with the currency side of things, because that was really a big feature in this
00:03five-year plan, building this offshore renminbi hub in Hong Kong.
00:07You just returned from Beijing. What came out? What's going to be the strategy now?
00:13Well, you know, internationalization of renminbi is a megatrend.
00:21Increasingly, in terms of global trade, in terms of central bank reserve currency, the allocation to renminbi is under increase.
00:28And, of course, jurisdictions, they tend to use their own currency to trade.
00:35This is also part of the diversification process.
00:38So we do believe the use of renminbi in the international arena will be increasing.
00:44So we need to enrich the port offering in terms of providing choices to holders of offshore renminbi.
00:54We need to build an infrastructure to enable cost collateralization, to enhance capital efficiency.
01:01We also want to increase the liquidity of the renminbi pool.
01:06I think that would be important, not just for the internationalization of renminbi, but indeed to meet the business needs.
01:14And I think recently, the bond connect quota was increased.
01:20The chief executive talked about possibly the renminbi bond index at some point.
01:28You talk about the availability of tools for investors to use.
01:32What can they look forward to specifically?
01:34What will be available that isn't available now?
01:36Well, you know, this is step by step.
01:40For example, in August, we launched the five-year futures product.
01:47This is just the first step.
01:49Going forward, depending on the implementation experience, we need to enrich the toolkits.
01:57So that in terms of risk management, risk management tools to those investors, they have more options.
02:06And they have more hedging tools as well.
02:10The Fiverr plan did mention about the need to boost liquidity across the financial markets here right now.
02:15Can you tell us specifically what sort of mechanisms and tools that you are deploying now?
02:20You mean the liquidity of the equities market in general, right?
02:24Yeah, yeah.
02:25Well, we need to have quality issuers because if you have good companies coming here for listing, international investors will
02:34follow.
02:35So apart from mainland business enterprises, we want to have more quality companies from ASEAN, from the Middle East, even
02:45from Europe.
02:46So we welcome them.
02:47On the other hand, in the process, we also enhance our listing regime to make it easier and simpler in
02:56terms of process for these companies to get listed.
02:58And also to relax in terms of reducing the ongoing compliance costs and procedures.
03:08So we want to make it easier for companies to come here and list.
03:11Yeah.
03:12And as you know, the flip side of having too many listings, which is a good problem to have, is
03:18sometimes the market tends to suffer because there's a liquidity squeeze.
03:21Everyone wants to get into the fixed IPO.
03:22So is there a conversation around spacing these big listings?
03:28Are there too much big listings?
03:30What's the framework you think investors should be looking at that conundrum or dilemma?
03:36Well, in the Hong Kong situation, I think readiness is important.
03:41So for those interests to get listed in Hong Kong, of course, they need to go to the Hong Kong
03:47EX and the SFC in terms of preparation, prospectus, things like that.
03:53But at the end of the day, when this company is going to go public, it is a matter up
03:59to the company themselves, judging from the then prevailing situation and the capital market situation.
04:06But we do believe if these are good companies, investors will follow.
04:12So in terms of, I mean, a few months ago, we talked about IPO quality.
04:16That was certainly something that was an issue.
04:18Is it still an issue?
04:19Do you feel like there's still more policing that needs to come?
04:22How do you assess things now?
04:24Well, as you may know, the SFC indeed organized meetings with the investment banks because over the past years, the
04:33IPO market is very hot.
04:35A lot of companies curing up.
04:37The iBanks are very busy.
04:39So we remind every player, including the iBanks and the professionals involved, in terms of due diligence, preparation, if they,
04:49at the early stage, they have done their due diligence properly and get those papers properly prepared, in fact, their
04:59approval time can be speed up quite a bit.
05:01So I think this communication is important.
05:04And this is this communication is with the most in the level of those investment banks.
05:10Right.
05:10Do you foresee more regulatory action to come?
05:12Well, depending on situations.
05:16But we do believe the market is also aware that at the end of the day, quality, credibility and the
05:24trust and confidence of investors are important.
05:27So in that sense, our objectives are aligned.
05:30And, you know, this has been a priority of the government for several months now.
05:36And I think we had a different conversation on this, right, in terms of ensuring the quality of the companies.
05:41Have the improvements been up to your expectations?
05:44What have you observed so far in as far as improvements are concerned?
05:48We are quite confident because in this process, the communication is not just the Hong Kong side, but also with
05:56the investment banks, the major players, stakeholders in the process, everyone is aware of that.
06:03And even in my recent interaction with some of the leading sponsors, this is very well aware.
06:11Some of them are in this building, some are just across the street or within a very small block area.
06:15They're listening, I'm sure.
06:16They're listening, I'm sure, right now.
06:17I mean, since we're talking about the Hong Kong exchange, and I think that is also a venue through which
06:21we can realize the other objective you pointed out, which is having more products available in the debt markets and
06:31in renminbi.
06:32Should we expect more renminbi-denominated products and securities and tools to be listed here in Hong Kong?
06:39Up to the market.
