From Persian Gulf to Red Sea - Promotional Visits to Qatar and Egypt

At the Belt and Road (B&R) Summit organised by the Hong Kong Special Administrative Region (HKSAR) Government last month, I chaired one of the policy dialogue sessions, namely “Tapping into the Potential of the Middle East”.  Together with the Minister of International Cooperation of Egypt, the Minister of Economy of the United Arab Emirates, and the Advisor in the General Secretariat of the Council of Ministers of Saudi Arabia who attended upon invitation, we discussed and explored the roles that Hong Kong and the Middle East can play as regional hubs in jointly promoting the sustainable development of the B&R strategy as well as the opportunities for co-operation. 

Countries along the B&R account for about 62% of the world's population, more than 35% of the global economy, and contribute to approximately 40% of global trade.  In the first eight months of this year, the Mainland's imports and exports to the B&R countries grew by 3.6%, accounting for over 40% of the country's foreign trade.   Arab countries are the key market in the B&R strategy.  The Mainland and Arab countries have implemented more than 200 large-scale cooperation projects in the energy and infrastructure sectors, with the fruits of cooperation benefiting nearly 2 billion people.  Given these opportunities, I embarked on a visit to Qatar and Egypt after the Summit to continue promoting the B&R Initiative and new opportunities for strengthening cooperation between Hong Kong and the Middle East.  I also attended the 8th Annual Meeting of the Asian Infrastructure Investment Bank (AIIB) in Sharm El Sheikh, Egypt.  I believe Hong Kong can strengthen cooperation with Qatar, Egypt and other countries along the B&R in three areas: attracting capital investments, fostering technological advancements, and drawing in talented professionals.

As the host of the 2022 FIFA World Cup, Qatar demonstrated to the world its strength on the social, cultural and innovation fronts while also strengthening its strategic position as a promoter of exchange and interaction between East and West in the Middle East region.  This coincides with the strategic positioning that Hong Kong has established in Asia thanks to our unique advantages under “One Country, Two Systems”, i.e. enjoying strong support of the Motherland while being closely connected to the rest of the world.  Against this background, there is much room for co-operation between Qatar and Hong Kong.  On the development of financial markets, Qatar Stock Exchange has in recent years made significant efforts to attract more listing, introduce more exchange traded funds, enhance Environmental, Social and Governance (ESG) disclosure of companies and make plans for the development of a listed derivatives market.  As for its sovereign funds, Qatar seeks to promote green transformation by increasing investment in clean energy, and will focus its attention on investment opportunities in relation to technology, venture funds, financial institutions and the sports industry.  With our rich experience in these areas, Hong Kong will foster exchanges with Qatar and offer recommendations on the development of financial markets and investment opportunities, as well as strengthen cooperation in fostering technological advancements and attracting talent.

Having one of the earliest civilisations in the world, Egypt is equipped with infrastructure that plays an important role in international trade and under the B&R strategy as well.  This is exemplified by the fact that nearly 12% of global trade passes through the Suez Canal in Egypt.  In recent years, Egypt has taken forward a number of new infrastructure projects, including the setting up of a new administrative capital, and hosted major international conferences such as the 27th United Nations Climate Change Conference (COP27) in 2022.  At the meetings with some senior officials during my visit to Egypt, I learned that the country has active plans for encouraging the development of green and sustainable infrastructure and will explore opportunities in Renminbi (RMB) investment and financing, promote reforms of public enterprises and seek to enhance international co-operation.  Riding on our country’s ongoing efforts to promote the implementation of the B&R strategy, Hong Kong can foster closer economic and trade ties with Egypt and facilitate the implementation of Egypt’s development strategies by leveraging our international financial and business networks.

This year, the AIIB adopted “Sustainable Growth in a Challenging World” as the theme of its annual meeting with green and sustainable finance topping its agenda.  During the meeting, the AIIB unveiled the Climate Action Plan which further exhibited its ambition and plan to mobilise its capital and resources to help members address climate change.  Given that Asia contributes over 50% of global greenhouse gas emissions, its effectiveness in achieving green transformation has a considerable bearing on the effectiveness of the global effort to tackle climate challenges.  The AIIB has set a specific target for the provision of climate finance, committing to allocate at least 50% of its annual financing approvals for addressing climate change by 2025.  By the second quarter of 2023, the amount of climate finance offered by the AIIB has reached a cumulative US$11.75 billion, providing financing for 107 climate projects.

Green and sustainable finance has been the focus and highlight of the development of the Hong Kong market in recent years.  At the AIIB Governors’ Business Roundtable session, I spoke on the discussion topic of “Low Carbon Development – Supporting a Just and Effective Transition” and shared with the attendees on how Hong Kong facilitates low-carbon transition in three aspects.  Firstly, we have set a clear goal of reducing local carbon emission by 50% before 2035 and achieving carbon neutrality by 2050.  Secondly, we provide green financing for market players around the globe with the proper financial tools, infrastructure and market available.  Since 2019, the HKSAR Government has issued some US$22 billion worth of government green bonds, including two mega-scale triple-currency offerings denominated in RMB, Euro and US dollars in January and June this year, marking the largest ESG bond issuance in Asia.  Moreover, with the support of the AIIB as an anchor investor, the Hong Kong Mortgage Corporation Limited completed its first issuance of infrastructure loan-backed securities in May.  Much to our delight, the issuance was well received by the market, and the total value of the five classes of notes issued, including sustainable financing notes backed by sustainable, green and social assets, amounted to US$364.4 million.  Thirdly, we have been actively nurturing talent in response to the new trend of developing low-carbon and sustainable economy.  Specifically, we launched the Pilot Green and Sustainable Finance Capacity Building Support Scheme last year to provide participants with subsidies for the training and acquisition of relevant qualifications in sustainable finance as part of a collaborative effort to build capability for the industry. 

Another focus of the visits was to promote Hong Kong’s RMB business.  In fact, Qatar set up the first RMB clearing centre in the Middle East region as early as 2015, facilitating entry into the RMB market by players in the region.  As for Egypt, the country is making plans for the issue of “panda bonds” so as to gain direct access to the onshore RMB financing market.  I believe that the building of closer economic and trade ties between our country and the Middle East region will lead to an increase in the use of RMB for bilateral trade settlement.  A prime example is the longest-ever natural gas supply contract, signed late last year between Qatar and our country's energy company.  This contract, valued at approximately $61 billion, spans 27 years.  I anticipate that as these ties strengthen, the demand for RMB investment products and other related investment solutions from governments and enterprises in the region will grow gradually.  Hong Kong, being the largest offshore RMB centre with a deep liquidity pool, a financial ecosystem characterised by a wide array of products and diversified risk management tools, is well-positioned to play an active role in serving the RMB investment and financing needs of the Middle East region while promoting the internationalisation of RMB.  For example, riding on the market trend of lower Renminbi interest rates, countries in the Middle East can explore the possibility of issuing Renminbi-denominated green, blue or social bonds in Hong Kong, so as to bring in more international capital interested in green and sustainable finance through our market.

Our promotional visits to Qatar and Egypt are fruitful and rewarding.  We will continue to explore opportunities for financial co-operation between Hong Kong and the Middle East under the B&R strategy.  We will also actively engage in relevant activities and create co-operation platforms to showcase Hong Kong as an international financial centre capable of satisfying the investment and financing needs of the B&R regions and to implement relevant projects in the process, thereby making further contribution to our country’s B&R Initiative.