Hong Kong Financial Secretary Paul Chan Mo-po said in a speech at the 2024 Hong Kong Capital Markets Forum recently that Hong Kong is currently negotiating with mainland Chinese regulators to speed up the approval process for enterprises to list in Hong Kong. The following is the speech delivered by Financial Secretary Paul Chan Mo-po at the 2024 Hong Kong Capital Markets Forum: Minister Xu Weigang (Director of the Economic Department of the Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region), Minister Li Xuhong (Deputy Director of the Administrative and Financial Department of the Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region), Kenneth (Dr. Lam Kin-hing, Vice Chairman of the Hong Kong Association of Listed Companies), Christopher (Dr. Tao Rong, Chairman of the Hong Kong Institute of Directors), Clement (Mr. Chan Kam-wing, Chairman of the Hong Kong Institute of Corporate Treasurers Limited), distinguished guests, dear friends: Good morning! It is a great pleasure to attend the 2024 Hong Kong Capital Markets Forum co-hosted by the Hong Kong Association of Listed Companies, the Hong Kong Institute of Corporate Treasurers and the Hong Kong Institute of Directors. Hong Kong’s Capital Markets: Challenges and Opportunities The theme of today’s forum centers on the outlook for Hong Kong’s capital markets and how we can enhance the vitality, competitiveness and attractiveness of our international financial center. As a free and open market, Hong Kong’s capital markets are highly connected with both the international and mainland markets. Against the backdrop of the global high-interest-rate environment, multiple overlapping external headwinds and geopolitical challenges, Hong Kong’s asset markets have inevitably been affected and experienced some fluctuations over the past period. The HKSAR Government has been monitoring market developments through cross-market coordination and round-the-clock oversight. So far, we have not observed any abnormal situations. The financial markets continue to operate in an orderly and efficient manner, the financial system remains robust, and the linked exchange rate system functions well. Against the backdrop of market fluctuations and weak market sentiment, some people are pessimistic about the future market outlook, while others believe that current market valuations are attractive and present investment opportunities. Of course, everyone has different views on how the market will develop, but I would like to share a few observations here. First, over 50% of the listed companies in Hong Kong’s stock market are from the mainland, accounting for more than 70% of the market capitalization and over 80% of the trading volume. Therefore, apart from being affected by the international political and economic environment, the local market more or less reflects investors’ assessments and sentiments towards the mainland’s economic conditions and market trends. Indeed, there have been concerns and even doubts about the mainland’s economy in public and media reports over the past period. However, if we look at the mainland’s data objectively, we will see that its economic development is progressing steadily in line with its plans. The economic growth rate last year was estimated at 5.2%; and indicators such as the total social financing, monetary credit, electricity consumption, passenger flow and freight volume recorded robust growth last year, which fully reflect the solid foundation of the country’s real economy. The country is comprehensively advancing Chinese modernization through high-quality development, and its economy is moving towards a more sustainable path. It takes time to adjust the economic structure and foster new growth drivers. The mainland has a strong industrial foundation, capital, innovation capabilities and talents, and will continue to generate new development momentum in high-end manufacturing, artificial intelligence, green transition and other areas. As Premier Li Qiang mentioned at the World Economic Forum Annual Meeting in Davos, the mainland’s economy has formed a sound and stable fundamental outlook over the years, and the overall trend of long-term sound growth remains unchanged. Second, Hong Kong actually delivered solid performance in other areas of the financial and capital markets last year. For example, Hong Kong’s bank deposits grew by more than 5% last year, proving that while capital flows in and out, there was a net overall inflow. In terms of bonds, Hong Kong issued bonds worth US$507 billion in the first nine months of last year, an increase of about 7% year-on-year. In terms of asset management, according to the latest statistics, the scale of assets under our management is about US$4 trillion, ranking leading in Asia; last year, the capital managed by private equity funds in Hong Kong reached US$220 billion, accounting for over 15% of Asia’s total, continuing to rank second only to the mainland. Third, geopolitical developments have inevitably affected the flow of some capital from Europe and the United States. However, due to the changing global political landscape, capital from the Middle East, ranging from sovereign wealth funds to family offices, is actively seeking investment opportunities outside Europe and the United States. As of the end of 2022, the total assets of Middle Eastern sovereign wealth funds reached US$3.6 trillion. Even if we do not make any positive adjustments to the allocation for China based on the global GDP ranking, a considerable amount of capital will still flow to China. The impact of geopolitics on capital flows is actually not one-sided. For Hong Kong’s capital markets, there will be both challenges and opportunities in the future. The key lies in how we seize and make good use of our unique strengths. On this issue, let me share a few observations. First, we must continue to revitalize our fundraising and financing markets. The focus is on how to make Hong Kong’s platform more attractive to more high-quality mainland and international enterprises