06:40In fact, it is market-driven.
06:42For us, as the government, we are doing the enabling infrastructure, facilitating the process.
06:49But at the end of the day, I think it is up to the market.
06:52At the moment, we have observed that in terms of trade, mainland's share of global trade is about 14%
07:03to 15%.
07:04But RMB used in the switch system in terms of trade settlement, only 3%, so there is room for growth.
07:14But on the other hand, this is a gradual process.
07:17So for us, it is to build the infrastructure to make it ready and available and also enhance the product
07:24offerings so that offshore renminbi holders can have better investment opportunities, be it bonds or equities.
07:32And also, this infrastructure to enable cost asset characterization so that bonds can be secure for borrowing to buy shares,
07:43for example.
07:44That will enhance capital efficiency.
07:47And at the same time, we involve the different key players so that we can tap the market's wisdom.
07:55So how can we further enhance ourselves?
07:59Where does that leave the Hong Kong dollar?
08:01You're holding the five-year plan right now.
08:04There's a significant emphasis on the renminbi.
08:06Maybe not as much attention when it comes to Hong Kong dollar.
08:09What is the future of the Hong Kong dollar?
08:11How does it fit into this long-term vision for Hong Kong as an international financial center?
08:16Under the basic law, Hong Kong has our own currency.
08:19And our current exchange rate is packed to the U.S. dollar since 1983, working very well.
08:26So we have no intention at all to change that.
08:30But what do you say of those concerns that, given this emphasis on the renminbi, that this could in some
08:35ways undermine the confidence in the credibility of the Hong Kong dollar?
08:39How do you address those concerns?
08:40I don't think so.
08:41I don't think so.
08:42I think Hong Kong will remain to be an open and free economy.
08:47Capital coming in, moving out anytime.
08:50I think it is important for those investors to have the certainty that this money could be moving in, move
08:59out anytime at certain exchange rate, which they trust.
09:03And this has been proven over the decades.
09:07So the pact to the U.S. dollar will remain to be there.
09:11And is it fair to say the government is confident it can achieve both?
09:15Keeping the peg, no questions around the peg, and improving the CNH yuan liquidity.
09:21Are those two goals?
09:22And you're also using renminbi in government spending, too.
09:24That was part of the five-year plan.
09:25Well, you know, we issue bonds.
09:28The interest rate of renminbi denominated bond is cheap.
09:33Very low.
09:33Very low.
09:34So we take advantage of that.
09:36So we are holding certain renminbi.
09:37We need to find a user case scenario.
09:40So some of our procurement are from the mainland.
09:43So why don't we use that for settlement?
09:45There's talk about an R&B bond index to be launched.
09:50What do we know about the timing of when we should expect that?
09:55Well, the MA and the other regulators are working on it.
09:59So pardon me for this stage.
10:01I could not give the details yet.
10:04Okay.
10:05Forthcoming.
10:06Working very hard.
10:08I was going to get more on the five-year plan.
10:10I mean, obviously, there's binding targets.
10:13There's anticipatory targets and the like.
10:15I think there was more than 20 that were unveiled here.
10:18How do you track these milestones?
10:20Are you going to be setting annual targets for yourself every year?
10:24I mean, as a policymaker, I'm just wondering,
10:25how does this change in terms of mindset and how you look at longer-term planning now?
10:30The mandatory targets, basically, are all environmental-related,
10:38relating to carbon emission, reaching to a 2050 target.
10:44The others, say, for example, for financial market,
10:47we are faced...
10:48Hong Kong is a small, open economy.
10:50We are facing geopolitical tensions, trade war.
10:54The competition is very keen.
10:56So for us, the real question is
10:58to continue to enhance our competitiveness
11:02with the other competitions.
11:06At the same time,
11:08broaden the offering of our financial service sector.
11:12Apart from renminbi, for example, gold and commodities.
11:15Right.
11:16That is another area.
11:18But fixed income in the future
11:19will be a very big part of our development plan.
11:23In terms of that,
11:24I mean, obviously, you're facing competition
11:26from cities like Singapore,
11:29there's all these tax sort of regime
11:30that Hong Kong is set to lay out and propose as well.
11:34In terms of where you're looking at,
11:36the types of wealth that are coming to Hong Kong,
11:39are there specific industries or types of wealth
11:41that you're targeting right now?
11:43Well, we welcome capital.
11:46And we have different offerings to suit their interests.
11:50For those who are interested in technology and innovation,
11:53for example,
11:54I think this is a growing and blooming sector in Hong Kong.
11:59For those wanting to get convenient access to the mainland market,
12:04Hong Kong naturally, the gateway.
12:06But at the same time,
12:08on asset and wealth management,
12:09we want to attract more high net worth individuals coming to Hong Kong.
12:13We are open free society,
12:16law and order,
12:16excellent lifestyle is also very attractive.
12:21So we do want to attract more talents
12:24and high net worth individuals to Hong Kong.
12:27Any changes to the visa schemes to attract,
12:29to your point,
12:30attract the right talent?
