HK Chief Gives Wide-Ranging Policy Address

by Mary Swire, LawAndTax-News.com, Hong Kong

14 October 2010

Hong Kong’s Chief Executive, Donald Tsang, has delivered his 2010-11 Policy Address during which he covered the government’s plans on supporting small and medium enterprises (SMEs), increasing financial cooperation with the Mainland, widening the relationship with Taiwan, and enhancing Hong Kong's status as an international centre for financial services, trade, shipping and logistics.

To encourage SMEs' participation in export promotion activities and enhance their competitiveness, Tsang said that the government plans to inject an additional HKD1bn (USD129m) into the SME Export Marketing and SME Development Funds next year.

Furthermore, he added, to offer more support to SMEs, Hong Kong’s Mortgage Corporation is also exploring the establishment of a market-oriented loan guarantee scheme to provide a sustainable platform for obtaining credit.

He emphasized that strengthening financial cooperation with the Mainland is vital for Hong Kong's financial services, which “should be positioned and developed in a way that will increase the city's contribution to promoting the modernization of the Mainland's financial system, particularly the internationalization of the renminbi (RMB) and the increased convertibility of the Mainland's capital account in a gradual and orderly manner.”

Chang said the government will seek early implementation in Hong Kong of those Mainland financial services which have not been liberalized because the capital account is not yet opened or it is necessary to test the market through piloting. "For example,” he said, “we may seek the expansion of channels for enterprises to invest in the Mainland the RMB capital raised in Hong Kong."

He stressed that the government’s objective will be “to promote capital flows between banks in Hong Kong and the Mainland, and to attract more foreign enterprises to use Hong Kong's RMB settlement services by taking advantage of the development of cross-border trade settlement in RMB.”

It will also encourage more Mainland, Hong Kong and foreign enterprises to issue RMB bonds in Hong Kong; and “strengthen the linkage between products traded on the stock exchanges of Hong Kong and the Mainland, seek mutual access for market participants and intermediaries, and expand the channel for capital flows between the two places.”

He added that: "We will enhance financial co-operation with emerging markets. Apart from Islamic finance, we will also tap into business opportunities in Russia, Central Asia, India, South America and other emerging markets to attract more large enterprises to list in Hong Kong and make use of Hong Kong's well-established financial and trading platform to expand their international business."

In the coming year, Tsang stated, the government will also promote multi-faceted, multi-level exchanges with Taiwan. These will include “updating air services arrangements, support for the regulatory bodies of both places to strengthen the liaison mechanism on co-operation in regulating the banking industry, the use of the new platform to explore opportunities for economic and trade co-operation and double taxation avoidance issues.”

On the insurance industry, the government will draft legislation on the establishment of an independent insurance authority. "To further boost market confidence and promote financial stability, we are preparing, in collaboration with the industry, a proposal to establish an insurance policyholders' protection fund. We hope to consult the public by the end of this year."

Finally, he vowed to ensure Hong Kong can better leverage its unique advantages and functions during the National 12th Five-Year Plan period. "We will strive to enhance Hong Kong's status as an international centre for financial services, trade, shipping and logistics,” he said.

"We are actively helping our service industries, especially the professional services sector, expand their presence in the Mainland market progressively. We will continue to provide suitable sites for port back-up uses, to facilitate efficient port operations and to consolidate Hong Kong's position as an international maritime centre,” he added.

Recommended