to list and raise funds. To promote the listing of mainland enterprises in Hong Kong, we are actively discussing with relevant mainland regulators to speed up the approval process for enterprises to list in Hong Kong. Internationally, we will encourage more enterprises from the Middle East and Southeast Asian countries to list in Hong Kong. On the other hand, we will also focus on developing a "headquarters economy" to attract domestic and overseas companies to set up headquarters or regional offices in Hong Kong, bringing in high-quality enterprises from home and abroad. This will also help strengthen Hong Kong’s role and functions as a fundraising and financing platform. At the same time, we will fully develop the local bond market to complement the financing functions of the stock market and the banking system. We will continue to issue bonds, drive technological innovation and upgrade relevant infrastructure to attract more mainland and overseas entities to use Hong Kong’s bond market platform, and deepen the development of the bond market. Second, we will continue to expand and deepen the connectivity between Hong Kong and the mainland’s financial markets, and strengthen Hong Kong’s position as an offshore renminbi business hub. The incremental expansion of the connectivity schemes means strengthening the links between the mainland and international capital markets through Hong Kong. On the one hand, it will help the orderly opening up of the mainland’s financial markets and contribute to the country’s steady progress towards building a financial powerhouse; on the other hand, with wider and more multi-layered connectivity channels between the two markets, the flow of capital passing through Hong Kong will naturally increase. In this regard, we are holding close consultations with mainland regulators to accelerate relevant work. One important measure is to add RMB trading counters to the "Southbound Connect", allowing mainland investors to directly purchase Hong Kong stocks using their onshore RMB funds, facilitating their capital inflow and reducing their exchange rate risk. In addition, including more international enterprises in the scope of the "Southbound Connect" is also an important step, which will allow these international enterprises to access both international and mainland capital, which will help their liquidity and valuation and form a virtuous cycle. The further advancement of market connectivity will also further promote the development of Hong Kong as an offshore renminbi hub. The functions of the renminbi as an international trade, payment and reserve currency will continue to strengthen, and the international community will need more RMB-denominated investment tools and risk management tools. Over the past few years, with the support of central government ministries and commissions, the connectivity of derivative products has also progressed steadily, including the MSCI A50 Index Futures, the Interest Rate Swap Connect, etc., and government bond futures will be launched soon. Last week, the People’s Bank of China and the Hong Kong Monetary Authority announced the "Three Connectivities and Three Facilitations" policy measures. For example, promoting mainland bonds to become eligible collateral will better meet the international investors’ demand for liquidity management of the mainland bond market, and at the same time help increase the depth of Hong Kong’s offshore renminbi market. Third, develop asset and wealth management businesses to attract more capital to Hong Kong. Over the past year, the HKSAR Government has actively promoted the development of asset and wealth management businesses. Family offices are one of the key focuses. In our policy statement released last March, we rolled out a comprehensive strategy covering tax incentives, building up the talent pool and service support for family offices, and promoting the development of Hong Kong’s charity sector. In recent months, we have announced the new "Capital Investment Entrant Scheme" and clarified the implementation details for the optimization of the "Cross-boundary Wealth Management Connect". These measures will drive more ultra-high-net-worth individuals and their capital to settle in Hong Kong. Going forward, we will continue to vigorously promote these areas and introduce new measures in due course. Distinguished guests and dear friends, promoting the true situation, unique status and strengths of Hong Kong is very important for attracting capital. Over the past period, Western media have carried biased reports about Hong Kong. The HKSAR Government and members of the "Hong Kong Team", including regulatory bodies, the Stock Exchange, statutory institutions and advisory organizations, have actively "gone out" for visits; we have also hosted a series of international financial events to "invite friends over", all with the aim of introducing the true situation, strengths and opportunities of Hong Kong to investors in different target markets. I hope that all of you here, who have extensive global networks, can help us spread the true story of Hong Kong together, using your wide international connections and人脉 networks, to attract more capital and business to Hong Kong. With less than a month to go, I will deliver my new Budget. I take this opportunity to call on everyone to offer us valuable suggestions so that this Budget can better meet the needs of society. Finally, I wish the forum a complete success. As the Year of the Dragon approaches, I wish you all good health, prosperous businesses and boundless energy in the new year. Thank you! © 2021 Meishun (Hong Kong) Management Consulting Co., Ltd. and Meishun (Hangzhou) Management Consulting Co., Ltd. All rights reserved. Meishun Meiyin (Hangzhou) Consulting Management Co., Ltd. is the domestic subsidiary of Hong Kong Meishun Management Consulting Co., Ltd. under the same actual controller. Both companies are under the same management, adhere to the one-China principle, and comply with the laws of Hong Kong and the mainland.