12:33The talent schemes are constantly under review
12:35and relaxed as appropriate.
12:38For example,
12:39the recent proposed relaxation
12:41is to enable more AI-related talents to come to Hong Kong.
12:45Okay.
12:46In terms of the tax incentives for hedge funds
12:48and the like,
12:49when is that bill going to be passed?
12:50Can you give us a bit of a timeline here?
12:52Oh, yeah, in this year.
12:53Within this year?
12:53Yeah, we are trying very hard.
12:54And is there a need to add more?
12:56We mean the 10 inches one.
12:56Okay.
12:56Yes, yes.
12:57And then is there a need to add more incentives?
13:00Just given what Singapore has also laid out too, right?
13:02It seems like you guys are neck and neck in some ways.
13:04Well,
13:07we won't...
13:07Are you going to match them dollar for dollar?
13:09We do not want to raise to the bottom.
13:10Okay.
13:11Yeah.
13:11But at the same time,
13:12we need to be competitive.
13:14Right.
13:14That is the guiding principle.
13:15And also for us,
13:18the attraction of Hong Kong is not just tax,
13:20but the whole suite of offering,
13:24the ecosystem,
13:26the opportunities,
13:28mainland opportunities,
13:29the availability of talent.
13:31And also here,
13:33in terms of lifestyle,
13:35university educations,
13:37and even secondary school educations for expectaries,
13:41I think we are offering excellent choices.
13:44Right.
13:45Can I ask you about just Northern Metropolis,
13:48which was a very big part,
13:49of course,
13:49of the five,
13:50and Yvonne was there,
13:50of course,
13:50visited that,
13:51and it's a very big part of the plan.
13:53I've always been curious,
13:54are there specific profiles of companies that you want to set up shop there?
13:59You mentioned AI tech.
14:00Are we going to get data centers there?
14:02So what are likely to be excluded,
14:04and what do you want to see?
14:06What types of companies do you want to see set up there?
14:08For us,
14:09the Northern Metropolis will be our major engine of growth in the next decade or two.
14:15in the next decade or two.
14:16The positioning of that is more on technology and innovation.
14:21It is such a wide-ranging area.
14:23So we focus on four areas.
14:25One is artificial intelligence and data,
14:28data science.
14:29The other is biotech,
14:30health tech,
14:31pharmaceutical.
14:33And then the third one is new materials.
14:36And finally,
14:37FinTech.
14:38Of course,
14:39the first two are the most important.
14:41The first two,
14:42Hong Kong,
14:43in order to realize our vision and our ambition,
14:46we need to collaborate with cities in the Greater Bay Area.
14:50We have excellent research,
14:52translational research.
14:54We need to have prototyping,
14:57the market scenario,
14:59the scaling up,
15:00and that perfectly match with cities in the Greater Bay Area.
15:06How do you scale up though?
15:07I mean,
15:07it's quite ambitious,
15:08right?
15:09The housing units,
15:10the three university towns and the like.
15:12What specific details can you tell us on how you're going to ramp up development of the Northern Metropolis?
15:17For example,
15:18the pharmaceutical and medical sector,
15:21the Hong Kong University of Science and Technology,
15:24we will be building the medical school there.
15:26And this medical school is basically clinical research.
15:30research-based as distinguished from the other two.
15:33And in the Northern Metropolis,
15:34we have the policy support from the central authority
15:37to enable biosamples and data to make available across the border.
15:42So imagine if you are a pharmaceutical companies in the U.S. or in Europe.
15:47If you are based there,
15:49you can have access to biosamples and data of both sides,
15:53I mean the mainland side and the international side.
15:57That is very important for any pharmaceutical companies.
16:00The products will be able to be sold to the GBA and across the mainland,
16:06and also to the international market.
16:09And that is the business proposition.
16:12Speaking of joint,
16:13let's call it joint ventures between two cities,
16:16Shenzhen,
16:16there's APEC that's coming up,
16:18and of course Hong Kong,
16:19we're hosting the financial...
16:21Finance ministers meeting.
16:21Have you confirmed the guest list for the finance ministers?
16:25We follow the APEC protocol to issue the...
16:30Everyone's invited?
16:31Yeah, yeah.
16:31We follow the protocol.
16:33Have you heard from Scott Besson?
16:35We are waiting for the various invitees to respond.
16:39Okay, okay.
16:39But you will welcome him to come to Hong Kong?
16:42We welcome everyone.
16:43Hong Kong is an open city.
16:45Okay.
16:46How are those discussions like?
16:47I mean, obviously,
16:48there's the Trump-Xi meeting this week as well.
16:50Where do you think Hong Kong sits
16:52when it comes to those negotiations?
16:54And how do you better engage with American officials
16:57in preparations leading up to APEC too?
17:00Well, our doors are open.
17:02And in the process of organizing this,
17:06the financial services and the Treasury Bureau
17:11is spearheading the task force.
17:13And we are meeting different people.
17:15in the process
17:16and understand their needs and expectations.
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