HK remains competitive

September 11, 2019

Financial Secretary Paul Chan

The idea of the Belt & Road Initiative is premised on mutual benefits as well as connectivity in everything from trade and culture to governmental and people-to-people ties. Infrastructural development is a cornerstone of the initiative. The vast, often multilateral, infrastructure projects underpinning the initiative demand equally vast financing, which requires both public and private-sector investment to bridge the substantial funding gaps we are seeing.


The infrastructure funding needs in Asia alone will total US$1.7 trillion a year, on average, through 2030, according to the Asian Development Bank.


In this regard, Hong Kong, as one of the world's leading financial centres and China's international financial capital, can make a pronounced difference.


Our deep liquidity, outstanding financial infrastructure and wide-ranging options for raising capital - from initial public offerings and loan syndication to bonds and Islamic sukuk - can meet the financing needs of any Belt & Road project. Anywhere literally.


The huge demand for infrastructure investment has also stimulated innovation in infrastructure financing to expand lending capacity. Apart from providing financing for greenfield projects through the Infrastructure Financing Facilitation Office under the Hong Kong Monetary Authority and allowing brownfield infrastructure projects to be listed on our stock exchange, the Hong Kong Mortgage Corporation Limited, again under the Hong Kong Monetary Authority, is pursuing the proposition of securitising infrastructure loans to provide banks with the opportunity to offload their loans to long-term investors. After offloading, banks can then have more capacity to finance new infrastructure projects.


Going green 

Hong Kong is also a green finance hub, capable of meeting the interests, and demands, of big-ticket green projects - from green finance certification to critical legal and marketing expertise and advice. Last year, Hong Kong arranged and issued US$11 billion worth of green bonds, tripling that of 2017.


The latest move to bolster our green finance development is the establishment of a Centre for Green Finance by our Infrastructure Financing Facilitation Office under the Hong Kong Monetary Authority. The Centre serves as a capacity-building platform for technical support and experience sharing for the green development of the Hong Kong banking and finance industry.


Investing in and financing complex projects in emerging markets involve a multitude of specialty risks. Hong Kong, a global risk-management centre and regional insurance hub, is home to an array of multinational insurers and reinsurers. They provide professional risk management services and insurance coverage that Belt & Road project owners can count on. They also offer reinsurance services to underwrite and manage project risks.


Last year, we reached an agreement with the China Banking & Insurance Regulatory Commission to lower the capital requirements of Mainland insurers who cede businesses to qualified Hong Kong reinsurers.


The agreement will reinforce Hong Kong's competitiveness as a risk management centre, enabling local reinsurers to take on Mainland reinsurance for Belt & Road projects.


If you would like to explore more of such potential, I invite you to join key insurance stakeholders in the Belt & Road Insurance Exchange Facilitation. The organisation, launched last year, promotes the exchange of intelligence, encourages alliances and facilitates networking.


Ideal platform

Hong Kong is also an ideal choice for setting up a corporate treasury centre (CTC). We offer an extremely tax-friendly environment for CTCs, taxing their qualifying profits at a concessionary rate of only 8.2%.


Last but not least, Hong Kong is the platform for high-end professional services. Our top-notch professionals in architecture, engineering, urban planning, surveying, financing, project management consulting as well as legal and dispute resolution have all the necessary experience and knowledge to lead Belt & Road projects, in ascertaining project feasibility, in implementing the project and in operating the infrastructure.


And with rich experience in innovative financing and city management, we are also prepared to share our knowledge and expertise with our Belt & Road counterparts in a variety of fields, such as airport management, railway financing and operation, emergency services, etc. The MTR Academy of our Mass Transit Railway Corporation and the International Aviation Academy of our Airport Authority, for example, have both been providing quality training to transport management talents worldwide.


Ladies and gentlemen, in every possible way, Hong Kong is here for you, and here to help you connect and excel along the Belt & Road.


Tackling challenges

Before I go, I would like to touch on the disruption that Hong Kong has been experiencing over the past few months. The demonstrations and protests reflect complex issues and they are concerning to us all.


But let me assure you that the recent incidents have not affected Hong Kong's core competitiveness, including the rule of law, free movement of capital, goods, information and people, freedom of expression, a simple and low tax regime, a sound regulatory system and an independent judiciary. The "one country, two systems" principle, which is the cornerstone of our economic success and long-term prosperity, remains intact. These fundamental and institutional underpinnings of our society stay strong and resilient.


Going forward, we are earnestly engaging in dialogues with the community, with the aim of mending differences, as well as looking for solutions. I believe that continued dialogue - conducted in the spirit of reason, mutual respect and reconciliation, together with the rule of law - will see us through the difficult times.


Financial Secretary Paul Chan gave these remarks at the Belt & Road Summit luncheon on September 11.

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