The new SAR governance team officially took office on July 1 this year. The Secretary for Financial Services and the Treasury, Xu Zhengyu, stayed in his original post, and the policy continuity was stronger.
Even so, Xu Zhengyu accepted an exclusive interview with "Hong Kong 01" to set some themes for future governance. He believes that facing the current complex and volatile local and international situation, Hong Kong must seize the "3D" opportunities, namely decentralization, carbon reduction, Digitalization, under the unique advantages of one country, two systems, will play a role as China's most international financial center, and "build a bridge" for the country's economy and the world.
As Sino-US relations continue to be tense, Hong Kong, as a bridge between China and the international capital market, may need to review its own positioning and advantages.
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The new SAR government is facing a more complicated situation than when Xu Zhengyu succeeded Liu Yixiang in 2020 when he was in charge of the Treasury Bureau. Internally, after the anti-amendment turmoil, social tears still need to be repaired, and externally, the new crown epidemic is protracted. The economies of various countries have been hit hard, and the relations between the Sino-Russian camp and Europe and the United States have deteriorated sharply.
As a bridge between China and the international capital market, Hong Kong may need to review its own positioning and advantages.
To answer this question, Xu Zhengyu started with the "Four Points of Hope" and "Four Musts" proposed by President Xi Jinping.
He pointed out that in Xi Jinping's important speech, there is a lot of space on Hong Kong's unique advantages, such as common law and the characteristics of one country, two systems, "It can be said that the management of expectations is a good booster for Hong Kong and the international community. A good system has no reason. will change!"
Xu Zhengyu specifically mentioned that Xi Jinping refers to everyone as "Hong Kong residents", which is a very broad definition, which reflects the characteristics of Hong Kong as an international financial center with "all rivers and rivers". "Other places, like Hong Kong, welcome outsiders? ”
He bluntly said that Hong Kong used to be a platform for mainland companies to go public and capital to “go out”. In the future, with the unique advantages of “one country, two systems”, it is believed that its status can be guaranteed.
However, facing the ever-changing global situation, it is by no means "waiting for shipment". Xu Zhengyu roughly divides the future development direction of Hong Kong's financial center into "3D", namely Decentralization, Decarbonization, and Digitalization (Digitalization).
Xu Zhengyu said bluntly that as an international financial center, Hong Kong is facing the impact of de-globalization, fragmentation, and rising protectionism.
(Photo by Liao Yanxiong)
1. Decentralization: Explore new opportunities to develop "Klook"
Xu Zhengyu's first blog after his re-election pointed out that due to the impact of the epidemic and geopolitical factors in the past period, countries around the world have experienced "tectonic plate movement", the world has moved towards de-globalization and fragmentation, and protectionism has risen.
Frankly speaking, how should Hong Kong respond?
Xu Zhengyu believes that under the globalization in the past, everyone thought about how to "optimize" or "maximize" the value of an enterprise's production chain, but in today's situation, it may be necessary to "turn around" and "think about the worst situation." What do we need to do next? We need early warning, some plans, and some risk awareness.”
He bluntly said that the market has different needs at different stages. For example, Indonesia moved its capital from Jakarta to Borneo earlier, and the relocation process will definitely require financing. "Hong Kong, in addition to attracting mainland institutions, of course welcomes institutions from all over the world to come to Hong Kong. Issuing bonds.” Xu Zhengyu revealed that he will actively visit foreign countries in the future, communicate more with Southeast Asian countries, and learn how to explore new opportunities. “In the past, it was said that international investors entered Hong Kong as a platform, but Southeast Asia is a big market. It doesn’t have to be Europe and the United States, we continue to do what we have done in the past, and at the same time explore new opportunities, and there are more ways to go.”
For example, continue to discuss with the mainland on measures to deepen "connectivity", and provide more incentives, including tax relief, to attract family offices and private equity funds to Hong Kong, and to strengthen Hong Kong's role as a "cornucopia" as an asset and wealth management center. , accounting and legal professional services, providing more opportunities.
The government has vigorously developed green finance in recent years, including issuing retail green bonds.
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2. Carbon Reduction: Attracting External Funding for Green Transformation
Another development direction is to do a good job in the green transformation of the economy.
Xu Zhengyu pointed out that China is one of the countries in the world that needs a green transition, and the impact itself also has a carbon reduction goal, because how to attract foreign funds to help the country and Hong Kong make a green transition is an important task in the future. "Climate change will affect our lives. The impact should be real and buried, and the goals and means of carbon reduction require joint participation between countries and regions.”
Looking through the information, Hong Kong has issued green bonds many times in the past, and has also issued two insurance-linked securities involving nearly 200 million yuan through catastrophe bonds. Do a good job in diversifying risks... Many investors are very interested in insurance-linked securities, because this kind of investment has nothing to do with the economic cycle, but only for changes in climate and natural disasters. Hong Kong is providing many ways, not only investment The local market also provides more tools, products and means to diversify investment.”
3. Digitization: Raising the technological level of financial institutions
For Hong Kong, digitalization is not only a general trend, but also provides new development opportunities.
Xu Zhengyu said that within the government, how to do a good job in digitalization and data management is also one of the "pain points", and there is still room for improvement.
Therefore, next month, we will co-organize a "bazaar" with the Logistics Department to collect solutions from local start-ups to improve the digitalization level of government departments; and Cyberport's "Painted on" Fintech Proof-of-Concept Test Funding Scheme (Fintech Proof- of-Concept Subsidy Scheme) to strengthen cooperation between financial institutions and fintech companies.
The market is worried that once Sino-US relations turn sour again, Europe and the United States will "weaponize" finance, launch a "financial war", and even exclude Hong Kong from SWIFT.
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Continue to monitor market operations in response to financial "weaponization"
Although the three "Ds" have laid the foundation for the future development of Hong Kong's financial industry, Xu Zhengyu also mentioned many times in his interview that investors want to do business in a stable and predictable financial center.
However, the market is worried that once Sino-US relations turn sour again, Europe and the United States will "weaponize" finance, launch a "financial war", and even remove Hong Kong from SWIFT (Society for Worldwide Interbank Financial Telecommunication). All actions will shake Hong Kong as an international financial center. foundation.
Facing the possibility that Hong Kong might be involved in a "war", Xu Zhengyu pointed out that the government has also been taking the initiative to "dynamically" assess market risks. Fortunately, we have "great strength" - Hong Kong currently has an exchange fund of 3.7 trillion Hong Kong dollars, which is close to 1.7 times the monetary base level; the capital adequacy ratio of local banks is nearly 20%, which is higher than the international requirement of 8%. Last year, Hong Kong’s current account surplus was 11% of GDP, and the real economy is in good condition.
On this basis, in the face of the recent situation in Russia and Ukraine, as well as the interest rate hike in the United States, the market is still operating smoothly, and there is no systemic risk.
He reiterated that even with geopolitical changes, countries cannot "sweep the snow before their own door", such as the "community with a shared future for mankind" advocated by Xi Jinping, there are still different international issues that need to be discussed and reached consensus, and Hong Kong will continue to cooperate with the international community , including a recent forum with the European Union Office in Hong Kong to discuss how to comply with local tax requirements, "Continue to play a role in China's most international city at the international level, and make Hong Kong make a difference!"
Interview | Seize the "3D" Opportunity to Maintain Status in the Reverse Globalization Xu Zhengyu: Make Hong Kong Make a Difference The DSE Talent Reserve in the Greater Bay Area will release the list next week, and Xu Zhengyu will give candidates the word "zhi" with great pen and strokes｜Wendona
