Financial Secretary Paul Chan

To begin, the open-ended fund company regime came into operation last July. It marks the first time that Hong Kong has established a dedicated legal framework for fund vehicles. 

No less important, it showcases the Government's commitment to making Hong Kong a multidimensional fund centre. And I am confident it will create more opportunities for our fund and related businesses.

Last month, the bill extending profits tax exemption to onshore funds, in addition to offshore funds, was introduced in the Legislative Council. Under this bill, private equity funds are among those that will enjoy profits tax exemption. A tax-exempt fund can invest in local and overseas private companies. I am hopeful that the new tax treatment will take effect very soon.

Last April, we rolled out a new listing regime for pre-revenue, or pre-profit, biotech companies and companies with a weighted voting rights structure. To date, seven have been listed on the Stock Exchange of Hong Kong under the new regime, and many are in the pipeline. 

Good news too on the IPOs (Initial Public Offerings) front. Last year, Hong Kong raised about $287 billion through IPOs, claiming the global IPO crown. Indeed, Hong Kong has ranked first globally six times in the past 10 years.

We continue to add jurisdictions with which we have mutual recognition arrangements with regard to funds. Yesterday, Luxemburg joined our existing partners of the Mainland, Switzerland, France and the United Kingdom.

And then there's Hong Kong's role as one of the world's leading international financial centres. You can see that, at work brilliantly, during this International Financial Week here, which began with the impressive two-day Asian Financial Forum concluded only yesterday. Today's forum is another highlight, as is tomorrow's EMPEA Private Equity Masterclass, organised by the Hong Kong Venture Capital & Private Equity Association.

Numbers also underline Hong Kong's status as a financial services powerhouse. We rank third in the Global Financial Centres Index, behind only London and New York. We topped the Milken Institute's Global Opportunity Index in 2017. And for the past 24 years in a row, the Washington-based Heritage Foundation has named Hong Kong the world's freest economy. 

Add it up, and you have a financial foundation as formidable and deeply rooted as anywhere in the world. And I have no doubt that economic growth and accelerating wealth creation in this part of the world, particularly the Mainland of China, will continue to support Hong Kong's asset and wealth management business.

At the end of 2017, assets under management in Hong Kong totalled some US$3.1 trillion. Non-Hong Kong investors accounted for two-thirds of this.

Private equity is critical to our asset and wealth management landscape. We are Asia's second-largest private equity centre, trailing only the Mainland.

As of mid-2018, our private equity players managed US$152 billion in Hong Kong. That is about 16% of the total capital under management in Asia.

During the first half of 2018, private equity funds raised in Hong Kong amounted to US$12 billion, about 20% of the total funds raised in Asia. Given investors interest in diversified portfolios – both in asset class and geographical exposure – Hong Kong can only continue to capture business opportunities in the Asian private equity market.

In the coming months, we will put out a proposal for industry consultation about introducing a limited partnership regime for private equity funds in Hong Kong. Thereafter, we will introduce a bill in the Legislative Council. If passed, it would be the second dedicated regime for a fund vehicle in our law books.

The Financial Services & the Treasury Bureau is working closely with the Hong Kong Monetary Authority and the Securities & Futures Commission on this proposal. Our objective is to have a regime catering for the needs of private equity funds, while safeguarding investor protection.

The Government will continue to boost Hong Kong's unique role as gateway between international markets and investors and their counterparts on the Mainland of China. We'll do so through the Stock Connects, Bond Connect, and the Mutual Recognition of Funds arrangements.  We will also further strengthen our position as the global offshore RMB business hub.

At the regional level, we will continue to take part in the Guangdong-Hong Kong-Macao Greater Bay Area development. Its sheer market size and number of high net-worth individuals, coupled with the policy objective of enabling people, goods, capital and information to flow freely within the region, will expand opportunities for our asset and wealth management sector. 

Turning to the Belt & Road Initiative, Hong Kong's financial services industry is well positioned to contribute in a number of areas. Given our liquid capital flow and deep pool of financial talent, Hong Kong is the natural centre from which to raise funds for infrastructure, investment and production projects.

We are also ideally suited to provide the risk management, insurance and dispute-resolution services that big-ticket infrastructure projects need.

Green finance is also promising. And I am pleased to report that the Government will soon launch its green issuance under the Government Green Bond Programme, which has a borrowing ceiling of $100 billion.

Financial Secretary Paul Chan gave these remarks at the Asia Private Equity Forum 2019 on January 16.